Small savings rates to be cut

■ Sukanya, senior citizens schemes may be untouched

■ RATES ON shortterm small savings schemes will be aligned with RBI’s policy rates.

■ RATES OFFERED on long- term savings schemes will be protected from ups and downs.

The Central government will revise interest rates for small savings schemes soon to align them with market rates, said economic affairs secretary Shaktikanta Das on Thursday. However, interest rates for the girl child and senior citizens schemes will be kept unchanged.

“The decisions have been taken and notification would be issued in a day or two. Broadly the underlying philosophy of small savings rate changes is to make the rate more frequently market aligned, make it as closely market aligned as possible,” he said.

Small savings rates are linked to Government Securities and readjusted every year. Now they will be a adjusted on quarterly basis, said the secretary.

The move comes after banks refused to lower lending rates as they have to maintain higher deposit rates to match those offered on small saving schemes.

The new rates would be applicable from April 1, 2016. Small saving schemes include Post Office Monthly Income Scheme ( MIS), PPF, post office fixed deposit scheme, Senior Citizens Savings Scheme, Post Office Savings Account and Sukanya Samriddhi Accounts.

“At the same time, taking into consideration, the interest of small savers and some important social sector measures of the government, the rates under the girl child scheme, the senior citizen scheme... will continue as they are. They will have quarterly adjustments but whatever spreads they have over the G- Sec rates will not be altered,” he said.

Similarly all long term savings over five years will continue to have the spread, he said, adding that at the shorter end of the curve the effort has been such that the reduction in rates is passed on and given effect to the system.