Jaitley’s take on small deposit rates cut
The new deposit rates will be applicable from next fiscal beginning April 1.
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Big Wire New Delhi Bureau
India slashed interest rates on small savings recently to align Asia’s third largest economy’s deposit rates in sync with last year’s several lending rate cuts by the country’s central bank.
Allaying fears that the move to slash small saving rates would make the economy sluggish, Finance Minister Arun Jaitley said the market-linked interest rates would still be high, even after the announced reduction in rates.
“The way (the) economy is moving today, we cannot have a situation where lending rates are going down but deposit rates remain high,” Jaitley told reporters on Sunday after the national executive meet of Bharatiya Janata Party (BJP).
In fact, both the rates – lending and deposit – were linked, he added.
“To make the economy more efficient rather than sluggish, the country has to move towards lower interest rates in both,” Jaitley said.
In 2015, the Reserve Bank of India (RBI) cut its policy rate by 125 points to ensure a lower interest rate regime for the economy.
The new deposit rates will be applicable from next fiscal beginning April 1. The rates have been framed in line with the recommendations of the Shyamala Gopinath Committee to ensure that the interest rates of Small Savings Schemes are market linked.
On March 18, the Narendra Modi-led government announced a sharp cut in interest earned on a range of state-run savings schemes including the popular Public Provident Fund (PPF), the Kisan Vikas Patra (KVP) and senior-citizen deposits.
In the new fiscal, interest rates on small savings would be reviewed every quarter, the interest rate on PPF scheme will be 8.1% for the period April 1 to June 30, down from 8.7%, at present.
The interest rate on KVP will be reduced to 7.8% from 8.7%.
The interest rate on Post Office savings has been retained at 4%, but the same for term deposits of one to five years has been reduced.
A five-year Monthly Income Account will fetch 7.8% as opposed to 8.4% now.
Girl-child saving scheme, Sukanya Samriddhi Account will see an interest rate of 8.6% as against 9.2%.
Senior citizen savings scheme of five-year would earn 8.6% interest compared with 9.3%.
Post Office term deposits of one, two and three years command an interest rate of 8.4% but from April 1, a 1-year Time Deposit will get 7.1%, 2-year Time Deposit will earn 7.2% and 3-Year Time Deposit will attract an interest of 7.4%.
The new applicable interest rates for the first quarter of 2016-17 will be as under: –
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