Govt hikes small savings interest rates

The central government on Saturday notified revised interest rates on small savings schemes, including a 20 basis point hike in the interest rates on the Sukanya Samridhi Yojana (SSY) and a 10 bps hike in the interest rate on Small Savings Account (SSA), for the January-March 2023-24 quarter. Interest rates on the other saving schemes remain unchanged

According to a finance ministry notification, deposits under the Sukanya Samriddhi scheme would attract an interest rate of 8.2 per cent for the fiscal fourth quarter against the 8 per cent paid for the previous three quarters while the SSA deposit will attract 7.1 per cent interest. 

The government notifies the interest rate on small savings schemes, a majority of which are operated by post offices, every quarter.

Being a government-backed scheme, the Sukanya Samridhi Yojana offers guaranteed returns. The interest generated through the scheme also is tax-free, subject to a maximum investment of Rs1.50 lakh a year.

The minimum annual contribution to the Sukanya Samriddhi Account is Rs250 and the maximum contribution is Rs1.5 lakh in a financial year.

Under the Sukanya Samridhi account, the guardians can withdraw 50 per cent of the savings in a financial year after a girl reaches 18 years of age. According to post office regulations, withdrawals can be made in a single transaction or installments, with a maximum of one withdrawal per year with up to a limit of 5 years.

The government has also hiked the three-year term deposit scheme by 10 basis points for the January-March quarter, while retaining the rates for all other small savings schemes. 

The 3-year term deposit would now fetch 7.1 per cent against the existing 7 per cent. 

Interest rates on small savings schemes are linked to market yields on government securities at a spread of 0-100 basis points over the yield of these securities of comparable maturities.

The government reviews the interest rates on small savings schemes every quarter.

The current revision is based on the September-November 2023 yield on five-year government bonds, which rose by around 10 basis points. The yield on 10-year bonds rose by 15 basis points.