The interest rate on Public Provident Fund (PPF), Sukanya Samriddhi Account, Kisan Vikas Patra, National Savings Certificate (NSC) and Other Small Savings Scheme have been kept unchanged for the fourth quarter of the fiscal year 2021-22 commencing from 1st January, 2022. PPF will continue to earn interest of 7.1 per cent for the 4th quarter of FY 2021-22. The National Savings Certificate (NSC) will continue to carry an annual interest rate of 6.8% for the same period.
The government has notified the interest rates on the Small Savings Scheme for the 4th quarter of FY 2021-22 on 31.12.2021.
In the first quarter of this fiscal year, initially, there was a sharp reduction of the interest rates on the Small Savings Scheme including the most popular investment scheme PPF by 70 bps to 140 bps across all the investment products which was reversed and status quo was maintained immediately on the next day citing the oversight reasons by the Finance Minister.
However, there was no cut in the rate of interest of various small savings schemes in the second and third quarters and the amended rate so notified for the first quarter was continued in the second and third quarters. The same rate of interest continued in the fourth quarter also. This is the seventh quarter in a row that the government has retained the same interest rate on various small savings schemes including PPF.
All these rates have been kept unchanged and the status quo is maintained for the fourth quarter.
The savings deposit will continue to earn the same rate of interest of 4 per cent. This is despite the fact that banks have reduced interest on savings accounts drastically. State Bank of India has slashed the interest rate on savings account to 2.70 per cent (w.e.f. 31.05.2020) whereas ICICI Bank is offering 3 per cent. In continuation of the trend, Bandhan Bank had also reduced its interest rate on savings accounts to 3% w.e.f 07.09.2020.
This was notified by the Department of Economic Affairs under the Ministry of Finance in a Circular dated December 31, 2021.
The Circular read: "The rate of interest on various Small Savings Schemes for the fourth quarter of financial year 2021-22 starting from 1st January, 2022 and ending on 31st March, 2022 shall remain unchanged from the current rates applicable for the third quarter (1st October, 2021 to 31st December, 2021) for FY 2021-22."
The interest rate on small savings schemes including PPF is revised on a quarterly basis.
For a Term Deposit of 5 years - 10 years term, the State Bank of India is offering an interest rate of 5.4 per cent which is increased by 80 basis points to 6.2 per cent for senior citizen deposit holders. (Source: www.sbi.co.in)
Compared to it, the PPF interest rate stood at 7.1 per cent whereas the 5-year Term Deposit was offering an interest rate of 6.7 per cent. The lowest interest rate it offers for a Term Deposit was 5.5 per cent.
The interest rate on the National Savings Certificates has been kept unchanged at 6.8 per cent which was slashed by 110 bps in the first quarter of FY 2020-21.
The Kisan Vikas Patra will earn interest of 6.9 per cent and it will take 124 months to double the principal amount of investment.
The Sukanya Samriddhi Account Scheme will continue to fetch a higher rate of interest of 7.6 per cent compared to other small savings schemes in the general category.
The flagship scheme for senior citizens namely, Senior Citizen Savings Scheme will fetch a rate of interest of 7.4 per cent. In this scheme, interest is paid quarterly.
The interest rate on 5-year Recurring Deposit Rate which suffered the highest reduction in the interest rate of 140 bps in the preceding quarter shall continue to earn an interest rate of 5.8 per cent.
For a 5-year time-deposit, the interest rate is 6.7 per cent. For 1-year, 2-years and 3-years time deposits, the rate of interest is 5.5 per cent. A similar time deposit of 5-year Recurring Deposit will earn an interest rate of 5.8 per cent.
For a conservative investor, PPF and other small savings schemes like Sukanya Samriddhi Account and Senior Citizen Savings Scheme offer good returns. These products offer guaranteed, safe, and risk-free returns.
The 5-year Post Office Monthly Income Scheme (MIS), where interest is paid out monthly, offers 6.6 per cent.
Small savings rates are revised every quarter and if there is no change in the rates, the finance ministry retains the existing rates.
Small Savings Scheme Interest Rates for Q4 of 2021 -22
Recently, the government has introduced a new PPF Scheme, 2019 to replace all the previous PPF rules.
Under the new scheme, contributions into a PPF in a year can be deposited without any restriction. Earlier, there was a limit of a maximum of 12 contributions in a year. The maximum amount that can be deposited in a year is capped at Rs. 1,50,000 whereas the minimum amount of contribution is Rs. 500. Any deposit can be made in multiples of Rs. 50, instead of Rs. 5 under the rule of 1968.
Further, a discontinued (dormant) account will also earn the same rate of interest as an active account earns. But a penalty of 1 per cent of interest rate will be applicable for premature closure of the account. An account can be closed prematurely only after 5 years and under specified circumstances.
Interest on loan taken against the PPF account is reduced by 100 basis points to 1 per cent from 2 per cent earlier.
Prior to 2016, the interest rates were announced once which was applicable for the full year. Interest rates were revised every year. From FY 2016-17, it was decided by the government that the interest rate on small savings schemes will be notified on a quarterly basis.
Similarly, Sukanya Samriddhi Account Scheme, 2019, Senior Citizens Savings Scheme, 2019, Kisan Vikas Patra Scheme, 2019 were introduced replacing the earlier respective rules.
Read the full text of the circular:
F.N0.1/4/2019-NS
Government of India
Ministry of Finance
Department of Economic Affairs
(Budget Division)
North Block, New Delhi
Dated: 31.12.2021
Office Memorandum
Subject: Revision of interest rates for Small Savings Schemes-reg.
The rate of interest on various Small Savings Schemes for the fourth quarter of financial year 2021-22 starting from 1st January, 2022 and ending on 31st March, 2022 shall remain unchanged from the current rates applicable for the third quarter (1st October, 2021 to 31st December, 2021) for FY 2021-22
2. This has the approval of the competent authority.
(IIanumaiah K.)
Deputy Secretary(Budget)
Tele:011-23092326
Download Circular dated 31.12.2021 notifying interest rate for small savings scheme for Quarter 4 of FY 2021-22.
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