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Informist, Monday, Sept. 30, 2024

--Govt keeps interest rates on small savings schemes unchanged for Oct-Dec 

NEW DELHI – The government left the interest rates on all small savings schemes unchanged for Oct-Dec. This marks the third consecutive quarter that the interest rates have remained the same.

The government had last raised the rate of interest on small savings schemes by 10-20 basis points for the quarter ended March. Between September 2022 and December 2023, the government increased interest rates on the schemes by 60-160 bps. 

The interest rate on Mahila Samman Savings Certificate, which was announced in the Budget for financial year 2023-24 (Apr-Mar), continues to be 7.5%. In her Budget speech, Finance Minister Nirmala Sitharaman had introduced the small savings scheme for two years, up to March 2025. The scheme involves deposits of up to 200,000 rupees for a period of two years at a fixed interest rate of 7.5% with an option of partial withdrawal.

Interest rates on small savings schemes are decided by the government, although any changes to them are expected to be determined by movements in market yields on government securities of similar maturity. Therefore, when market yields on government securities decline, interest rates on small savings schemes should fall. A spread of 0-100 bps is applied to the market yields to arrive at the small savings interest rates.

However, these interest rates have been left unchanged for the last quarter of 2024 even though government bond yields have declined. In Jun-Aug – the reference period for small savings interest rates for Oct-Dec – the yield on 10-year government bonds fell by 12-14 bps, while that on the five-year bond declined by around 25 bps. Meanwhile, the cut-off yield on the 364-day Treasury bill fell by an even larger 32 bps over Jun-Aug.

Interest rates on various small savings schemes for Oct-Dec are as follows:

End

Reported by Krity Ambey

Edited by Ashish Shirke

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