RBI Claims To Cut Interest Rates on Saving Schemes
Recently we have seen an immediate rise in the interest rates of Fixed Deposits by almost all the public sector and private banks. Amid increasing FD rates the Reserve Bank Of India (RBI) asserted that the interest rates on small saving schemes or post office schemes need to be cut down. As per the ‘State of Economy’ report by RBI, it states that “The existing rates of interest on SSIs need to be reduced in the range of 9-118 bps for Q1:2022-23 to align them with the formula-based rates.”
The report states, “Interest rates on small saving schemes are administered and set by the Government of India. These administered interest rates are linked to market yields on G-secs with a lag and are fixed on a quarterly interval at a spread ranging from 0-100 bps over and above G-sec yields of comparable maturities. The Government of India is expected to review interest rates on small saving instruments (SSIs) for Q1:2022- 23 on March 31, 2022.”
Term Deposit Rates Increased Due To Credit Demand
As per RBI due to the rising credit demand, some scheduled Commercial Banks (SCBs) have elevated their term deposit rates. The report says, “With credit offtake picking up, some SCBs have raised interest rates on term deposits. The extent of pass-through of policy rate reduction to the median term deposit rate (MTDR) which remained 154 bps during the period March 2020 to September 2021, dipped marginally to 150 bps in February 2022. The perceptible decline of 174 bps is discernible in the case of short tenor deposits of maturity of up to one year. Across domestic banks, robust deposit growth has enabled higher pass-through by private banks to term deposit rates compared to their public sector counterparts.”
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Schemes Managed By Postal Department
The Postal Department manages certain savings schemes which are then analysed by the “Ministry of Communications of the Government of India”.
These schemes include:
| Schemes | Interest Rates P.A |
| Post Office Savings Account(SB) | 4% |
| Post Office Recurring Deposit Account (RD) For 5 Years | 5.8% |
| Post Office Time Deposit Account (TD) | 5.5-6.7% |
| Post Office Monthly Income Scheme Account (MIS) | 6.6% |
| Senior Citizen Savings Scheme (SCSS) | 7.4% |
| Public Provident Fund Account (PPF ) For 15 Years | 7.1% |
| Sukanya Samriddhi Yojana (SSY) | 7.6% |
| National Savings Certificates (NSC) | 6.8% |
| Kisan Vikas Patra (KVP ) | 6.9% |
