INTEREST RATES CUT ON PPF, SMALL SAVINGS

Centre cuts interest rate on post office schemes, PPF by 0.1%

The government on Monday lowered the interest earned on many post office saving schemes and Public Provident Fund (PPF) by 0.10 per cent, affecting lakhs of small savers in the country.

The interest rates on small savings has been reduced even as consumer price inflation is high at 10.91 per cent in February, thereby diminishing the real returns on such small saving schemes.

In absolute numbers, you will earn `100 less in interest a year for every `1 lakh invested in the schemes

The interest rate of PPF has been lowered from 8.8 per cent to 8.7 per cent with effect from April 1, 2013.

The government on Monday lowered the interest earned on many post office saving schemes and Public Provident Fund (PPF) by 0.10 per cent affecting lakhs of small savers in the country.

The interest rates on small savings has been reduced even as consumer price inflation is high at 10.91 per cent in February, thereby diminishing the real returns on such small saving schemes.

In absolute numbers, you will earn `100 less in interest a year for every lakh.

The interest rate of Public Provident Fund (PPF) has been lowered from 8.8 per cent to 8.7 per cent with effect from April 1, 2013. The interest rate on the five-year National Saving Certificate has been redu-ced from 8.6 per cent to 8.5 per cent and 10-year from 8.9 per cent to 8.8 per cent.

Monthly Income Schemes (MIS) of five-year maturity will earn an interest of 8.4 per cent from 8.5 per cent. The rate for five year term senior citizens savings scheme (SCSS) will now stand at 9.2 per cent, down from 9.3 per cent.

However, rates on savings deposit schemes and on fixed deposit of up to oneyear offered by post offices have been kept unchanged at four per cent and 8.2 per cent respectively.

The revision in interest rates follows a decision taken by the government last year to link the small savings returns with the market rate. The new rates are required to be announced at the beginning of a financial year.

The step comes at a time when the government is trying to wean away investors from gold towards financial instruments by planning to launch inflation-linked products. The Economic Survey 2012-13 had said that the composition of gold has seen a steady movement towards non-jewellery items, showing its rising demand for pure investment purposes.

As per RBI data, outstanding small savings maintained with post offices have contracted by 1.5 per cent in December 2012. However, Kotak Mahindra Bank, chief economist, Indranil Pan and Crisil, chief economist D.K. Joshi said that there is unlikely to be any fall in small saving schemes due to the small reduction in interest rates. “Schemes like public provident fund still offer greater returns,” said Mr Pan.

If you want low (interest) rate environment, you can’t say, ‘I want higher interest rate for savers and low rate for borrowers’

–– Montek Singh Dy chairman, plan panel