Revision In Interest Rates On Small Saving Schemes: Rates Increased By 70 BPs

The Union Finance Ministry after almost a year decided to hike the interest rates of small savings schemes by up to 70 bps (1% point is equal to 100 basis points(bps)) for the April-June 2023 quarter. The rate hike update was announced through a circular issued by the Department of Economic Affairs on March 31, 2023.

The highest interest rate of 8.2% is offered on Senior Citizen Savings Scheme, followed by 8% rate on Sukanya Samriddhi Account Scheme.

National Savings Certificate, 5-year term deposits, Monthly Income account scheme, public provident fund and 3-year time deposit will provide an interest rate of 7.7%, 7.5%, 7.4%, 7.1% and 7% respectively as per the revisions, for the quarter.

As per the revised list, 1-year time deposit will now offer an interest rate of 6.8%, while the 5-year recurring deposit will provide an interest rate at 6.2%.

For Kisan Vikas Patra, the government decided to change the tenure as well. It has reduced the term but increased the rate to 7.5% for 115 months from previous rate of 7.2% for 120 months. While the savings deposit rate was left unchanged a 4%.

Last time the interest rates were increased between 20 bps and 110 bps for the January-March 2023 quarter on few small savings schemes. This rate hike was expected as the bond yields have risen, Small savings rates are linked to government bond yields of the same maturity and are reset every quarter. Now that bond yields have risen sharply, small savings rates have been revised upwards.