Big dent in savings |
The government of India has announced a steep cut in interest rates on small savings schemes such as Public Provident Fund (PPF), National Savings Certificate (NSC) and Kisan Vikas Patras - which will fetch up to 90 basis points lower returns during the April-June quarter.In case of PPF, the most popular scheme for middle-class savers, the reduction of 60 basis points (100 basis points equal a percentage point) is among the sharpest in nearly 15 years. Although the rates are to be reviewed every three months, if they remain unchanged during the next financial year, someone with Rs 5 lakh in his PPF account would face a hit of Rs 3,000 in 2016-17. Thus, the announcement has not gone down well with the middle class. Angry protests have begun on social media with PPF trending on Twitter. The government, however, claimed the changes were linked to the market rate, offering a parallel to global oil prices. A reduction in rates on small savings is also bad news for those with large balance in fixed deposits, especially senior citizens, as banks are now expected to follow government action with similar cuts. This will be effective from April 2016, which is the annual date for reset.
|
|
|
|