After RBI slashed the repo rate, the government has now sharply cut down the interest cuts for small savings schemes in the first quarter of 2020-21.
Mumbai| The coronavirus crisis has impacted millions of lives in India forcing the state and central governments to take necessary measures to provide relief in this situation. Although the 75 basis point interest rate cut announced by the RBI is likely to result in drastically low interest income for millions of those who invest in such a small savings scheme.
After RBI slashed the repo rate, the government has now sharply cut down the interest cuts for small savings schemes in the first quarter of 2020-21.
Beginning from Wednesday, small savings schemes such as Public Provident Fund(PPF), National Savings Certificate (NSC), Kisan Vikas Patra (KVP) will earn lower interest in this period.
Though the interest rate on savings deposit was kept at 4 percent, the PPF saw a slashing of 80 basis points to 7.1 percent. The interest provided on PPF in the last quarter was 7.9 percent.
Meanwhile, the interest rate on five-year NSC has been sharply cut down to 7.4 percent from the previous 8.4 percent, a 100 basis point reduction.
The interest rates on 5 senior citizens’ schemes have also been brought down by 120 basis points to 7.4 percent from 8.6 percent.
This comes out as bad news for those investing in a small savings scheme, especially senior citizens who are dependent on fixed income schemes.
Fixed-income investors, largely retired and senior citizens will now earn less on their investment schemes as the interest rates have been slashed.
Many of these small investment schemes are taken benefit of by a big chunk of people across the country, who will now have to restructure their whole investment plan as the interest on the existing schemes have been reduced.
Although DEA Secretary Atanu Chakraborty hinted at the revision of popular small savings schemes in February, reported news agency PTI.
“In India, right now we have about Rs 12 lakh crore in small savings schemes and roughly Rs 114 lakh crore in bank deposits. So the liability side of banks is getting affected by Rs 12 lakh crore. When banks say this, it seems a bit of a tail wagging the dog situation,” Chakraborty told the PTI.
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