Small Savings Schemes Interest Rates Cut (April 2020)

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Small savings schemes interest rates fell significantly on March 31, 2020 since the Reserve Bank of India’s (RBI) has cut its policy rates in the seventh Bi-monthly MPC meet. The government revised the interest rates on small savings scheme for April-June quarter of FY2020-21 by anywhere between 70-140 bps.

Steep Cut in Small Savings Schemes Interest Rates (April-June 2020)

Introduction

Small savings schemes interest rates fell significantly on March 31, 2020 since the Reserve Bank of India’s (RBI) has cut its policy rates in the seventh Bi-monthly MPC meet. The government revised the interest rates on small savings scheme for April-June quarter of FY2020-21 by anywhere between 70-140 bps.

In this article we will see the updated Interest Rates on Small Savings Schemes – EPF, PPF, SCSS, SSY, NSC, KVP for Q1 FY2020-21 (April-June).

Financial Planning Knowledge Bank by Invest Yadnya
Financial Planning Knowledge Bank by Invest Yadnya

If you are planning to invest in any of these savings schemes, you should know about their interest rates. For all the small savings schemes interest rates are aligned with Government security rates of similar maturity, with a little spread.

Different Small Savings Schemes

Small Savings Schemes
Small Savings Schemes

Below you can find the interest rates for various small savings schemes:-

Public Provident Fund (PPF)

  • PPF is a long-term investment for a period of 15 years. The government will review the PPF rates quarterly.
  • Interest rates on PPF Scheme have been brought down by 80 bps from 7.9% to 7.1% for the 1st quarter of FY2020-21 (April-June)
  • Compounding Frequency : Annually
Public Provident Fund (PPF) Interest Rates Q1 FY2020-21
Public Provident Fund (PPF) Interest Rates Q1 FY2020-21

Employee Provident Fund (EPF)

  • Employee Provident Fund is a long term investment tool. Interest rate on EPF contributions is revised every year.
  • The interest rate on investments in EPF was 8.65% per annum for FY2018-19, the EPF interest rates have come down from 8.65% to 8.50% for FY2019-20. It is lowest since FY2012-13.
Employee Provident Fund (EPF) Interest Rates FY20
Employee Provident Fund (EPF) Interest Rates FY20

Senior Citizen Savings Scheme (SCSS)

  • The government will review the SCSS rates quarterly. But, once a subscriber has enrolled, the rates will remain unchanged for the tenure. Deposit has a maturity period of 5 years.
  • The interest rate for Senior Citizens Savings Scheme is slashed by 120 bps from 8.6% to 7.4% per annum for 1st quarter of FY2020-21 (April-June)
  • Compounding Frequency : Annually
Senior Citizen Savings Scheme (SCSS) Interest Rates
Senior Citizen Savings Scheme (SCSS) Interest Rates Q1 FY2020-21

National Savings Certificate (NSC)

  • From FY2016–17 onwards, the interest rate on the NSC will be revised every quarter as per the prevailing government-bond rates. However, once you have invested in the NSC, the rate applicable that time will remain the same throughout the tenure of the investment. Certificate comes with the maturity period of 5 years.
  • The interest rate on National Savings Certificate ie. NSC (5 year VIII Issue) has been slashed by 110 bps from 7.9% to 6.8% for 1st quarter of FY2020-21 (April-June).
  • It is compounded annually but is payable at maturity.
  • The 10 year option of the NSC has been discontinued.
National Saving Certificate (NSC) Interest Rates Q1 FY2020-21
National Saving Certificate (NSC) Interest Rates Q1 FY2020-21

Kisan Vikas Patra (KVP)

  • The KVP rates will be notified every quarter as per the prevailing government security rates. Scheme aims at doubling the investment in 124 months (10 years 4 months) with the applicable interest rate.
  • However, once you have made an investment, the rate will remain unchanged for you throughout the tenure.
  • KVPs slashed interest rate from 7.60% to 6.90% for 1st quarter of FY2020-21 (April-June) same as last quarter which is compounded annually.
  • Compounding Frequency : Annually

Sukanya Samriddhi Yojana (SSY)

  • The interest rate for the SSY is to be 75 basis points over the ten year government bond yield. The rates will be revised every quarter and the new rates will be applicable to all the subscribers.
  • Scheme will continue to offer the same interest rate of 8.40% per annum for 1st quarter of FY2020-21 (April-June) compounded annually which is calculated on a yearly basis.
Sukanya Samriddhi Yojana Interest Rates for Q1 FY2020-21
Sukanya Samriddhi Yojana Interest Rates for Q1 FY2020-21

Conclusion

  • Small savings schemes interest rates have been reduced by Government to bring them in consonance with the interest rates prevailing in the economy.
  • Shyamala Gopinath Committee had suggested that the interest rates of different small savings schemes should be 25-100 bps higher than the yields of the government bonds of similar maturity.
  • Thus, after the magnificent policy repo rate cut by RBI is its seventh Bi-monthly Monetary Policy Committee FY2019-20, the interest rates of these schemes have been slashed by between 70 bps and 140 bps for the April-June quarter of 2020-21.
  • Department of Economic Affairs, Ministry of Finance has made an announcement regarding it on March 31, 2020.
  • Those who depend primarily on income from these schemes may now need to revisit their portfolio. Individuals with investments in fixed deposits or small savings schemes should consider the real rate of return from these instruments before investing.

6 thoughts on “Small Savings Schemes Interest Rates Cut (April 2020)

  1. I start sukanya smiridhi yojana on my daughter name in 2015,
    I want to known as of today if I deposit any money I will get the current interest rate or the one which I got while enroll time.

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