Interest
Rates of Small Saving Schemes to be recalibrated w.e.f. 1.4.2016 on a Quarterly
Basis to align the small saving interest rates with the market rates of the
relevant Government securities; Interest rate on savings schemes based on
laudable Social Development or Social Security Goals including Sukanya
Samriddhi Yojana, the Senior Citizen Savings Scheme and the Monthly Income
Scheme left untouched by the Government.
The
National Savings Schemes (NSSs) regulated by the Ministry of Finance offer
complete security of investment combined with high attractive returns. These
schemes also act as instruments of financial inclusion especially in the
geographically inaccessible areas due to their implementation primarily through
the Post Offices, which have reach far and wide.
The small savings interest rates are
perceived to limit the banking sector’s ability to lower deposit rates in
response to the monetary policy of the Reserve Bank of India. In the
context of easing the transmission of the lower interest rates in the economy,
the Government also has to take a comprehensive view on the social goals of
certain National Small Savings Schemes. Accordingly, it has been decided
that the following shall be implemented with effect from 1.4.2016 with regard
to National Savings Schemes:
1.
The Sukanya Samriddhi Yojana, the Senior Citizen Savings Scheme and the Monthly
Income Scheme are savings schemes based on laudable social development or
social security goals. Hence, the interest rate and spread that these
schemes enjoy over the G-sec rate of comparable maturity viz., of 75 bps, 100
bps and 25 bps respectively have been left untouched by the Government.
2.
Similarly the spread of 25 bps that long term instruments, such as the 5 yr
Term Deposit, 5 year National Saving Certificates and Public Provident Fund
(PPF) currently enjoy over G-Sec of comparable maturity, have been left
untouched as these schemes are particularly relevant to the self-employed
professional and salaried classes. This will encourage long term savings.
3.
The 25 bps spread that 1 yr., 2yr. and 3 yr. term deposits, KVPs and 5 yr
Recurring Deposits have over comparable tenure Government securities, shall
stand removed w.e.f. April 1, 2016 to make them closer in interest rates to the
similar instruments of the banking sector. This is expected to help the
economy move to a lower overall interest rate regime eventually and thereby
help all, particularly low-income and salaried classes.
4.
The interest rates of all small saving schemes would be recalibrated w.e.f.
1.4.2016 on a quarterly basis as given under, to align the small saving
interest rates with the market rates of the relevant Government securities;
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Sr. No.
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Quarter for which rate of interest would be effective
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Date on which the revision would be notified
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Rate of interest to be based on FIMMDA month end
G-Sec. rate pertaining to
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1.
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April to June
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15th March
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Dec.-Jan.-Feb.
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2.
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July to September
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15th June
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Mar.-Apr.-May.
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3.
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October to December
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15th September
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Jun.-Jul.-Aug.
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4.
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January to March
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15th December
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Sep.-Oct.-Nov.
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5.
The compounding of interest which is biannual in the case of 10 yr National
Saving Certificate (discontinued since 20-12-2015), 5 yr National Saving
Certificate and Kisan Vikas Patra, shall be done on an annual basis from
1.4.16.
6. Premature
closure of PPF accounts shall be permitted in genuine cases, such as cases of
serious ailment, higher education of children etc,. This shall be permitted
with a penalty of 1% reduction in interest payable on the whole deposit and
only for the accounts having completed five years from the date of opening.
7.
In pursuance to the decision as mentioned in Para 4 above, the rates of
interest applicable on various small savings schemes for the quarter from April
to June 2016 effective from 1.4.2016 would be notified in March, 2016.
The
above changes have been brought with the objective of making the operation of
National Saving Schemes market-oriented in the interest of overall economic
growth of the country, even while protecting their social objectives and
promoting long term savings.
Source : PIB
