Interest Rates of Small Saving Schemes to be
recalibrated w.e.f. 01.04.2016
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;
|
Sr. No.
|
Quarter for which rate
of interest would be effective
|
Date on which the
revision would be notified
|
Rate of interest to be
based on FIMMDA month end G-Sec. rate pertaining to
|
|
1.
|
April to June
|
15th March
|
Dec.-Jan.-Feb.
|
|
2.
|
July to September
|
15th June
|
Mar.-Apr.-May.
|
|
3.
|
October to December
|
15th September
|
Jun.-Jul.-Aug.
|
|
4.
|
January to March
|
15th December
|
Sep.-Oct.-Nov.
|
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.
**********
DSM(PIB) 16.02.2016
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