Govt raises interest rates on small savings

New Delhi: The government on Friday raised interest rates on most post office saving schemes by up to 0.7 per cent for the April-June 2023 quarter in line with the firming of interest rates in the economy. While the interest rates for popular PPF and savings deposits have been retained at 7.1 per cent and 4 per cent, respectively, there has been an increase between 0.1 per cent and 0.7 per cent in other saving schemes, a finance ministry statement said.

The highest increase was in the interest rate of the National Savings Certificate (NSC), which will now attract 7.7 per cent, up from 7 per cent, for the April 1 to June 30, 2023 period. The new rate for the girl child savings scheme Sukanya Samriddhi has been increased to 8 per cent from 7.6 per cent. The interest rate on the senior citizen savings scheme and Kisan Vikas Patra (KVP) is 8.2 per cent (up from 8 per cent) and 7.5 per cent (up from 7.2 per cent), respectively. KVP will now mature in 115 months as against 120 months earlier.

Interest rates were increased in the last quarter as well. Interest rates for small savings schemes are notified on a quarterly basis. With the revision, a one-year term deposit with post offices would earn 6.8 per cent (up from 6.6 per cent), for two years -- 6.9 per cent (up from 6.8 per cent), three years -- 7 per cent (up from 6.9 per cent) and five years -- 7.5 per cent (7 per cent). The interest rate on Public Provident Fund (PPF) has been retained at 7.1 per cent and that of the savings deposit at 4 per cent. Monthly Income Scheme has been increased by 30 basis points to 7.4 per cent. The Reserve Bank since May has raised the benchmark lending rate by 2.5 per cent to 6.5 per cent, prompting banks to raise interest rates on deposits as well.

The RBI raised the repo rate or short-term lending rate by 25 basis points last month. This was the sixth consecutive rate hike after a 40 basis points increase in May and 50 basis points hike each in June, August and September. In all, the RBI has raised the benchmark rate by 2.5 per cent since May last year.