The Centre has reportedly brought down the interest rate on various small savings instruments from 70 basis points (bps) to 140 basis points.
The present interest rate of 7.9% on the Public Provident Fund (PPF) has been lowered by 80 basis points to stand at 7.1% for the period April-June.
In the same line, the government has also cut the savings interest rate on the National Savings Certificate (NSC) by 1.1% to 6.8% from the previous rate of 7.9%.
The rate on the rural savings scheme, the Kisan Vikas Patra has been slashed by 0.7% to 6.9% from the previous year 7.6%.
Also, the interest rate on the 5-year recurring deposits has been brought down to 5.8% after a rate cut of 1.4% from the previous 7.2%. In the case of time deposits, the rate has been reduced from 7.7% to 6.7% following a rate cut of 1%.
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The government revises the interest rate on such small savings schemes every quarter. The high-interest rate on savings schemes gives the bank no other option but to keep the lending rates unchanged for borrowers.
The Centre at present is trying to safeguard the interest of the scheme subscribers and the borrowers while revising the interest rate on small saving schemes.
Earlier in the bi-monthly monetary policy meeting in February, the monetary policy committee (MPC) had announced that monetary transmission had improved with the introduction of the external benchmark system on 1 October 2019.
For any clarifications/feedback on the topic, please contact the writer at viswanathan.v@cleartax.in
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