- Date : 01/04/2020
- Read: 4 mins
Interest rates for small saving schemes such as PPF and NSC have been cut after RBI’s move to revise the repo rate to counter the economic impact of the Coronavirus pandemic

The Central Government has slashed interest rates on various small savings schemes by 70 to 140 basis points (bps) for the present quarter, April – June 2020. The interest rates are reviewed by the government on a quarterly basis, and after the Reserve Bank of India (RBI) recently cut its repo rate by 75 bps to counter the economic impact of the Coronavirus pandemic, the government has correspondingly made a downward revision on the yields of various fixed income schemes.
Related: Top 7 fixed-income investments in India
What are the changes?
Based on the recommendations of the Shyamala Gopinath Committee, the interest rates of different investment schemes are usually 25 to 100 bps (100 bps = 1%) higher than government bonds with similar maturities. So while the interest rate on bank savings remains unchanged, the yield on Public Provident Fund (PPF), and the girl child focused Sukanya Samriddhi Yojana have been cut by 0.8% or 80 bps each, and even more so on long-term fixed deposits.
Here is a look at the returns on various savings instruments with revisions as stated in a circular issued by the Finance Ministry on March 31, 2020.
Instrument | Interest Rate (Jan'20-Mar'20) | Interest Rate (Apr'20-Jun'20) | Change (%) | Compounding frequency |
---|---|---|---|---|
Savings deposit | 4% | 4% | NIL | Annually |
1 year Time Deposit | 6.90% | 5.50% | -1.40% | Quarterly |
2 year Time Deposit | 6.90% | 5.50% | -1.40% | Quarterly |
3 year Time Deposit | 6.90% | 5.50% | -1.40% | Quarterly |
5 year Time Deposit | 7.70% | 6.70% | -1.00% | Quarterly |
5 year Recurring Deposit | 7.20% | 5.80% | -1.40% | Quarterly |
5 year Senior Citizen Savings Scheme | 8.60% | 7.40% | -1.20% | Quarterly and paid |
5 year Monthly Income Account | 7.60% | 6.60% | -1.00% | Monthly and paid |
5 year National Savings Certificate | 7.90% | 6.80% | -1.10% | Annually |
Public Provident Fund | 7.90% | 7.10% | -0.80% | Annually |
Kisan Vikas Patra | 7.60% | 6.90% | -0.70% | Annually |
Sukanya Samriddhi Yojana | 8.40% | 7.60% | -0.80% | Annually |
Related: Government’s social welfare and health schemes – are you eligible?
What does this mean?
Many of these fixed income schemes are popular investment choices for millions of Indians, especially a large number of senior citizens, who are dependent on interest income. India has roughly Rs 12 lakh crore in small savings schemes, and Rs 114 lakh crore in bank deposits, all such investments will now earn a lower rate of interest.
According to experts, a revision in the interest rates was expected, to keep in line with prevailing interest rates in the economy, but the Coronavirus outbreak has definitely accelerated the rate of change. FM Sitharaman announces economic relief measures to quash coronavirus impact.