New Delhi, April 1
The government has raised the rate of interest on various Small Savings Schemes for the first quarter of the financial year 2023-24 starting April 1 (today) by up to 70 basis points (100 basis point is equal to 1 percentage point).
The interest rates on small savings schemes are typically reviewed every quarter by the government. The formula to arrive at the interest rates for a small savings scheme was given by the Shyamala Gopinath Committee. The committee had suggested yields on government bonds should be the benchmarks for the interest on various small savings instruments and should be reset every first of April.
The interest rate on the Senior Citizen Savings Scheme was hiked by 20 basis points, National Savings Certificate by 70 basis points, Kisan Vikas Patra by 30 basis points, and Sukanya Samriddhi Yojana by 40 basis points.
Following is a table detailing the increase in interest rates on various small savings schemes:
Meanwhile, the Reserve Bank of India (RBI) has also been increasing the repo rate since May 2022 to manage rising inflation. In line with RBI’s rate hike, banks too are following suit, which is a positive for various deposit schemes.
At the latest Monetary Policy Committee (MPC) of the RBI in early February, it decided to raise the repo rate by 25 basis points to 6.5 percent to keep inflation expectations anchored, break the persistence of core inflation, and strengthen the medium-term growth prospects.
Raising interest rates is a monetary policy instrument that typically helps suppress demand in the economy, thereby helping the inflation rate decline. In early 2020 when Covid hit the world, the repo rate was 4 percent.