September quarter – PPF, other small savings scheme interest rates kept steady

The Finance Ministry declared on June 30 that the interest rate on numerous small savings programmes will remain constant for the second quarter of fiscal year 2021-22.

Small savings instruments include the Public Provident Fund (PPF), the Senior Citizens Savings Scheme (SCSS), the National Savings Certificate (NSC), and the Monthly Income Scheme (MIS). They provide variable interest rates ranging from 4% to 7.6%.

“The interest rate on various Small Savings Schemes for the second quarter of financial year 2021-22, commencing on 1 July 2021 and ending on 30 September 2021, shall remain unchanged from the current rates applicable for the first quarter,” according to a statement issued by the Ministry of Finance’s Department of Economic Affairs.

The Finance Ministry publishes quarterly interest rates on modest savings products. The administration first announced a rate cut for Q1 FY22. However, the rate drop was quickly reversed, with the administration citing a “oversight.”

Speculations were then prevalent that the Centre would lower rates in Q2, when five states’ assembly elections, including high-stakes West Bengal, would conclude. However, the administration has opted to maintain the current tariffs.

The nine small savings programmes offered by India Post or the Department of Posts are considered to be the safest investment options available.

The following table summarises the interest rates on various small savings plans:

-Public Provident Fund (PPF): The PPF earns 7.1% and matures after 15 years. Partial withdrawals are permitted after five years, and investors may also extend the account beyond fifteen years. A minimum annual deposit of Rs 500 is required to keep the account operational.

-Senior Citizen Savings Scheme (SCSS): Investors aged 60 years and above can deposit up to Rs 15 lakh in a Senior Citizen Savings Scheme to earn quarterly interest. The senior citizens scheme offers a 7.4 percent interest return.

-Sukanya Samriddhi Yojana (SSY): It will maintain its 7.6 percent interest rate. A household may have a maximum of two accounts for each of its two daughters.

-Time Deposits at Post Offices: You can also open time deposits at post offices for tenures of 1, 2, 3, or 5 years. It is comparable to bank-offered fixed deposits. Post office term deposits with a maturity of 1-3 years earn a rate of 5.5 percent. 6.7 percent on a five-year term deposit.

-Five-Year Post Office RD: New investors will earn 5.8 percent on this recurring deposit given by post offices.

-National Savings Certificate (NSC): This five-year certificate pays a fixed rate of 6.8 percent compounded annually.

-The Kisan Vikas Patra (KVP) will now mature or double in value after 124 months (10 years and 4 months), at a 6.9 percent interest rate.

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Krishna Rath is a SEBI Registered Investment Adviser, and since 2015 has been educating netizens on investments and insurance. Krishna is a fee only SEBI RIA and is Odisha's first SEBI RIA. With background in IT, Krishna is changing the advisory space with new innovations in AdvisoryTech.

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