In line with the hike in bank FD rates, investors in small saving schemes can get some more. The Finance Ministry has notified interest rates for the October-December 2018 quarter, and most of the products have seen higher rates being offered.
Interest rates for small savings schemes are notified on a quarterly basis. Returns on small saving instruments were linked to the market in 2011 and were then adjusted annually. Slowly, the interest rate on these were pegged to the average government securities (G-secs) yield with similar maturity in the preceding year. However, since January-March 2015-16, the government started revising these rates quarterly, instead of doing so annually.
Now, let us come to the new rates for small savings schemes. Do remember the 10-year Indian government bond (G-sec) yields 8.07% at present.
|Small-saving scheme name||Interest rate % for Jul-Sep 2018||Interest rate % for Oct-Dec 2018||Change %||Compounding frequency *|
|1 year time deposit||6.6||6.9||0.3||Quarterly|
|2 year time deposit||6.7||7||0.3||Quarterly|
|3 year time deposit||6.9||7.2||0.3||Quarterly|
|5 year time deposit||7.4||7.8||0.4||Quarterly|
|5 year recurring deposit||6.9||7.3||0.4||Quarterly|
|5 year senior citizens saving scheme||8.3||8.7||0.4||Quarterly and paid|
|5 year monthly income account||7.3||7.7||0.4||Monthly and paid|
|5 year national savings certificate||7.6||8||0.4||Annually|
|Kisan Vikas Patra (KVP)||7.3||7.7||0.4||Annually|
|Sukanya Samriddhi account scheme||8.1||8.5||0.4||Annually|
|* No change|
For time deposits, savings with 1-year tenure will fetch 6.9% in Oct-Dec 2018 compared to 6.6% in Jul-Sep 2018. The 2-year time deposit will give 7% compared to 6.7%. The 3-year time deposit will generate 7.2% now as against 6.9% earlier. The 5-year time deposit will give you 7.8% interest compared to 7.4%.
All Time Deposits and Recurring Deposits undergo compounding quarterly.
The government has also revised interest rates upward for monthly income account. The 5-year tenure instrument will not fetch you 7.7% in Oct-Dec 2018 compared to 7.3% in Jul-Sep 2018.
The 5-year NSC (National Savings Certificate) is also giving better rates. From 7.6% earlier, the NSC will now offer 8%. The Public Provident Fund (PPF) has also seen a similar quantum of hike (7.6% to 8%).
For those interested in Kisan Vikas Patra (KVP), the higher interest rates mean that maturity will happen quicker. While the earlier interest rate of 7.3% meant maturity in 118 months, the new KVP rate of 7.7% means that the money will mature six months quicker i.e 112 months.
The interest rate for the Sukanya Samriddhi Account Scheme has been increased from 8.1% to 8.5% (compounding annually).
The rate for savings deposit, which undergoes compounding annually, is unchanged at 4%.