Now earn more from your small savings

The government has hiked interest rates of various small savings schemes for the third quarter (October 1 to December 31) by up to 40 bps. These schemes include the Public Provident Fund (PPF), Sukanya Samriddhi Yojana (SSY), National Savings Certificate (NSC), and post office time deposits. This is a welcome relief for fixed income investors as rates have remained unchanged for the previous two quarters. Added to that, the government had reduced the interest rates on these schemes in January -March 2018, quarter.According to a circular issued by the Finance Ministry on September 19, the interest rates of various small saving schemes have been hiked by between 30 basis points and 40 basis points. (One percentage point is equivalent to 100 basis points.)The one year, two-year and three-year time deposit interest rates have been hiked by 30 basis points. Rates for other schemes such as the five-year time deposit, Sukanya Samriddhi Scheme and PPF have been increased by 40 basis points. After the hike, PPF and NSC will earn 8 percent, the Sukanya Samriddhi Scheme will fetch 8.5 percent, and the Senior Citizens' Savings Scheme will get you 8.7 percent.Interest rates on small savings scheme for quarter ending December 31, 2018InstrumentRate of Interest w.r.t 01.07.2018 to 30.09.2018Rate of Interest w.r.t 01.10.2018 to 31.12.2018Compounding Frequency*Savings Deposit4.04.0Annually1 year Time Deposit6.66.9Quarterly2 year Time Deposit6.77.0Quarterly3 year Time Deposit6.97.2Quarterly5 year Time Deposit7.47.8Quarterly5 year Recurring Deposit6.97.3Quarterly5 year Senior Citizen Savings Scheme8.38.7Quarterly and Paid5 year Monthly Income Account7.37.7Monthly and Paid5 year National Savings Certificate7.68.0AnnuallyPublic Provident Fund Scheme7.68.0AnnuallyKisan Vikas Patra7.3 (will mature in 118 months)7.7 (will mature in 112 months)AnnuallySukanya Samriddhi Account Scheme8.18.5Annually*No Change Source: Finance ministry websiteHowever, interest rate on the post office savings account balance has been kept unchanged at 4 per cent. The expectation of a hike in interest rates was building up for quite some time because the government has benchmarked these schemes to the yields of government bonds of the same maturity. The interest rates on these schemes are calculated by adding a mark-up to the average of the government yield in the preceding quarter. The formula was given by the Shyamala Gopinath Committee to determine the interest rates of the schemes. The committee had suggested that the interest rates of different schemes should be 25 - 100 basis points higher than the yields of the government bonds of similar maturity.The country's central bank, Reserve Bank of India (RBI) has also hiked the repo rate cumulatively by 50 basis points in its last two bi-monthly monetary policies announced in June and August 2018.

from Economic Times https://ift.tt/2QKDlao