Why The Government Hasn't Raised Interest Rates On Popular Savings Schemes
Despite rising bank interest rates, the government hasn't changed small savings scheme rates in two years.
For the past two years, the government has kept the interest rates on popular small savings schemes unchanged. This is even though both public and private banks have raised their home loan and fixed deposit rates significantly since May 2022. The hikes came after the Reserve Bank of India (RBI) increased the repo rate by 140 basis points during that period.
Small savings schemes such as the Public Provident Fund (PPF), National Savings Certificate (NSC), Post Office Savings, and Sukanya Samriddhi Yojana are important for the average Indian investor. These schemes offer long-term savings options with government backing, making them a reliable choice for pensioners and middle-class families.
Why Interest Rates Stayed the Same
According to Zee Business, experts in the banking sector say that the situation goes back to the early days of the COVID-19 pandemic. In March 2020, just after the nationwide lockdown was announced, the RBI slashed its repo rate by 75 basis points to 4.40 per cent to ease financial pressure on citizens. Following this, banks also lowered their deposit interest rates.
During that time, the government did not reduce interest rates on small savings schemes. This was done to protect the earnings of depositors, especially senior citizens who rely heavily on such schemes for regular income. Now, even though the RBI is increasing the repo rate and banks are offering higher returns on deposits, the government is holding small savings rates steady.
Banking insiders believe that the government is using this as a way to manage rising interest costs, as per Zee Business. Since banks had earlier lowered deposit rates and small savings rates remained untouched, the current strategy helps balance the overall interest burden.
Officials also mentioned that future changes will depend on how inflation behaves and the country's liquidity situation. If inflation rises sharply or there is less liquidity in the system, the government may consider revising the rates. But for now, no such move has been made.
On June 30, 2022, the Finance Ministry officially announced that interest rates for small savings schemes would remain the same for the July–September quarter of the financial year 2022–23.
Current Interest Rates
Here are the latest rates on key small savings schemes:
– Public Provident Fund (PPF): 7.1 per cent
– National Savings Certificate (NSC): 6.8 per cent
– Post Office Monthly Income Scheme: 6.6 per cent
– Sukanya Samriddhi Yojana: 7.6 per cent
– Senior Citizens Savings Scheme (5-Year): 7.4 per cent
– Kisan Vikas Patra: 6.9 per cent
These rates remain fixed for now, offering stable but slightly lower returns compared to bank deposits. However, they continue to be a safe and preferred choice for many Indian savers.
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