Govt may cut rate on small savings schemes

The government is considering rate moderation for small savings schemes in the upcoming quarter, a development that could lead to speedier transmission of monetary policy rate cuts, sources said.

During the current quarter, the government refrained from cutting interest rates on small savings schemes, such as Public Provident Fund (PPF) and National Savings Certificate (NSC), despite moderating bank deposit rates.

Bankers have been complaining that high rates on small savings schemes prohibit them from cutting deposit rates.

Currently, there is a difference of nearly 100 basis points between deposit rate of banks and small savings rate for one-year maturity.

Earlier, RBI Governor Shaktikanta Das said the Monetary Policy Committee (MPC) will take a call on an interest rate cut and all options were on the table to counter the coronavirus blow.

The MPC in its February Bi-monthly Monetary Policy Statement said that while there is a need for adjustment in interest rates on small saving schemes, the external benchmark system introduced from October 1 last year has strengthened the monetary transmission.