The National Savings Schemes
(NSSs) regulated by the Ministry of Finance offer complete security of
investment combined with high attractive returns. These schemes also act as
instruments of financial inclusion especially in the geographically
inaccessible areas due to their implementation primarily through the Post Offices,
which have reach far and wide.
The small savings interest
rates are perceived to limit the banking sector’s ability to lower deposit
rates in response to the monetary policy of the Reserve Bank of India. In the
context of easing the transmission of the lower interest rates in the economy,
the Government also has to take a comprehensive view on the social goals of
certain National Small Savings Schemes. Accordingly, it has been decided that
the following shall be implemented with effect from 1.4.2016 with regard to
National Savings Schemes:
1. The Sukanya Samriddhi Yojana, the Senior Citizen Savings Scheme and the
Monthly Income Scheme are savings schemes based on laudable social development
or social security goals. Hence, the interest rate and spread that these
schemes enjoy over the G-sec rate of comparable maturity viz., of 75 bps, 100
bps and 25 bps respectively have been left untouched by the Government.
2.
Similarly the spread of 25 bps that long term instruments, such as the 5 yr
Term Deposit, 5 year National Saving Certificates and Public Provident Fund
(PPF) currently enjoy over G-Sec of comparable maturity, have been left
untouched as these schemes are particularly relevant to the self-employed
professional and salaried classes. This will encourage long term savings.
3.
The 25 bps spread that 1 yr., 2yr. and 3 yr. term deposits, KVPs and 5 yr
Recurring Deposits have over comparable tenure Government securities, shall
stand removed w.e.f. April 1, 2016 to make them closer in interest rates to the
similar instruments of the banking sector. This is expected to help the
economy move to a lower overall interest rate regime eventually and thereby
help all, particularly low-income and salaried classes.
4. The interest rates
of all small saving schemes would be recalibrated w.e.f. 1.4.2016 on a quarterly
basis as given under, to align the small saving interest rates with the market
rates of the relevant Government securities;
|
Sr.
No.
|
Quarter
for which rate of interest would be effective
|
Date
on which the revision would be notified
|
Rate
of interest to be based on FIMMDA month end G-Sec. rate pertaining to
|
|
1.
|
April
to June
|
15th
March
|
Dec.-Jan.-Feb.
|
|
2.
|
July
to September
|
15th
June
|
Mar.-Apr.-May.
|
|
3.
|
October
to December
|
15th
September
|
Jun.-Jul.-Aug.
|
|
4.
|
January
to March
|
15th
December
|
Sep.-Oct.-Nov.
|
5. The compounding of interest which is biannual in the case of 10 yr
National Saving Certificate (discontinued since 20-12-2015), 5 yr National
Saving Certificate and Kisan Vikas Patra, shall be done on an annual basis from
1.4.16.
6. Premature
closure of PPF accounts shall be permitted in genuine cases, such as cases of
serious ailment, higher education of children etc,. This shall be permitted
with a penalty of 1% reduction in interest payable on the whole deposit and
only for the accounts having completed five years from the date of opening.
7.
In pursuance to the decision as mentioned in Para 4 above, the rates of
interest applicable on various small savings schemes for the quarter from April
to June 2016 effective from 1.4.2016 would be notified in March, 2016.
The above changes have been brought with the objective of making the operation
of National Saving Schemes market-oriented in the interest of overall economic
growth of the country, even while protecting their social objectives and
promoting long term savings.
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DSM