New Delhi: Bowing to the banking lobby, the Central government on Tuesday announced a 0.25 per cent cut in interest rates for short-term post office deposits and Kisan Vikas Patras.
However, the government has left long-term instruments such as Monthly Income Scheme, PPF, senior citizen and girl child schemes untouched.
The new interest rates for these small saving schemes will be applicable from April 1, 2016. Now interest rates of all small saving schemes would be recalibrated on a quarterly basis.
Post office savings of one, two and three year term deposits, Kisan Vikas Patra (KVP) as well as five-year recurring deposits will no longer earn 0.25 per cent higher interest than the government securities of similar tenures.
While the short deposits currently fetch 8.4 per cent interest, KVP doubles the investment in eight years and four months (100 months).
Moreover, the compounding of interest which is biennial in the case of 10-year national saving certificate (discontinued since December 2015), five year National Saving Certificate and Kisan Vikas Patra, will be done on an annual basis from April.
However, Sukanya Samriddhi Yojana, Senior Citizen Savings Scheme and the Monthly Income Scheme which earn interest rate of 0.75 per cent, one per cent and 0.25 per cent respectively over government securities of similar tenure have been left untouched due to their social security goal.
