Published On: Fri, Dec 30th, 2022

Centre hikes interest on senior citizen savings scheme, Post office savings schemes, NSC, KVP

New Delhi: The government on Friday raised interest rates on most post office savings schemes that do not get income tax benefits in line with the firming of interest rates in the economy.

This is the second quarter of an increase in a row in interest rates for some schemes

While the interest rate for popular PPF and girl child savings scheme Sukanya Samriddhi were retained, rates for deposits up to 5 per cent as well as NSC, senior citizen savings scheme and Kisan Vikas Patra (KVP) where income accruing is taxable have been hiked by up to 1.1 percentage points, according to a finance ministry notification.

This is the second quarter of an increase in a row in interest rates for some schemes. This follows a status quo or unchanged rates for nine straight quarters. Interest rates for small savings schemes are notified on a quarterly basis. With the revision, a one-year term deposit with post offices would earn 6.6 per cent, for two years (6.8 per cent), three years (6.9 per cent) and five years (7 per cent).

Senior Citizen Savings scheme will earn 40 basis points more at 8 per cent during the January-March period, the notification said. With regard to KVP, the government has hiked the interest rates to 7.2 per cent, thereby maturing in 120 months. Currently, KVP yields 7 per cent rate with a maturity period of 123 months.

Monthly Income Scheme would earn 40 basis points more at 7.1 per cent, while National Savings Certificate (NSC) has been raised by 20 basis points to 7 per cent. The interest rate on girl child savings scheme Sukanya Samriddhi Yojana was retained at 7.6 per cent, and that for Public Provident Fund (PPF) it has been kept unchanged at 7.1 per cent. Savings deposits will continue to earn 4 per cent per annum.

The Reserve Bank since May has raised the benchmark lending rate by 2.25 per cent to 6.25 per cent, prompting banks to raise interest rates on deposits as well. RBI raised repo rate or short-term lending rate by 35 basis points earlier this month. This was the fifth consecutive rate hike after a 40 basis points increase in May and 50 basis points hike each in June, August and September. In all, the RBI has raised the benchmark rate by 2.25 per cent since May this year.

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