No rate change on small savings


The government on Thursday opted to leave interest rates on small savings vehicles like the Public Provident Fund unchanged for April-June 2022, maintaining the status quo for the eighth consecutive quarter.

The Reserve Bank of India had pointed to the need to cut interest rates on these programs by between 0.09 and 1.18 percentage points in the coming quarter. However, the resurgence of inflation above 6% in the last two months and the rise in oil prices may have dampened against an unpopular move, especially after the Employees’ Provident Fund rate for 2021-22 had previously risen to 8.1% from 8.5% % had been slashed this month, the lowest in over 42 years.

Interest rates for various small savings plans were last reduced in the range of 0.5 to 1.4 percentage points in April 2020, an announcement of further cuts in the range of 0.4% to 1.1% as of March 31, 2022 was withdrawn until April 1 .

The quarterly interest rate paid on one-year term deposits remains at 5.5%, the senior savings program will continue to yield 7.4%, while the yield on the Sukanya Samriddhi account program is 7.6%. The PPF yield remains at 7.1%.

ICRA chief economist Aditi Nayar said small savings rates could be raised in the second half of the year after expected rate hikes by the central bank through August and October.

“Given the rise in government bond yields over the past three months, as well as the rise in bank deposit rates, we had anticipated a low probability of an upward revision in small savings rates for the coming quarter,” she noted.

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