As per a Business Standard report, for the July-September quarter, the government may reduce interest rates by 30-50 basis points on small savings schemes. The step will affect lakhs of depositors in these schemes.

Ahead of the elections, for the previous quarter the government left the rates unchanged even though the bond yields declined as much as 29 basis points. Bond yield trajectory helps the centre to decide on the rates.

The report quoted an official as saying, "Reducing the cost of capital to boost investment has been a stated aim of this administration. A part of that was done when the RBI's Monetary Policy Committee (MPC) cut interest rates thrice. Now, the small savings rates will be reduced to speed up the transmission of interest rates".

Also, as per the minutes of the last held MPC meet, the RBI governor said that interest rates on savings schemes are higher than the prescribed formula for them.

GoodReturns.in