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Interest Rates Of Provident Fund, Senior Citizens Savings, NSC Can Be Reduced?

There is a possibility that the interest rates of small savings schemes will be reduced by the RBI. The interest rates are being cut down in order to reduce the cost of borrowing in the broader economy.

These schemes include multiple small savings schemes such as Sukanya Samriddhi, National Savings Certificate (NSC), Public Provident Fund (PPF), Monthly Income Scheme and Senior Citizen Savings Schemes.

Reserve Bank of India To Reduce Interest Rates of Small Savings Schemes
The apex bank is facing a lot of struggles and challenges in order to keep bond yields from going through a rise. Especially now that the North Block is expanding its balance sheet so as to make up for the lack of immediate private sector investments.

Reducing the interest rates will reportedly help reduce the cost of borrowing which requires both fiscal and monetary support in order to return to a trajectory of sustainable growth.

As we all know, the interest rates on small savings schemes every quarter are decided by the Centre. The interest rates on small savings schemes for the present quarter are fixed between the range of 4-7.6%.

The finance ministry had cut the last rates on these schemes on March 31 by 50-100 basis points. However, this was rescinded the next day.

Will RBI’s Reduction In Interest Rates Result In Lower Lending Rates
As per industry experts, four states and one Union Territory were planning on going to polls but now that the election results are already announced, the government will be taking decisions on the rates.

As per reports, the next rate review will be due on June 30.

As of now, a one-year term deposit plan at the State Bank of India offers 5%, compared with 7.6% for Sukanya Samriddhi, 7.1 % for PPF, 6.8% for NSC and 6.9% for Kisan Vikas Patra.

The Reserve Bank of India has also reduced the repo rates by 175 basis points to 4%. Whereas, returns on small savings plans have been reduced by 80-110 basis points.

The apex bank has also tried to keep the benchmark bond rate around or below the 6% mark. Additionally, if the small savings rates are reduced, it will help banks raise deposits at lower costs, which will in turn result in lower lending rates.

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