Saturday, December 14, 2024
HomePersonal FinancePPF Interest Rates: PPF, other small savings scheme unlikely to be slashed...

PPF Interest Rates: PPF, other small savings scheme unlikely to be slashed this fiscal

The government’s increasing dependence on small savings schemes such as PPF and NSC to fund its annual fiscal deficit is likely to ensure that interest rates are kept intact so as not to hurt inflows

Union Finance Minister Nirmala Sitharaman may have dashed the hopes of small investors by not increasing the annual Public Provident Fund (PPF) contribution limit but economists anticipate that interest rates paid to investors on small savings schemes won’t be reduced this year.

Over the past few years, the government has become increasingly dependent on small savings schemes such as PPF, NSC, and post office deposits etc to fund its annual fiscal deficit.




The government estimated that it would need to borrow Rs 2.40 lakh crore from these schemes to finance the fiscal deficit in FY21 which instead turned out to be Rs 4.80 lakh crore. However, as a percentage of the deficit, this borrowing was down to 26% as compared to FY21 budget estimates of 30%, according to an SBI report.

For the forthcoming financial year 2021-22 (FY22), funding from small savings scheme is estimated at Rs 3.9 lakh crore or 26% of fiscal deficit.

This underscores the importance of inflows to these schemes on which the government is heavily reliant and therefore it is unlikely to cut interest rates lest investors move to better pastures.

It is therefore unlikely that the interest rates these schemes, which are notified by the finance ministry on a quarterly basis, will be reduced as the cannot afford to jeopardise the inflows owing to channelisation to bridge the deficit from these.

New change in LPG cylinder booking system – here is the full details

In the last quarter of FY21, these interest rates of schemes such as PPF, National Savings Certificates (NSC) untouched which remain at 7.1% and 6.8% respectively. The Interest rate for the Senior Citizen Savings Scheme which is paid out quarterly remains at 7.4%.




It is 7.6% for Sukanya Samriddhi Yojana during the January-March quarter of FY21 while the same was retained at 6.9% for  Kisan Vikas Patra (KVP). The government last cut these interest rates in the first quarter of FY21 by 140 bps after which they have been kept stable.

Some of the popular government savings schemes are PPF, Atal Pension Yojana (APY), National Savings Certificates (NSC), Post Office Savings Account. Post Office Time Deposit, Post Office Recurring Deposit Account, Post Office Monthly Income Scheme (POMIS), and Sukanya Samriddhi Yojana among others.

Parvesh Maurya
Parvesh Maurya
Parvesh Maurya, has 5 years of experience in writing Finance Content, Entertainment news, Cricket and more. He has done BA in English. He loves to Play Sports and read books in free time. In case of any complain or feedback, please contact me @ informalnewz@gmail.com
RELATED ARTICLES
- Advertisment -

Most Popular

Recent Comments