Govt raises interest on 5 small savings schemes

After maintaining status quo for 10 straight quarters, the Centre has revised interest rates on five small savings schemes—including the senior citizen savings scheme (SCSS) and Kisan Vikas Patra (KVP)—by up to 30 basis points for the October-December period.

One basis point is one-hundredth of a percentage point.

The department of economic affairs on Thursday hiked the interest rates on three-year post office term deposit to 5.8% from 5.5% and on two-year term deposits to 5.7% from 5.5%. Interest payouts on SCSS and KVP were hiked by 20 bps and 10 bps, respectively. The KVP scheme will now have a tenure of 123 months, implying an interest rate of 7% against 6.9% earlier.

The post office monthly income scheme will pay out a higher interest rate by 10 bps at 6.7% for the December quarter. Other popular schemes such as Public Provident Fund, National Savings Certificate and Sukanya Samriddhi Scheme will continue to pay interest rates of 7.1%, 6.8% and 7.6%, respectively, as before.

These small savings schemes are popular among the salaried class for tax savings, and their returns are higher than bank fixed deposits.