The lowering of interest rates on the lending front by RBI is now catching up with a matching trend on the deposit front as well. There will now be a lowering of interest rates across the different saving schemes with the banks and post offices. These include the PPF, the Sukanya Samriddhi Scheme and the Senior Citizens Savings Scheme etc. Other savings instruments like the National Savings Certificate (NSC), Post Office Recurring Deposit (RD) and Monthly Income Schemes (MIS) in any form will also see a drop in the rate of interest being offered by the respective institutions.
The drop in the rates is 10 basis points. It means 0.1% cut, i.e. where is used to 7.7% interest per annum, it will be 7.6% p.a. These rates are announced every quarter and all deposits made during that quarter will earn an interest for the term the deposit is accepted except in cases where the annual rates apply. These rates do not cover the interest rates for different fixed deposit (FD) products which the banks announce separately, depending on the duration of the deposits and with special rates for senior citizens etc.
The Public Provident Fund or PPF scheme is aimed more at those people who are taxpayers but may not have salaried employment. This is long-term savings instrument but provides tax exemption on the amount deposited (with a ceiling of Rs 1.5 lakh per year), the interest earned and even on the amounts withdrawn. The interest on PPF deposits this quarter will be 7.9% against the previous quarterâ€™s rate of 8%. The annual earning of interest is later adjusted to reflect the average of the four quarters.
Senior Citizens Savings Scheme
The SCSS has come handy for retired employees and other elder population who have been crying that they are the victims of a low interest regime. This is one instrument that offers a higher interest allows a larger sum to be deposited as savings by citizens aged over 60. This is a five-year scheme. Not all bank branches offer the facility and only select ones do. For the deposits in SCSS made in the July-September quarter, the interest will be credited at 8.6%. The rate was 8.7% for the April-June quarter.
Sukanya Samriddhi Account is another similar small savings scheme that offers a higher interest rate than other schemes. The revised rate for this scheme, this quarter, is 8.4%, 0.1% down from the 8.5% it fetched from April to June this year.
Some of the other savings schemes where the interest rates for this quarter have been lowered are the Kisan Vikas Patra (KVP) and the Monthly Income Scheme from the post office at 7.6%, the NSC at 7.9% instead of 8%. The term deposits at the post offices will offer 6.9% for a 1-3-year deposit and 7.7% for a five-year deposit.