Feeling worried about the rise in your home loan rate? There’s a silver lining. The government has revised the small savings schemes interest rates w.e.f. 1 October 2018. The interest rates of PPF, NSC, and other small saving schemes have been revised and matched up to FD’s interest offered by various PSUs and private banks. The move is aimed at matching the rising interest rates in the banking sector. Interest rates are revised on a quarterly basis.
Since 2016, the government has linked small saving schemes with that of government securities (G-sec) rate. With the yields rising in the past few quarters, the expectations from the government was high that the interest rates of small savings scheme will increase. The decision was in line with the interest rates offered by various top notch banks including SBI, ICICI, YES, HDFC, etc. The rise in yield prompted the government to increase the interest rates on small saving schemes.
In the past 2 months, the Indian bonds have increased. Several banks also have taken an action with the rise in yields and raised their fixed and recurring deposit rates. So, people can benefit from the rising interest income, which is a big relief to senior citizens as their solely rely on retirement income. If you have also invested in short-term debt funds and fixed maturity plans (FMPs), rising interest will benefit you.
The interest rates on 5-year recurring deposit have increased to 7.8%, compounded on a quarterly basis as compared to 7.4% offered by the post office in the last quarter. The 5-year senior citizen savings scheme has also increased to 8.7%, which is also compounded quarterly.
Public Provident Fund (PPF) and National Savings Certificate (NSC) will fetch an annual interest rate of 8 per cent while Kisan Vikas Patra (KVP) will yield 7.7 per cent and mature in 112 months.
The girl child savings scheme Sukanya Samriddhi account will now be offered at 8.5 per cent rate.
Term deposits of 1-5 years will fetch an interest rate of 6.9-7.8 per cent, to be paid quarterly, while the five-year recurring deposit is pegged at 7.3 per cent.
The move is welcomed by fixed-income investors who invest in traditional saving schemes and can now switch their investments to small saving schemes offered by Post Office India.
Given below is a comparison of interest rates on five small savings schemes: PPF, NSC, SCSC, KVP and Sukanya Samriddhi accounts