Despite the pressure and subsequent withdrawal of moves on taxing PF, the government on Friday reduced the interest rates payable on small savings including PPF and Kisan Vikas Patra (KVP). The move is to bring them closer to market rates.
As a part of its February 16 decision to revise interest rates on small savings every quarter, the interest rate on Public Provident Fund (PPF) scheme will be cut to 8.1 per cent for the period April 1 to June 30, from 8.7 per cent, at present.
Similarly, the interest rate on KVP will be cut to 7.8 per cent from 8.7 per cent, according to a Finance Ministry order.
The interest rate on Post Office savings has been retained at 4 per cent and that for term deposits of one to five years has been cut.
The five-year National Savings Certificates will now earn an interest rate of 8.1 per cent from April 1 as against 8.5 per cent, at present.
A five-year Monthly Income Account will fetch 7.8 per cent as opposed to 8.4 per cent now. Girl-child saving scheme, Sukanya Samriddhi Account will see interest rate of 8.6 per cent as against 9.2 per cent.
Senior citizen savings scheme of five-year would earn 8.6 per cent interest compared with 9.3 per cent.
"On the basis of the decisions of the government, interest rates for small savings schemes are to be notified on quarterly basis," the order said announcing the rates for the first quarter of fiscal 2016-17.
Post Office term deposits of one, two and three years command an interest rate of 8.4 per cent but from April 1, a 1-year time deposit will get 7.1 per cent, 2-year time deposit will earn 7.2 per cent and 3-Year time deposit will attract interest of 7.4 per cent. Five-year time deposit will fetch 7.9 per cent interest in the first quarter as against 8.5 per cent while the same on five-year recurring deposit has been slashed to 7.4 per cent from 8.4 per cent.
The government had on February 16 announced moving small saving interest rates closer to market rates. On that day, rates on short-term post office deposits was cut by 0.25 per cent but long-term instruments such as MIS, PPF, senior citizen and girl child schemes were left untouched.