RBI and banks have been pressing for reduction in small savings rates
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New Delhi: Finance ministry is likely to take a call on interest rate on various small savings like Post Office savings and Public Provident Fund (PPF) by December end. RBI and banks have been pressing for reduction in small savings rates and bring them in line with market rate for effective transmission of monetary policy.
Banks have been urging the government that their deposit rates are high because small saving scheme are offering savers higher returns.
Banks have told the government that until their deposit rates don’t come down, they will not be able to pass fully benefit of lower repo rate by RBI to consumers and industry. Most small saving instruments pay an interest rate of 8.75 per cent, compared to 7.5 per cent on deposits at SBI.
However, last week finance minister Arun Jaitley had said that government will cut interest rate on small savings “cautiously” so as to protect vulnerable sections like retired employees. He cited the example of the girl child scheme launched last year to saying that “if after one year you immediately slash it (interest rate) down radically, (it) may not be very politically prudent.
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( Source : deccan chronicle )
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