NEW DELHI: The government has decided to keep the interest rate on small saving schemes such as National Saving Certificates (NSC) and Public Provident Fund (PPF) unchanged for July, despite the yield on dated government securities seeing a downtrend.
With the government extendeding the date for deposit in small savings and investment in life insurance policies till July 31 to avail of tax benefit for FY2019-20, the move is expected to encourage more people to invest in small savings, helping in collecting more money under this savings account.
The government borrows from small savings to fund its expenditure. The latest data released by the Controller of Accounts suggests that the government had used Rs 53,090 crore from NSC account to finance its deficit by the end of May.
In the last few months, the banks have also reduced interest rate on savings account and term deposits, which led to the speculation that the government will cut the rates. Typically, small savings schemes are attractive because of the higher interest rates and tax benefits. The small savings schemes basket comprises 12 instruments including Kisan Vikas Patra and Sukanya Samridihi Scheme, apart from PPF and NSC. While the government offers 6.8 per cent on NSC, State Bank of India gives 5.4 per cent.