The government on Thursday notified that it raised the interest rates on some small savings schemes. Passing the hardening of interest rates to depositors, the govt has kept rates of PPF, NSC and five other schemes unchanged.?
The interest rates for Savings Deposit (4%), 1 Year Time Deposit (5.5%), 5 year Time Deposit (6.7%),5 Year Recurring Deposit (5.8%), National Savings Certificate (6.8%), Public Provident Fund (7.1%) and Sukanya Samriddhi Account Scheme (7.6%) have been kept unchanged for the Oct-Dec quarter of 2022, which starts on 1st Oct and ends on 31st December 2022.
But amongst the 12 small savings schemes, the Finance Ministry has brought some cheer by hiking interest rate for five schemes. 2 Year Time Deposit¡¯s rate has been hiked from 5.5% to 5.7%, 3 Year Time Deposit¡¯s rate has been hiked from 5.5% to 5.8%, Senior Citizen Savings Scheme¡¯s rate has been hiked from 7.4% to 7.6%, Monthly Income Account Scheme¡¯s rate has been hiked from 6.6% to 6.7% and Kisan Vikas Patra¡¯s rate has been hiked from 6.9% to 7.0%.
The revision comes after nine quarters of the status quo, i.e. unchanged rates. The interest rate on small savings schemes was last revised during the first quarter of 2020-21, when rates were slashed, as per ET report. For the uninitiated, interest rates for small savings schemes are notified on a quarterly basis?and were notified yesterday, i.e. on 29th September 2022, for the Octo-Dec 2022 quarter.
In all, interest rates on seven schemes were kept unchanged while the hike was announced for five schemes.
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The interest rates of small savings schemes are aligned with the yields of the government securities (G-sec) of similar maturity, according to the earlier mentioned press release by the Finance Ministry, as per ET. The Union government reviews the interest rate of small savings schemes every quarter based on the G-Sec yields of the previous three months, according to the mentioned release by the Finance Ministry. This is in line with the recommendations of the Shyamala Gopinath Committee, 2011 to ensure that the interest rates of small savings schemes are market-linked.
The interest rates of the small savings schemes are linked to market yields on G-secs with a lag and are reviewed, fixed on a quarterly basis at a spread ranging from 0-100 basis points over (100 basis points = 1%) and above G-Sec yields of comparable maturities, according to the Reserve Bank of India (RBI), the report mentioned.??
In a separate statement with regard to?the Senior Citizens' Savings Scheme (SCSS), the finance ministry reportedly said that in cases where the SCSS account holder/s passes away and the account is being closed on request of the nominee/legal heir, the rate of interest as applicable on SCSS scheme would be paid till the date of demise of the account holder.
Thereafter, the interest rate applicable on Post Office Savings Account would be paid from the date of demise of the account holder till the date of final closure of the account. Premature closure clause does not trigger on account of the demise of the SCSS account holder, it said.
The premature closure of the account is applicable only when the SCSS account holder requests for closure of own SCSS account before the maturity period. In such cases of premature closure of the account, a penalty would be levied as mentioned in the rules of the SCSS, it mentioned, as per the?ET report.
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