The interest rates on public provident fund (PPF) and other small savings deposits might be increased. The interest rates are usually reviewed quarterly and will be reviewed at the end of this month.
At present, the interest rate of PPF stands at 7.1 per cent. The government securities yield has already crossed 7.3 per cent, Hindustan Times’ business publication Live Mint reported.
The interest rates on small savings schemes were last revised in the April-June 2020 quarter, and it has been 27 months since then. Amit Gupta, managing director, SAG Infotech, told Live Mint there is a direct relation between the small savings investments and the government security returns. The increase in government securities will not only increase the interest rate on PPF but also affect the interest rates of small savings investments, the market expert added.
On the other hand, Vivek Iyer of Grant Thornton Bharat told the publication that the globally rising inflation eats into the savings of citizens. Adding further, he said that the monetary policy demands that the interest rates should be hiked to manage inflation. Iyer backed increasing the PPF rates as a right approach due to inflation which erodes the purchasing power.
The savings schemes include National Savings Certificates, Kisan Vikas Patra, time-deposits, senior citizens savings scheme and the Sukanya Samriddhi Yojana. The interest rates of NSC stands at 6.8 per cent, while that of one-year term deposit scheme is 5.5 per cent. The senior citizens saving scheme has an interest rate of 7.4 per cent, the Sukanya Samriddhi Yojana at 7.6 per cent, Live Mint reported.
The savings deposit interest rate is set at four per cent while term deposits of 1-5 years have interest rates ranging between 5.5 and 6.7 per cent.
Gupta added that with the increase in government securities yield, the investors in small savings schemes will also see a increase in their investment rates.