Interest Rates on Savings Schemes unchanged for Q3 F.Y 2020-21. Check rates of your personal small schemes:

The government had sharply cut the small savings rates (in the range of 70-140 basis points) for the June quarter, in sync with the fall in bond yields and interest rates on bank deposits. The small savings rates are revised quarterly. The banks have been on a rate-cutting spree, following the COVID-19 crisis.

TERM DEPOSITS

The State Bank of India (SBI) did its most recent cut on 10 September, reducing the one-year fixed deposit (FD) rate to 4.9% from 5.1%. HDFC Bank had last reduced its rates last month. The one-year FD in HDFC Bank now yields 5.1% and in ICICI Bank 5%. The same one-year FD with Post Office gives 5.5%.

The gap between bank FDs and Post Office FDs, which are part of the small savings schemes is wider in the five-year bucket. Here, the SBI FD gives 5.4%, HDFC Bank FD gives 5.5% (for five years and one day), and ICICI FD gives 5.5%. This compares with 6.7% on a Post Office 5-year deposit and 6.8% on a five-year National Savings Certificate. The Public Provident Fund (PPF), which is not strictly comparable with FDs due to its long tenure of 15 years, is giving a return of 7.1%. If your bank FDs are close to maturity, you can gain higher returns by making the new FD at the Post Office. The government guarantees post Office FDs. The tax treatment is also the same as bank FDs. However, you may not get the same level of net banking and bill payment services for Post Office accounts.

SMALL SAVING SCHEMES

The interest rate for the five-year Senior Citizens Savings Scheme has been retained at 7.4 per cent. The interest in the senior citizens’ scheme is paid quarterly. The interest rate on savings deposits has been retained at 4 per cent annually. The girl child savings scheme Sukanya Samriddhi Yojana will offer 7.6 per cent rate during the third quarter of the current fiscal. The annual interest rate on Kisan Vikas Patra (KVP) has been retained at 6.9 per cent.

The government maintaining interest rates on small savings schemes in this review is also a relief because interest rates on bank fixed deposits (FDs) have been on a downward trajectory for more than a year now. The interest rates on small savings schemes are reviewed every three months by the government.
The Shyamala Gopinath Committee suggested the formula to arrive at the interest rates for small savings scheme. The committee had suggested that the interest rates of different schemes should be 25-100 bps higher than the yields of government bonds of similar maturity.

CHECK THE RATES IN THE TABLE GIVEN BELOW