Interest Rates of PPF,NSC,Sukanya Samriddhi Account (SSA),SCSS,Postal Term /Recurring Deposits For Quarter April-June 2016

As we in low inflation – lower interest rate scenario,Govt have cut interest rates on small saving schemes.

As it was essential  to align interest rates closer to market rates, there will be revision in interest rates of PPF,KVP,NSC,Term deposits,Sukanya Samriddhi Account- SSA.

Here is comparison of older and new interest rates.

All rates will be benchmarked against G-sec (Govt securities) & interest rates will be reset quarterly.Interest rates will be declared 15 days before start of quarter.So for next quarter interest rates will be declared on June 15, 2016.

Each instrument will offer you additional interest rate above corresponding G-sec yield of last quarter.

Additional spread available for investor will be as follows:

1. PPF : 0.25% above G-Sec.
2. Senior Citizen Saving Scheme: 1% above G-Sec yield.
3. Sukanya Samridhi Account: 0.75% above G-sec yield.
4. 05 yr term deposit , MIS, NSC : 0.25% above corresponding G-sec yield.

What’s future of fixed income instruments:

In future,financial institutes/  banks can also switch from fixed interest rates to floating deposits benchmarked to that offered by Govt securities.Few institutes are already offering floating rates on recurring deposits.Banks like IDBI bank is already offering floating rate deposits , along with fixed rate deposits ….where interest rate is reset quarterly.Dynamic, market linked deposits is a future of fixed income instruments and investors need to be prepared for the changes.