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PPF Interest Rate reduced from 1.4.2021 || NSC, SSA and Other Small Savings Interest Rates Slashed

PPF interest rate Q1 2021-22, reduction PPF, SSA, NSC, PO TIME DEPOSIT interest, notifies on 31.03.2021 FY 2021-22, Senior Citizens Savings Scheme interest

PPF Interest Rate reduced from 1.4.2021: Government has reduced the rate of interest of small savings schemes including PPF by 50-100 basis points for the first quarter (Q1) ending on 30.06.2021 of the financial year 2021-22 to be effective from 1st April 2021. The PPF interest rate for quarter 1 (Q1) is reduced by 70 bp from 7.1% to 6.4%.

 

The government has notified the interest rates on the Small Savings Scheme for the 1st quarter of FY 2021-22 on 31.03.2021.


The government has also reduced the interest rates for small savings schemes for the first time in this financial year. The rates were last time reduced for Quarter 4 of the FY 2020-21.



From 2016-17. interest rates for small savings schemes, including PPF, are reviewed on a quarterly basis.


According to a Circular issued by the Finance Ministry on 31st March 2021, the rates of small savings schemes including PPF have been reduced by 50-110 basis points for the first quarter of the financial year 2021-22. The interest rates for small savings schemes are reviewed and notified by the finance ministry on a quarterly basis.


The revised rate of interest of PPF as applicable for the Q1 FY 2021-22 and other small savings schemes and reduction are given below:


Instruments

Rates of interest from 01.01.2021 to 31.03.2021

Rates of interest from 01.04.2021 to 30.06.2021

Reduction in Interest rate (basis points)

Savings Deposit

4.0

3.5

50 bps

1 Year Time Deposit

5.5

4.4

110 bps

2 Year Time Deposit

5.5

5.0

50 bps

3 Year Time Deposit

5.5

5.1

40 bps

5 Year Time Deposit

6.7

5.8

90 bps

5 Year Recurring Deposit

5.8

5.3

50 bps

Senior Citizen Savings Schemes

7.4

6.5

90 bps

Monthly Income Account

6.6

5.7

90 bps

National Savings Certificate

6.8

5.9

90 bps

Public Provident Fund Scheme

7.1

6.4

70 bps

Kisan Vikas Patra

6.9 

(will mature in 124 

months)

6.2 

(will mature in 138 months)

70 bps

Sukanya Samriddhi Account Scheme

7.6

6.9

70 bps


From 1st April 2021, Public Provident Fund (PPF) will get an interest rate of 6.4% as against 7.1% in the preceding quarter. This translates into a reduction in the interest rate of PPF by 70 basis points.


The interest rate for National Savings Certificate (NSC) has been reduced to 5.9% from 6.8% witnessing a cut of 90 bps in the interest rate.


The Sukanya Samriddhi Scheme will fetch an interest rate of 6.9% after a 70 bps cut in the interest rate from 7.6% in the last quarter.


Similarly, the interest rate for the five-year Senior Citizens Savings Scheme has seen a reduction of 90 bps to 6.5% from 7.4%.


The interest rate on Kisan Vikas Patra (KVP) is reduced to 6.2%. It will now mature in 138 months compared to 124 months from the preceding quarter.


Even the interest rate on post office savings banks (POSB) has been reduced by 0.5% to 3.5% from 4.0%. 


Term deposits of one-five years maturity period will fetch interest rate in the range of 4.4-5.8%, to be paid quarterly, while the interest rate on five-year recurring deposit is slashed to 5.8%. The one-year time deposit has seen the sharest cut in the interest rate of 110 bps. The interest rate in this segment is reduced to 4.4% from 5.5%.


This was notified by the Department of Economic Affairs under the Ministry of Finance in a circular dated 31st March 2021.


The last time, the government has drastically reduced the interest rate for small savings scheme including PPF was in Q1 of the FY 2020-21 subsequent to the announcement of a nationwide lockdown amid rising COVID-19 cases. In that quarter of last year, the government had cut interest rates on small savings schemes by up to 140 basis points and since then they have remained steady.


With this reduction, the interest rates of small savings schemes have been slashed by a total of 120-250 bps during the current financial year.


With this slash in the interest rates, the biggest slash is noticed in the 1-year time deposit scheme followed by SCSS, NSC and MIS schemes. The savings bank account has the least reduction in the rate of interest in terms of basis points.


After remaining on a higher side for almost a year, the interest rate on small savings schemes is now at par with the interest rate offered by the banks on similar products.


A 5-year fixed deposit with State Bank of India fetches an interest rate of 5.4% while the savings bank interest rate is 2.70%. 


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 the 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, the interest rate on small savings schemes are being 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: 31.03.2021


OFFICE MEMORANDUM


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


In exercise of the powers conferred by Rule 9( 1) of the Government Savings Promotion General Rules, 2018, the rates of interest on various Small Savings Schemes for the first quarter of financial year 2021-22 starting from 1st April, 2021 and ending on 30th June, 2021 have been revised as indicated below: 


Instruments

Rates of interest from 01.01.2021 to 31.03.2021

Rates of interest from 01.04.2021 to 30.06.2021

Compounding frequency*

Savings Deposit

4.0

3.5

Annually

1 Year Time Deposit

5.5

4.4

Quarterly

2 Year Time Deposit

5.5

5.0

Quarterly

3 Year Time Deposit

5.5

5.1

Quarterly

5 Year Time Deposit

6.7

5.8

Quarterly

5 Year Recurring Deposit

5.8

5.3

Quarterly

Senior Citizen Savings Schemes

7.4

6.5

Quarterly and paid

Monthly Income Account

6.6

5.7

Monthly and paid

National Savings Certificate

6.8

5.9

Annually

Public Provident Fund Scheme

7.1

6.4

Annually

Kisan Vikas Patra

6.9 (will mature in 124 

months)

6.2 (will mature in 138 months)

Annually

Sukanya Samriddhi Account Scheme

7.6

6.9

Annually

*No change.


2. This has the approval of competent authority. 



(Rajesh Panwar)

Deputy Secretary(NS)


Download Copy of the Circular notifying interest rate for small savings scheme for Quarter 1 of FY 2021-22.


Also Read:

Govt notifies PPF NSC SSY and Other Small Savings Scheme Interest Rates for Q3 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 Q1 2020-21

PPF NSC SSY and Other Small Savings Scheme Interest Rates for Q4 2019 -20

11 Changes in New PPF Scheme 2019

Layman Guide to PPF Laws and Rules

Public Provident Fund Scheme, 1968

Public Provident Fund Act, 1968

Public Provident Fund Scheme, 2019

Government Savings Promotion General Rules, 2018

The Government Savings Banks Act, 1873


Update:

 

Govt. has rolled back the reduction in the PPF and small savings interest rate citing 'oversight' while issuing the Order.

 

Interest rates of small savings schemes of GoI shall continue to be at the rates which existed in the last quarter of 2020-2021, ie, rates that prevailed as of March 2021. 

 

Orders issued by oversight shall be withdrawn, Finance Minister informed.



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