Interest rates up on small savings

As a result of a 50 basis point hike in repo rate by the Reserve Bank of India over the last three months and a subsequent increase in deposit rate offerings by banks, the Central Government has announced up to 40-basis point hike in interest rate of small savings schemes for the third quarter i.e October-December 2018.

With the first hike in 30 months, in the interest offering on small savings schemes, the public provident fund (PPF) will now earn 8 per cent w.e.f from October 1 as against 7.6 per cent in the July-September quarter.

The interest offering on the 5-year senior citizen savings scheme will be 8.7 per cent as against 8.3 per cent for the quarter ending September.

The flagship Sukanya Samriddhi Yojana will earn an interest rate of 8.5 per cent in the next quarter.

The 5-year national savings certificate (NSC) will earn 8 per cent now and the 5-year time deposit will earn 7.8 per cent.

The hike in rates of small savings will also increase their attractiveness over bank deposits significantly. Currently a 5-year term deposit with the State Bank of India earns 6.85 per cent.