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Govt notifies PPF NSC SSY and Other Small Savings Scheme Interest Rates for Q2 2020-21



govt-notifies-ppf-nsc-ssy-and-other-small-savings-scheme-interest-rates-for-q2-2020-21

Govt notifies PPF NSC SSY and Other Small Savings Scheme Interest Rates for Q2 2020-21: The interest rate on Public Provident Fund (PPF), Sukanya Samriddhi Account, Kisan Vikas Patra, National Savings Certificate (NSC) and Other Small Savings Scheme have been kept unchanged for the second quarter of the fiscal year 2020-21 commencing from 1st July, 2020. PPF will continue to earn interest of 7.1 per cent for the second quarter of FY 2020-21.
The government has notified the interest rates on the Small Savings Scheme for the 2nd quarter of FY 2020-21 on 01.07.2020. In the preceding quarter, there was a sharp reduction of the interest rates on the Small Savings Scheme including the most popular investment scheme PPF by 70 bps to 140 bps across all the investment products.

It was expected that there will be a big cut in the rate of interest of various small savings schemes to align the rate of interest on these schemes to the prevailing market rates on other savings instruments.

There was a reduction in the rate of interest of all the small savings schemes including PPF (Public Provident Fund), NSC (National Savings Certificate), SSY (Sukanya Samriddhi Yojana) and others except savings deposit as compared to the rate of interest for the preceding quarter between January and March quarter of FY 2019-20. All these rates have been kept unchanged and the status quo is maintained for the second quarter. 

The savings deposit will continue to earn the same rate of interest of 4 per cent. This is despite the fact that banks have reduced interest on savings account drastically. State Bank of India has slashed the interest rate on savings account to 2.7 per cent (w.e.f. 31.05.2020) whereas ICICI Bank is offering 3 per cent. In contrast, Bandhan Bank is offering a higher interest rate of a minimum of 4% on its savings accounts.

This was notified by the Department of Economic Affairs under the Ministry of Finance in a circular dated June 30, 2020.

The interest rate on small savings schemes including PPF is revised on a quarterly basis.

For a Term Deposit of 5 years - 10 years term, the State Bank of India is offering an interest rate of 5.4 per cent which is increased by 80 basis points to 6.2 per cent for senior citizen deposit holders. (Source: www.sbi.co.in)

Compared to it, the PPF interest rate stood at 7.1 per cent whereas the 5-year Term Deposit was offering an interest rate of 6.7 per cent. The lowest interest rate it offers for a Term Deposit was 5.5 per cent.

The interest rate on the National Savings Certificates has been kept unchanged at 6.8 per cent which was slashed by 110 bps in the first quarter.

The Kisan Vikas Patra will earn interest of 6.9 per cent and it will take 124 months to double the principal amount of investment.

The Sukanya Samriddhi Account Scheme will continue to fetch a higher rate of interest of 7.6 per cent compared to other small savings schemes in the general category. 

The flagship scheme for senior citizens namely, Senior Citizen Savings Scheme will fetch a rate of interest of 7.4 per cent. In this scheme, interest is paid quarterly.

The interest rate on 5-year Recurring Deposit which suffered the highest reduction in the interest rate of 140 bps in the preceding quarter shall continue to earn an interest rate of 5.8 per cent.

For a 5-year time-deposit, the interest rate is 6.7 per cent. For 1-year, 2-years and 3-years time deposits, the rate of interest is 5.5 per cent. A similar time deposit of 5-year Recurring Deposit will earn an interest rate of 5.8 per cent.

For a conservative investor, PPF and other small savings schemes like Sukanya Samriddhi Account and Senior Citizen Savings Scheme offer good returns. These products offer guaranteed, safe, and risk-free returns.

The 5-year Post Office Monthly Income Scheme (MIS), where interest is paid out monthly, offers 6.6 per cent.

Small savings rates are revised every quarter and if there is no change in the rates, the finance ministry retains the existing rates.

Small Savings Scheme Interest Rates for Q2 of 2020 -21
InstrumentRate of Interest from
01.04.2020 to 30.06.2020
Rate of Interest from
01.07.2020 to
30.09.2020
Compounding Frequency
Savings Deposit44Annually
1 year Time Deposit5.55.5Quarterly
2 year Time Deposit5.55.5Quarterly
3 year Time Deposit5.55.5Quarterly
5 year Time Deposit6.76.7Quarterly
5 year Recurring Deposit5.85.8Quarterly
Senior Citizen Savings Scheme7.47.4Quarterly and Paid
Monthly Income Account6.66.6Monthly and Paid
National Savings Certificate6.86.8Annually
Public Provident Fund Scheme7.17.1Annually
Kisan Vikas Patra6.9
(will mature in 124 months)
6.9
(will mature in 124 months)
Annually
Sukanya Samriddhi Account Scheme7.67.6Annually

Recently, the government has introduced a new PPF Scheme, 2019 to replace all the previous PPF rules.

Under the new scheme, contributions into a PPF in a year can be deposited without any restriction. Earlier, there was a limit of a maximum of 12 contributions in a year. The maximum amount that can be deposited in a year is capped at Rs. 1,50,000 whereas the minimum amount of contribution is Rs. 500. Any deposit can be made in multiples of Rs. 50, instead of Rs. 5 under the rule of 1968.

Further, a discontinued (dormant) account will also earn the same rate of interest as an active account earns. But a penalty of 1 per cent of interest rate will be applicable for premature closure of the account. An account can be closed prematurely only after 5 years and under specified circumstances.

Interest on loan taken against the PPF account is reduced by 100 basis points to 1 per cent from 2 per cent earlier.

Prior to 2016, the interest rates were announced once which was applicable for the full year. Interest rates were revised every year. From FY 2016-17, it was decided by the government that the interest rate on small savings schemes will be notified on a quarterly basis.

Similarly, Sukanya Samriddhi Account Scheme, 2019, Senior Citizens Savings Scheme, 2019, Kisan Vikas Patra Scheme, 2019 were introduced replacing the earlier respective rules.


Read the full text of the circular:

F.No.1/4/2019-NS
Government of India
Ministry of Finance
Department of Economic Affairs
(Budget Division) 


North Block, New Delhi
Dated: 30.06.2020


Office Memorandum

Subject: Revision of interest rates for Small Savings Schemes-reg.

The rates of interest on various Small Savings Schemes for the second quarter of financial year 2020-21 starting from 1st July, 2020 and ending on 30th September, 2020 shall remain unchanged from those notified for the first quarter (1st April, 2020 to 30th June, 2020) of financial year 2020-21. 

2. This issues with the approval of competent authority. 

(Rajesh Panwar)
Dy. Director (NS)

Download Copy of the Circular notifying interest rate for small savings scheme for Quarter 2 of FY 2020-21.


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