Small Savings Schemes: Central Govt says interest rates on key instruments better than banks

The Centre has claimed that the current interest rates on various Small Savings Schemes are comparatively better than the fixed deposit schemes offered by public and private banks at present. Replying to a query in the parliament, Union Minister of State for Finance Pankaj Chaudhary said that interest rates on small savings schemes are revised periodically and as market sentiments. 

The government has a number of small Savings schemes, like the Public Provident Fund, Senior Citizen Savings Scheme (SCSS), National Savings Certificate, Sukanya Samriddhi Yojana (SSY), Kisan Vikas Patra, and various deposit schemes available at the Post Office. 
“Prevailing interest rates on Small Savings Schemes are better than those being offered through similar financial instruments being made available by leading Scheduled Commercial Banks. Rates applicable of Small Savings Schemes are being periodically revised,” Union Minister of State for Finance, Pankaj Chaudhary, said in a written reply to the query in Lok Sabha. 

Chaudhary further said that interest rates on select small savings schemes were last revised for Q4 FY 2022-23. 

He added that several factors determine the interest rates that are applicable to Small Savings Schemes. "These inter-alia include, recommendations of Syamala Gopinath Committee, the existence of taxation benefits for small investors and resultant rates(s) of return, interest, cost, etc,” the minister said.

In Budget 2023, Finance Minister Nirmala Sitharaman too revised some of the small savings schemes. She proposed to double the deposit limits for Senior Citizen Savings Scheme (SCSS) and Monthly Income Account Scheme (MIS) and also introduced a new small savings scheme — Mahila Samman Savings Certificate. 

The FM increased the limit of the Senior Citizen Savings Scheme and the Monthly Account has been increased to Rs 30 lakh from Rs 15 lakh. For a single account under MIS, the deposit limit has been increased to Rs 9 lakh.

The Reserve Bank of India too had said that after the latest hike in interest rates of some small savings schemes, the banks will find it tough to match the rates, which would compel them to raise the rates.  

“The increase in rates on small savings schemes may pose competition to banks for raising deposits, and banks may be prompted to further increase their retail deposit rates,” it has said. 

The interest rates of small savings are revised quarterly, which range between 0 and 100 bps. It is over and above the yields on government securities of comparable maturities. For the quarter of January-March, the Centre has raised the interest rates on 8 of the 12 small savings instruments.  

There was a minimal 20 basis points (bps) increase for the National Savings Certificate and Kisan Vikas Patra and a 110 bps higher return on one-, two- and three-year time deposits.  

Returns on the Public Provident Fund (PPF) and the Sukanya Samriddhi Account scheme were left unchanged at 7.1 per cent and 7.6 per cent, respectively.  

The interest rates offered by top small savings schemes are: 

Public Provident Fund (PPF): The current interest rate on PPF deposits is 7.1%. The maximum deposit during a financial year is Rs. 1.5 lakh. 
Senior Citizen Savings Schemes (SCSS): The current interest rate on SCSS deposits is 8%. The minimum deposit is Rs 1,000, while the maximum deposit is extended to Rs 30 lakhs from Rs 15 lakh. 
National Savings Certificate (NSC): The current interest rate on NSC deposits is 7%. There is no maximum limit on the purchase of NSCs. But investments up to Rs 1.5 lakh annually can earn the investors the tax savings under Section 80C of the Income Tax Act, 1961. 
Sukanya Samriddhi Yojana (SSY): The current interest rate on SSY deposits is 7.6%. Investors can put in any amount from Rs 250 up to Rs 1.5 lakh every fiscal. 
Kisan Vikas Patra (KVP): The current interest rate on KVP deposits is 7.2%. KVP is available in denominations of Rs 1,000, Rs 5,000, Rs 10,000, and also Rs 50,000. There is no maximum limit of investment. 

Current Interest Rates on Various Small Savings Schemes 

5-year Time Deposit: 7% 
3-year Time Deposit: 6.9% 
2-year Time Deposit: 6.8% 
1-year Time Deposit: 6.6% 
5-year Recurring Deposit: 5.8% 
Monthly Income Scheme account: 7.1%