Technoglitch
Core Member
The government will lower interest rates on small savings schemes with a tenure of less than five years, effective 1 April, while maintaining the interest spread for social security schemes targeted towards girl children and senior citizens, economic affairs secretary Shaktikanta Das said on Thursday.
“From now on, such interest rates will be reviewed every quarter instead of the current practice of reviewing them annually. A notification to this effect will be issued in a day or two,” Das said.
The interest rates of small saving schemes are linked to the yield of government bonds. Small savings schemes include the Kisan Vikas Patra, National Savings Certificate, the Senior Citizens Savings Scheme and post office term deposits.
The move is expected to allow banks to pass on the policy rate cuts by the central banks through lower lending rates. Banks blame high short-term savings rates on small savings schemes as a reason for high cost of deposits which prohibit them from significantly passing on policy rate cuts to borrowers.
While the Reserve Bank of India (RBI) has cut policy rates by 125 basis points (bps) in the last one year, banks have passed on the benefit to borrowers by lowering lending rates only by 70 bps. One basis point is a hundredth of a percentage point.
Govt to lower interest rate on small saving schemes - Livemint
“From now on, such interest rates will be reviewed every quarter instead of the current practice of reviewing them annually. A notification to this effect will be issued in a day or two,” Das said.
The interest rates of small saving schemes are linked to the yield of government bonds. Small savings schemes include the Kisan Vikas Patra, National Savings Certificate, the Senior Citizens Savings Scheme and post office term deposits.
The move is expected to allow banks to pass on the policy rate cuts by the central banks through lower lending rates. Banks blame high short-term savings rates on small savings schemes as a reason for high cost of deposits which prohibit them from significantly passing on policy rate cuts to borrowers.
While the Reserve Bank of India (RBI) has cut policy rates by 125 basis points (bps) in the last one year, banks have passed on the benefit to borrowers by lowering lending rates only by 70 bps. One basis point is a hundredth of a percentage point.
Govt to lower interest rate on small saving schemes - Livemint
