Today the government announced several changes in interest rates of different accounts and schemes. This came after the GST bill passed and certain tax slabs are decided and will be implemented by 1 July. The interest rates on small saving schemes are lowered by 0.1 per cent with effect from April 1, 2017. The interest rates of popular Public Provident Fund (PPF) will fetch an interest rate of 7.9 per cent which is the lowest in the 40 years, this is little shocking as it is the lowest in the 40 years of its implementation, according to National Savings Institute.
The Five-Year National Savings Certificate will fetch an interest rate of 7.9 per cent. The existing rate for PPF and Five-Year National Savings Certificate is currently 8 per cent but now revised to 7.9 per cent. A small scheme for protection of girl child (Sukanya Samriddhi Account Scheme), will offer an interest rate of 8.4 per cent annually, from 8.5 per cent at present, it also showed an decease after the changes.
The Finance Ministry said that
"On the basis of the decision of the government, interest rates for small savings schemes are to be notified on a quarterly basis," while notifying the rates for the fourth quarter of 2016-17 starting from April 1, 2017.
And also the interest rate on 'Kisan Vikas Patra' will come down to 7.6 per cent, Five-Year Senior Citizens Savings Scheme at 8.4 per cent and Five-Year National Savings Certificate at 7.9 per cent. It shows again an decease in all the rates.
Irrespective of all the changes, the interest on savings deposits has been retained at 4 per cent annually.
Term deposits of 1-5 years will fetch a lower interest rate of 6.9-7.7 per cent, which will be paid quarterly and the Five-Year recurring deposit has been lower at 7.2 per cent while the Retirement fund body Employees' Provident Fund Organisation or EPFO had earlier decided to lower the interest on provident fund deposits for the current fiscal year to 8.65 per cent, from 8.8 provided in 2015-16. This decision is expected to prompt banks to lower the deposit rate in line with the small savings rate as offered by the government.
The reduction in interest rate comes after the overall decline in interest rate in the financial system. The interest rates are linked to yields on government bonds.