The government on July 1 hiked interest rates on some small savings schemes for the July-September quarter. It hiked the rates on five-year recurring deposit, three-year time deposits, and one-year time deposits by 10-30 basis points.
The five-year recurring deposits would fetch 6.5 per cent during the second quarter, 30 basis points higher than the current level. Post office deposits of one and two years were increased by 10 bps.
Interest rates on public provident funds were however kept unchanged for the 13th consecutive quarter.
The interest rate on Mahila Samman Savings Certificate was unchanged at 7.5 per cent, as announced in the Budget this year. Finance Minister Nirmala Sitharaman in her budget speech introduced the Mahila Samman Savings Certificate, a small savings scheme available for two years, up to March 2025. The scheme involves deposits of up to 200,000 rupees for a period of two years at a fixed interest rate of 7.5% with an option of partial withdrawal.
The interest rates for the Kisan Vikas Patras, Senior Citizens Savings Schemes and Sukanya Samriddhi Scheme were also unchanged for the quarter beginning in July.
Interest rate hikes since Oct-Dec Quarter
The government has been increasing rates on small savings instruments since the October-December quarter. The rate of return on several schemes were hiked by 10-70 bps in the quarter ended June.
The government had last announced sharp cuts in interest rates on small savings schemes in March 2021, but within a day they were rolled back. Since 2016, the government has been revising interest rates on small savings schemes every quarter to align them with market rates on relevant government securities. However, these revisions, or the lack thereof, have had little link to the movement in bond yields.
In March-May, the reference period for small savings rates for July-September, the yield on the five-year government security fell 53 basis points.
