In a decision by the Government taken on Monday which is not likely to go down well with millions of small savers, it has decided to cut down interest rates of post office savings schemes as well as that of public provident fund (PPF, which is the lifeline of every common man due to its high returns) by 0.10 per cent.
The decreased interest rates would be applicable from April 1, 2013 onwards, a statement issued by the Finance Ministry said.
Though the step has been taken on the lines of a thought process within the Finance Ministry that interest rates of small savings scheme and PPF should be in sync with market rates determined by returns offered by other securities, experts said that the reduction is too minor to have any adverse impact on the common investors’ savings in the long run.
Subsequent to the decision announced by the Government, investors will earn less on their post office savings schemes.
“The cuts announced by the Government are too small to have any impact on the common man. These are very minor reductions, so there would not be any negative impact on investors,” said Crisil Chief Economist D K Joshi.
The interest rate of Public Provident Fund (PPF) has been lowered from 8.8 per cent to 8.7 per cent with effect from April 1, 2013, said the statement.
However, the rates on savings deposit schemes and on fixed deposit of up to one year run by post offices has been kept unchanged at 4 per cent and 8.2 per cent, respectively.
Further, Monthly Income Schemes (MIS) of 5 year maturity will earn an interest of 8.4 per cent.
The National Savings Certificates (NSC) having maturity of five and 10 years will now attract 8.5 per cent and 8.8 per cent interest respectively, down 0.10 per cent each.
The interest rates would be applicable for the entire 2013-14 fiscal. The rate for senior citizens savings scheme (SCSS) will now stand at 9.2 per cent, down from 9.3 per cent.
The revision in interest rates follows a decision taken by Government last year to link the small savings returns with the market rate.
The new rates are required to be announced at the beginning of a financial year.
The decision is in line with the recommendations of Shyamala Gopinath Committee, which had suggested that returns should be in sync with market rates determined by the returns offered by other securities.