The central government on Friday lowered the interest rate on the Public Provident Fund from 8.7% to 8.1%, according to reports. This comes weeks after the government said that PPF withdrawals will continue to be fully exempt from tax. The government also lowered rates for a number of saving schemes including the Kisan Vikas Patra, Girl Child Scheme, Senior Citizen Scheme, and time deposits.
The government decided in February to review the interest rates on small savings schemes every quarter, instead of annually. This would prevent the schemes from being more lucrative investment options than savings instruments from banks, allowing the Reserve Bank of India's rate cuts to be better transmitted into the economy. The Economic Survey of India, tabled before the Budget, also pointed out that high interest rates on these schemes were acting as "implicit subsidies" that accrued mostly to the rich.
Interest rates were also cut for:
- Girl Child Scheme: 9.2% to 8.6%
- Five-year Senior Citizen Scheme: 9.3% to 8.6%
- One-year time deposits: 8.4% to 7.1%
- Two-year time deposits: 8.4% to 7.2%
- Five-year time deposits: 8.5% to 7.9%
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