Recently, government has tweeked the interest rates on small savings schemes, including those of the PPF, KVP and the PIS in order to spur the Indian economy.
The reason for cutting interest rates at the post office is to largely make these rates more competitive with banks. In fact, banks have not cut interest rates, because they have to then reduce their deposit rates.
They cannot reduce deposit rates, because the post office interest rates are higher. What this means is that investors will move money from bank deposits to post office schemes. this is why the government decided to cut interest rates of KVP, PPF and Post Office Monthly Income Scheme (MIS).
Small savings schemes are very popular among senior citizens and risk averse individuals due to its safety and tax benefit. Small savings schemes hold a major chunk in the investment portfolio for many
Here are latest interest rates on small savings schemes like PPF, KVP, MIS NSC etc.
|Small Savings Schemes||Interest rates||Revised rates|
|Post Office Monthly Income Scheme||8.40 Per cent||8.40 Per cent|
|Kisan Vikas Patra (KVP)||8.70 Per cent||8.45 per cent|
|Public Provident Fund||8.70 Per cent||8.70 per cent|
|5-Year NSC (VIII Issue)||8.50 Per cent||8.50 per cent|
|1 yr., 2yr. and 3 yr. term deposits||8.40 Per cent||8.15 per cent|
|5-Year Recurring Deposit||8.40 Per cent||8.15 per cent|
|Sukanya Samriddhi Yojana||9.20 Per cent||9.20 per cent|
|Senior Citizens Savings Scheme||9.30 Per cent||9.30 per cent|
Also, the compounding of interest which is bi-annual in the case of 10 yr National Saving Certificate (discontinued since 20-12-2015), 5 yr National Saving Certificate and Kisan Vikas Patra, shall be done on an annual basis from 1.4.16.
Long-term instruments are left untouched which include Monthly Investment Scheme, Public Provident Fund (PPF), Senior Citizen Savings Scheme, five-year National Savings Certificate (NSC), and Sukanya Samriddhi Accounts.
Rate of interest on one, two and three-year deposits of post office, KVP, and five-year RD now stands reduced to 8.15 per cent from earlier 8.40 per cent.
Banks as of now are offering interest rate around 7.25 -8.25 per cent on deposits ranging from one year to three years.
Individuals who are having a major chunk in small savings scheme can consider re-looking at it.
Young investors can reshuffle their investments considering their risk appetite, age, financial goals, also tax implications.