Govt cuts in­ter­est rate on PPF to 8.1% from 8.7%

Sharp cuts in in­ter­est rates on other sav­ings schemes too

Hindustan Times ST (Mumbai) - HT Navi Mumbai Live - - FRONT PAGE - HT Correspondent let­ters@hin­dus­tan­times.com

NEW DELHI: The govern­ment an­nounced on Fri­day sharp cuts in in­ter­est earned on a range of state-run sav­ings schemes in­clud­ing the pop­u­lar pub­lic prov­i­dent fund, the Kisan Vikas Pa­tra and se­nior-ci­ti­zen de­posits.

Lower ear nings on th­ese schemes could force mil­lions of house­holds to shuf­fle their sav­ings port­fo­lios. Middle-class In­di­ans rely on small in­vest­ment op­tions of­fered at post of­fices for so­cial se­cu­rity and park­ing sur­plus cash.

To­tal out­stand­ing de­posits in such schemes stand at over Rs9 lakh crore. In­di­ans have been park­ing more than Rs50,000 crore an­nu­ally as ad­di­tional sav­ings in th­ese in­stru­ments over the last three years. The govern­ment de­pends on this pool of money, also called the Na­tional Small Sav­ings Fund, to fi­nance part of its bud­get.

Eco­nomic affairs sec­re­tary Shak­tikanta Das de­scribed the de­ci­sion to cut in­ter­est rates as a “nor­mal ex­er­cise of re­set­ting” rates in March ev­ery year. The move will en­able banks to re­duce lend­ing rates.

The rate of in­ter­est on the PPF ( Pub­lic Prov­i­dent Fund) scheme has been cut to 8.1% for in­vest­ments made dur­ing April 1-June 30, 2016 from 8.7% cur­rently.

In­vest­ments in the Kisan Vikas Pa­tra will earn a re­turn of 7.8% from 8.7% at present, while se­nior- cit­i­zens sav­ings scheme de­posits of five years would earn 8.6% in­ter­est com­pared with 9.3% cur­rently.

The se­nior- cit­i­zens sav­ings scheme will fetch 8.6% per an­num com­pared to 9.3% cur­rently, which could up­set fi­nan­cial plans of pen­sion­ers and in­di­vid­u­als who are near­ing re­tire­ment age.

Like­wise, the Sukanya Sam­ridhi Yo­jana will give a re­turn of 8.6% from 9.2% at present. The scheme launched last year was specif­i­cally de­signed to en­cour­age par­ents to set aside money for girl chil­dren to fund their education and other fu­ture needs. The govern­ment last month an­nounced a de­ci­sion to move to a new sys­tem for in­ter­est rates on state-ad­min­is­tered schemes, mak­ing th­ese mar­ketlinked. Mar­ket rates move in tan­dem with govern­ment bond rates that are cur­rently on a down­ward trend.

CON­TIN­UED ON P12

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