Topic 3: Small savings schemes like PPF, NSC and SSCS see big cuts in rates

Millions of Indians will earn less from their small savings schemes in the April-June quarter, with the government on Tuesday slashing interest rates on these popular schemes in a falling rate cycle.
Interest rate on Public Provident Fund (PPF), Kisan Vikas Patra (KVP) and National Savings Certificate (NSC) will earn 70 to 140 basis points less during the June quarter. One basis point is one-hundredth of a percentage point. Since April 2016, interest rates of all small saving schemes have been linked to government bond yields, and are readjusted every quarter.
Investments in PPF schemes will earn 7.1% against 7.9% in the March quarter, the five-year National Savings Certificate will return 6.8% against 7.9% earlier, KVP 6.9% against 7.6% earlier, Sukanya Samriddhi Account 7.4% against 8.4% earlier, five-year Senior Citizens Savings Scheme 7.6% against 8.6% earlier, five-year Monthly Income Scheme 6.6% against 7.6% earlier, term deposits of 1-5 years 5.5-6.7% and a five-year recurring deposit will earn 5.8%.
A cut in small savings schemes was expected after the Reserve Bank of India last week cut the repo rate (at which RBI lends money to banks) by a steep 75bps in an attempt to soften the blow from the covid-19 outbreak. Still, Tuesday’s cut was sharper than expected. Those who depend primarily on income from these schemes may now need to revisit their portfolio.

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