The government may link interest rate on public provident funds ( PPF) and post office deposits to bank deposit rates or RBI's repo rate and allow for quarterly or half-yearly reset in returns on small savings schemes.
The move is part of the review launched by the finance ministry, which currently uses the returns on government securities to annually fix the rates for small savings schemes, a critical element of household savings in the country. The government is looking to lower interest rates on a large number of small savings schemes, while building in safeguards for senior citizens and the girl child, following a reduction in key policy rates by RBI.
"Real interest rates are probably higher today. So, that needs a correction. In a high inflation regime, you had a certain interest structure for banks as well as the small savings schemes. But when inflation is down, interest rates naturally need a correction," said economic affairs secretary Shaktikanta Das, adding that a final decision is yet to be taken.
The move is part of the review launched by the finance ministry, which currently uses the returns on government securities to annually fix the rates for small savings schemes, a critical element of household savings in the country. The government is looking to lower interest rates on a large number of small savings schemes, while building in safeguards for senior citizens and the girl child, following a reduction in key policy rates by RBI.
"Real interest rates are probably higher today. So, that needs a correction. In a high inflation regime, you had a certain interest structure for banks as well as the small savings schemes. But when inflation is down, interest rates naturally need a correction," said economic affairs secretary Shaktikanta Das, adding that a final decision is yet to be taken.
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