? Cool title, but what’s the news?

The government today slashed interest rates on small savings schemes, including NSC and PPF, by 0.2 percentage point for the January-March period from the rates applicable in the previous quarter, a move that will prompt banks to lower deposit rates.

? Okay, so what does it mean? 

Since April last year, interest rates on all small savings schemes have been recalibrated on a quarterly basis.

According to the notification, PPF and NSC will bring in a lower annual rate of 7.6% while KVP will yield 7.3% and mature in 11 months. The girl child savings scheme Sukanya Samriddhi Account will offer 8.1% from existing 8.3% annually. Term deposits of 1-5 years will fetch a lower interest rate of 6.6-7.4%, to be paid quarterly, while the five-year recurring deposit is pegged at 6.9%.

? I get it, now tell me why should I care?

The Big Picture:
While announcing the quarterly setting of interest rates, the ministry had said that rates of small savings schemes would be linked to government bond yields. The move is expected to see banks lowering their deposit rates in line with the small savings rate offered by the government.

For you personally:
This comes as yet another shocker to people who are still banking on the banking system in our country to offer higher returns. While in contrast, mutual funds have been offering returns higher than 10% owing to the high markets, and project higher returns up to 30%. 

So for you the question is now whether you’re content with the low interest rates that your bank is offering you, or you want to expand your portfolio by trying out an investment marketplace that has proved it’s worth over the past and is projected to continue in the future? 

Source: Economic Times

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