The government will announce a revision of interest rates for small savings schemes in a couple of days so as to align them with market rates but those for the girl child and senior citizens will be kept unchanged, a senior official said.
“The decisions have been taken and executive order and notification would be issued in a day or two. Broadly the underlying philosophy of small savings rate changes is to make the rate more frequently market-aligned, make it as closely market-aligned as possible,” Economic Affairs Secretary Shaktikanta Das told reporters here.
“At the same time, taking into consideration the interest of small savers and some important social sector measures of the government, the rates under the girl child scheme, the senior citizen scheme, they will continue as it is. They will have quarterly adjustments but whatever spreads they have over the G-Sec rates will not be altered,” he said.
“First effect of these changes will take place from 1st of April. They will be reset from 1st April,” he added.
The economic affairs secretary said small savings rates are linked to government securities and readjusted every year, but now be adjusted on a quarterly basis.
Moreover, all long term savings of over 5 years will continue to have the spread, he added.
“That is whatever policy rates are being announced by the Reserve Bank, the small savings rate will also pass it on. But at the long end of the curve, the spread will be protected. Government has taken into consideration the interest of small savers and the need to also encourage long term savers,” Das said.
The finance ministry had, last year, announced its plan to review interest rates on small savings after bankers said high rates on such schemes run by the government make it difficult for banks to lower fixed deposit rates.
Asked if commercial banks would pass on the benefit of the Reserve Bank of India rate cuts to customers, Das said they were free to decide on their interest rates.
“Banks are free to decide on the interest rate. It is for banks to decide by what basis points they will cut interest,” he said.