Government slashes interest rates on PPF, NSC, SCSS, other Post Office Schemes amid coronavirus COVID-19 outbreak

Image courtesy: Reuters

New Delhi: The Department of Economic Affairs, Ministry of Finance, on Tuesday (March 31) announced an interest rate cuts on small savings schemes for the first quarter (April to June) of Financial Year 2020-21. Interest rates have been reduced on various savings schemes between 70 basis points and 140 basis points as the RBI had recently reduced the repo rate by 75 basis points, thereby, giving a clear signal for rates to come down. 

According to the government notification, interest rates on Small Savings like Public Provident Fund (PPF), Kisan Vikas Patra, National Savings Certificate (NSC), Senior Citizens Scheme, Monthly Income Scheme have been reduced.

The Public Provident Fund (PPF) and Sukanya Samriddhi Yojana rate has been cut by 0.8 per cent or 80 bps each and it will now get an 7.1 per cent. 
Senior Citizens Scheme will get 7.4 per cent (interest cut by 1.2 per cent), 
Monthly Income Scheme will get 6.6 per cent (cut by 1 per cent)
, while NSC will get an interest of 6.8 per cent (cut by 1.1 per cent) for the April-June quarter.

Accordingly, post office time deposits of certain tenors have seen the sharpest cut of 1.4 per cent or 140 bps. Notably, interest rates on small savings schemes (except for post office savings account) were last revised in July 2019. Since then, interest rates have been kept unchanged.

Interest rates have also been reduced on bank fixed deposits and saving schemes.

-Sukanya Samriddhi Yojana used to get 8.4 per cent interest earlier, now it will get 7.6 per cent.
-Kisan Vikas Patra will get 6.9 per cent instead of 7.6 per cent.
-1, 2, 3 year-old bank FD used to get 6.9 per cent interest earlier, now it will get 5.5 per cent.
-Interest on 5-year FD was 7.2 per cent, now it will get 5.8 per cent.
-National Saving Certificate used to get 7.9 per cent interest, now it will get 6.8 per cent.
-Earlier Interest on PPF was 7.9 per cent, now it will get 7.1 per cent.

Recently, the RBI had reduced the repo rate by 75 basis points. The SBI had subsequently announced a revision in the SBI FD rates by lowering the interest rate across different FD scheme tenure. With the PO interest rate lower than before, the FD rates in banks are also expected to fall further down.