The Centre is likely to
reduce the interest rates on small savings schemes by the end of this month
with a view to aligning them with the market rates.
"The government
will take a decision on reducing small savings rate by the end of this
month," a Finance Ministry official said.
The ministry in
September had announced its intention to review interest rates on small
savings, which includes Post office savings and Public Provident Fund ( PPF),
after bankers said high rates on such schemes run by the government make fixed
deposits of banks uncompetitive.
The government may leave
the interest rates on Senior Citizen's Savings Scheme and Sukanya Samriddhi
Accounts unchanged.
With small saving
deposits commanding a rate of 8.7-9.3 per cent, banks have been reluctant to
transmit the entire policy rate reduction by the RBI to borrowers.
The median base lending
rates of banks have come down by about 60-70 bps despite extremely easy
liquidity conditions, which is a fraction of the 125 basis points of the policy
rate reduction since January.
Smalls saving schemes
include Post Office Monthly Income Scheme (MIS), Public Provident Fund (PPF),
Post Office fixed Deposit Scheme, Senior Citizen's Savings Scheme, Post Office
Savings Account and Sukanya Samriddhi Accounts.
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Source : The Economic
Times