The central government may reduce the interest rate on small savings schemes such as Public Provident Fund (PPF), National Saving Certificate (NSC) and Sukanya Samriddhi Yojana. At the same time, it can cause a big blow to the common people. At the same time, despite the reduction in the interest rate on deposits like FD by banks during the current quarter, the government has not reduced the interest rate on these small savings schemes. Banks have been complaining for a long time that they are not able to cut the interest rate on other deposit schemes due to the higher interest paid by the government on the small savings scheme.
There is a difference of about one percent in interest on deposit schemes and small savings schemes of the bank with a maturity of one year. Along with this, the revision in the interest rate on a small savings scheme is done on a quarterly basis. With this, RBI Governor Shaktikanta Das said earlier this week that the Monetary Policy Committee (MPC) may consider all options, including interest rate cuts, to address the crisis arising from the coronavirus. The central bank, in its bi-monthly meeting in February, said that interest rates on small savings schemes need to be adjusted. RBI had said that the benchmark system implemented on October 1 has helped to spread the benefits of monetary policy to more people.
Finance Ministry has been asking the public sector banks to give the full benefit of the repo rate reduction. At the same time, he says that this will help increase consumption. However, banks say they fear that giving full profit will affect their margins. With this, on 31 December 2019, the government kept the interest rate for PPF and NSC unchanged at 7.9%. The government had decided to keep the rate of interest on the farmer development paper to be matured in 113 months at 7.6 percent. The rate of interest on the Senior Citizen Saving Scheme with five years of maturity was maintained at 8.6 percent. At present, the government has said that in the last quarter of the current financial year, interest in Sukanya Samriddhi Yojana will be 8.4%.