The National Savings Schemes (NSSs) are one of the very popular saving schemes in India. These are regulated by the Ministry of Finance. They offer complete security of investment combined with attractive returns.
These schemes also act as instruments of financial inclusion especially in the geographically inaccessible areas due to their implementation primarily through the Post Offices, which have reach far and wide.
It is estimated that nearly $137 billion or over Rs. 9 lakh crore are tied up in small savings schemes.
Some of the very popular schemes which fall under NSS are as below
- PPF (Public Provident Fund)
- Sukanya Samriddhi Scheme
- Monthly Income Scheme (Monthly Income Account)
- Senior Citizen Savings Scheme
- KVP (Kisan Vikas Patra)
- NSC (National Savings Certificate)
- Time Deposits &
- Recurring Deposits
Small Saving Schemes Interest Rates & New norms w.e.f. April 2016
Let’s have a look at what are the changes that have been implemented regarding Small saving Schemes’ interest rates;
- As per the current norms, the interest rates of these small saving schemes are linked to the yield of government bonds of comparable maturity (with a small mark-up) and are revised once a year. Mark-up here refers to ‘Spread’.
For example : The interest rate on PPF has a mark-up of 25 basis points over and above the G-Sec rate (Govt Bonds rate). So, if comparable maturity G-sec rate is say 8.5% then the interest rate on PPF will be determined as 8.75%. (One Basis Point is equivalent to 0.01%)
- The government has decided to revise Small Saving Schemes Interest Rates on a Quarterly basis.
- The saving schemes like Sukanya Samriddhi, Senior Citizen Savings Scheme and Monthly Income Scheme enjoy ‘spreads’ over the G-sec rate of comparable maturity viz., of 75 basis points (0.75%), 100 bps (1%) and 25 bps respectively. These mark-ups / spreads have been left untouched by the Government.
- Similarly the spread of 25 basis pointss that long term instruments, such as the 5 yr Term Deposit, 5 year National Saving Certificates (NSC) and Public Provident Fund (PPF) currently enjoy over G-Sec of comparable maturity, have been left untouched.
- The 25 bps (0.25%) spread that 1 year, 2 year and 3 year Term Deposits, KVPs and 5 yr Recurring Deposits have over comparable tenure Government securities, shall stand removed w.e.f. April 1, 2016 to make them closer in interest rates to the similar instruments offered by the banking sector.
- The interest rates on a 10 year National Saving Certificate (discontinued since 20-12-2015), 5 year National Saving Certificate and Kisan Vikas Patra is compounded on half-yearly basis. This shall be done on an annual basis from 1st April, 2016.
- Premature closure of PPF accounts shall be permitted in genuine cases, such as cases of serious ailment, higher education of children etc,. This shall be permitted with a penalty of 1% reduction in interest payable on the whole deposit and only for the accounts having completed five years from the date of opening. (Read : ‘PPF Account pre-mature closure – latest rules, eligibility & amount calculation‘)
Latest Post Office Small Saving Schemes Interest rates FY 2018-19 (July to Sep 2018)
Due to the increase in interest rates in the economy by the RBI, it was expected that the government would increase interest rates on small savings schemes as well. But, the Govt has kept the rates unchanged and there is no hike in interest rates of Small Savings Schemes.
The rates of interest on various small savings schemes for the second quarter of financial year 2018-19 starting 1 July 2018 shall remain unchanged from those notified for the first quarter of financial year 2018-19.
The rates of interest applicable on various small savings schemes for the quarter from July to September 2018 effective from 1.07.2018 would be as below;
- The new rate of Interest on Sukanya Samriddhi Scheme (SSA ) is 8.1%.
- The new rate of Interest on PPF (Public Provident Fund) would be 7.6%.
- The interest rate on Senior Citizen Savings Scheme (SCSS) has been retained same at 8.3%.
- New interest rate on Kisan Vikas Patra (KVP) would be 7.3%.
- The rate of interest on 5 year National Savings Certificate (NSC) is 7.6%.
- New interest rate on post office MIS (Monthly Income Scheme) is 7.3%.
- The rate of interest on a 5 year Post Office RD (Recurring Deposit) would be 6.9%.
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Latest updates :
- Govt allows all Public Sector Banks and three Private Banks (ICICI, HDFC & Axis) to accept deposits under Small Savings Schemes like National Savings Certificate (NSC), Recurring Deposits and Monthly Income Scheme (MIS).
- It has now been decided to extend the last date to link Aadhaar with Small Savings Schemes from 31 March, 2018 indefinitely, until further orders.
Continue reading :
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- Are you aware of this interesting fact on Bank Fixed Deposits?
- Tax Saving investment options u/s 80c : In whose name can they be invested?
- RBI hikes interest rates | RBI’s Rate hike & its Impact on the Economy & your Personal Finances
(Source : Min of Finance Notification) (Post first published on 29-March-2018)