The Finance Ministry on Thursday announced that interest rates on small saving schemes for three months’ period starting July 1 will remain unchanged. This means interest rates on various small saving schemes such as National Saving Certificates (NSC), Public Provident Fund (PPF) will continue for at least three more months starting Friday.
This is the ninth successive quarter when interest rates have been kept unchanged. The small savings schemes basket comprises 12 instruments, including the NSC, PPF, Kisan Vikas Patra (KVP) and Sukanya Samridihi Scheme. The government resets the interest rate at the beginning of every quarter.
Decision to keep rates unchanged has happened at a time when there are sharp increases seen in the G-Sec yields of various maturities, to which such interest rates are linked. Also, many banks have raised rates in deposits.
Rise in G-Sec yields
The average month-end G-Sec yields for one-year, two-year and 5-year bonds have increased substantially to 5.26 per cent, 5.65 per cent and 6.79 per cent, respectively, during March to May 2022 period, from 3.88 per cent, 4.72 per cent and 6 per cent, respectively, during December 2021 to February 2022 period; as well as 3.5 per cent, 4.41 per cent and 5.69 per cent, respectively, during September to November 2021 period.
Theoretically, since 2016, interest rate resetting has been done based on yields of government securities of the corresponding maturity with some spread on the scheme for senior citizens, as advised by the Shyamala Gopinath Committee. However, in practice, the interest rate changes are made considering several other factors, including political ones.
June 30, 2022