With hardening of interest rates in the country and abroad, the government on Thursday decided to pass some benefits to select depositors of certain small savings schemes – senior citizens savings scheme, Kishan Vikas Patra (KVP), monthly income account scheme, and time deposits for two and three years – between 10 and 30 basis points. One basis point is one hundredth of a percentage point.
Interest rates have not been changed for other popular schemes such as Public Provident Fund (7.1%), Sukanya Samriddhi Account Scheme (7.6%), savings deposits (4%) and National Savings Certificates (6.8%), according to a finance ministry notification.
“The rates of interest on various Small Savings Schemes for the third quarter of financial year 2022-23 starting from 1st October, 2022 and ending on 31st December 2022 have been revised…, it said. The government revised the interest rates after maintaining status quo for nearly nine quarters. The rates were last revised downwardly in the first quarter of 2020-21.
While interest rate for senior citizen savings scheme has been raised by 20 basis points from 7.4% to 7.6%, both tenure and interest rates of KVP has been hiked. Now interest rate for KVP is 7% for the maturity period of 123 months, compared to the earlier 6.9% for maturity period of 124 months.
As per the revised rate, a three-year time deposit with post offices will earn 5.8% (from 5.5%), but for a two-year time deposit the rate increase is only 20 basis points (from 5.5% to 5.7%). There is no change in the rates of one-year and five-year time deposits. They will continue to fetch interest rates of 5.5% and 6.7%, respectively.
The rates of small savings have been changed to factor in recent hikes in interest rates by commercial banks after the Reserve Bank of India (RBI) raised the benchmark policy rate by 140 basis points since May this year.
In a separate statement with regard to Senior Citizens’ Savings Scheme (SCSS), the finance ministry said in cases where the SCSS account holder/s passes away and the account is being closed on request of the nominee/legal heir, the rate of interest as applicable on SCSS scheme would be paid till the date of demise of the account holder.
Thereafter, the interest rate applicable on Post Office Savings Account would be paid from the date of demise of the account holder till the date of final closure of the account.
Premature closure clause does not trigger on account of demise of the SCSS account holder, it said.
The premature closure of the account is applicable only when the SCSS account holder requests for closure of own SCSS account before the maturity period. In such cases of premature closure of the account, a penalty would be levied as mentioned in the rules of the SCSS, it said.
(With inputs from agencies)