The government has effected minor hikes of 0.1% to 0.3% in interest rates payable on five small savings instruments, including Kisan Vikas Patra, Senior Citizens’ Savings scheme and time deposits for two and three years, for the quarter beginning 1 October, according to a statement.
The interest rate for senior citizens savings scheme has been hiked to 7.6% from 7.4%, for Kisan Vikas Patra to 7% from 6.9% and also increased for two, three-year time deposits.
How are interest rates of PPF, Sukanya Samriddhi Accounts, other small savings scheme calculated?
The interest rates of small savings schemes are aligned with the yields of the government securities (G-sec) of similar maturity, according to the earlier mentioned press release by the Finance Ministry. The Union government reviews the interest rate of small savings schemes every quarter based on the G-Sec yields of the previous three months, according to the mentioned release by the Finance Ministry. This is in line with the recommendations of the Shyamala Gopinath Committee, 2011 to ensure that the interest rates of small savings schemes are market-linked.
The interest rates of the small savings schemes are linked to market yields on G-secs with a lag and are reviewed, fixed on a quarterly basis at a spread ranging from 0-100 basis points over (100 basis points = 1 per cent) and above G-Sec yields of comparable maturities, according to the Reserve Bank of India (RBI).