With authorities securities (G-sec) yield going up, rates of interest on Public Provident Fund (PPF) and different small financial savings deposits could go up quickly. These charges are reviewed quarterly and are set for assessment by the tip of this month. Currently, the rate of interest of PPF stands at 7.1 per cent whereas that of presidency securities yield has already crossed 7.3 per cent. “The rate of interest of the Public Provident Fund (PPF) could also be hiked quickly,” stated Amit Gupta, MD, SAG Infotech.
The rate of interest on small financial savings schemes has not been revised for the final 27 months. The charges had been final revised downwards within the April-June 2020 quarter.
Amit Gupta stated that there’s a direct relation between small financial savings investments and Government-Sec returns. “That’s why this enhance in G-Sec yield won’t solely enhance the rate of interest on PPF however will even have an effect on the charges of small financial savings investments,” he said.
Vivek Iyer, Partner, Grant Thornton Bharat said that globally rising inflation is a phenomenon that eats into the savings of citizens, globally. Monetary policy demands that interest rates be increased to manage inflation effectively. If the inflation is transitory, then the rate increases are not passed on to the savers.
However, inflation seems to be here to stay for sometime and increasing the PPF rates is the right approach keeping in the mind the inherent purchasing power that inflation erodes, he added.
Apart from PPF, other small savings products include National Savings Certificates (NSC), KVP, Time-deposits, Senior Citizens Savings Scheme, and Sukanya Samriddhi Yojana.
The rate of interest in these small savings schemes are distributed rates and are connected to market yields on government securities with an interval, and get fixed at quarterly intervals around and above the g-sec yields of comparable maturity and spread of 0-100 bps. “It is expected that with the rise in G-sec yield, investors in small savings products including National Savings Certificate, Time-Deposit, KVP, Public Provident Fund, Sukanya Samriddhi Yojana and Senior Citizen Savings Scheme may also see an increase in their investment rates,” Amit Gupta added.
PPF, SSY and different small financial savings scheme newest rates of interest
Public Provident Fund (PPF) – 7.1 per cent
National Savings Certificate (NSC) – 6.8 per cent
One-year time period deposit scheme -5.5 per cent
Senior residents’ financial savings scheme (SCSC)- 7.4 per cent.
Sukanya Samriddhi Yojana -7.6 per cent.
Five yr recurring deposit – 5.8 per cent
Savings deposits curiosity rate- 4 per cent
Term deposits of 1 to 5 years – 5.5-6.7 per cent
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