The government on Thursday elected to leave interest rates on small savings instruments like the Public Provident Fund unchanged for April to June 2022, maintaining the status quo for the eighth consecutive quarter.
The Reserve Bank of India had indicated that it would have to cut interest rates on these schemes between 0.09 and 1.18 percentage points in the coming quarter. However, the rebound in inflation to above 6% in the past two months and the rebound in oil prices may have weighed against taking an unpopular move, especially after the Employees’ Provident Fund rate was cut from 2021-22 from 8. .5% to 8.1% earlier this month, the lowest in more than 42 years.
Rates on several small savings plans were last cut between 0.5 and 1.4 percentage points in April 2020, and an announcement of further cuts from 0.4% to 1.1% on March 31, 2022, was withdrawn on April 1. .
The quarterly interest paid on one-year term deposits will remain at 5.5%, the Senior Savings Scheme will continue to earn 7.4%, while the return of the Sukanya Samriddhi Account Scheme is 7.6%. The PPF yield remains at 7.1%.
ICRA chief economist Aditi Nayar said small savings rates could be raised in the second half of the year after expected rate hikes by the central bank through August and October.
“With the rise in government bond yields over the past three months, as well as the rise in bank deposit rates, we had foreseen a slim chance that small savings rates would be revised upwards for the coming quarter,” she noted.