Small Saving Schemes Current Affairs

Government lowers interest rates on Small saving schemes by 0.1%

The Union Finance Ministry has lowered interest rates on all nine small saving schemes by 0.1% for the April-June quarter as compared to January-March quarter.

These schemes includes Public provident fund (PPF), National Savings Certificate (NSC), Kisan Vikas Patra, Sukanya Samriddhi Account, Senior Citizens Savings Scheme. It does not include Post Office Savings Account.

Key Facts
  • Investments in the PPF scheme will fetch lower annual rate of 7.9% from previous rate of 8%.
  • 5-year National Savings Certificate will also fetch lower annual rate of 7.9% from previous rate of 8.
  • Kisan Vikas Patra (KVP) investments will yield 7.6%
  • Sukanya Samriddhi Account Scheme, will offer 8.4% annually, from 8.5% at present.
  • Senior Citizens Savings Scheme will offer 8.4% for the 5-year. The interest rate is paid quarterly.
  • Term deposits of 1-5 years will fetch a lower 6.9-7.7 % that will be paid quarterly.
  • The 5-year recurring deposit has been pegged lower at 7.2%.
  • However, interest on savings deposits has been retained at 4% annually.

The Ministry also has notified that rates of small saving schemes will be linked to government bond yields. The move is expected to prompt banks to lower their deposit rate in line with the small savings rate as offered by government. Since April 2016, interest rates of all small saving schemes are recalibrated on a quarterly on the basis market-linked interest rates system

What are small saving schemes?

Small Savings Schemes are more of social welfare schemes .They are government run schemes that provide higher interest rate. These schemes are meant for small investors backed by a sovereign guarantee and tax benefits.

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Union Government cuts interest rate on small post office schemes by 0.25%

Union Government has cut interest rates on short-term small saving schemes below five years of maturity by 0.25 per cent including post office deposits and Kisan Vikas Patras.

The decision to this effect was taken to align interest rates on small savings with market rates and help the economy move to a lower overall interest rate regime eventually.

Key facts

  • Post office savings with term of 1, 2 and 3 year, Kisan Vikas Patra as well as 5-year Recurring Deposits till now earned higher interest than the government securities of similar tenures.
  • However, Government has left social security schemes such as Senior Citizen Savings Scheme, Sukanya Samriddhi Yojana, long term Monthly Income Scheme and PPF untouched.

Employees Provident Fund (EPF) Rate

  • Union Government has increased interim interest rate for the Employees Provident Fund (EPF) for this year by 0.05% over last year and has been fixed at 8.8%.
  • The decision for this marginal increase was taken in meeting of the Central Board of Trustees of the Employees Provident Fund Organisation (CBTEPFO) chaired by the Minister of State (MoS) for Labour and Employment Bandaru Dattatreya.

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