Government of India is going to reduce interest rates on small savings scheme which also includes the most favorite and zero risk investment scheme i.e. public provident fund. Other one is national savings scheme. This is as per the notification by the government on 11th February 2016.

Starting April 01, 2016, every three months rates would be revised and rates would be decided on the basis of the yield of government bonds. The main reason to lower the interest rate was the repo rate which RBI has been reducing which is now almost 1.25%. However banks had passed just 0.75% benefit to the consumers as decision is on banks by how much basis point they will cut the rate. Reason for passing only fraction of benefit is because banks had to give more interest to the consumers through various investment schemes. So in order to ease cutting of FD rates, decision on reducing the interest rates has been taken. Another benefit of the rate cut is that government will save over Rs. 4,760 crore in a year and banks will too get funds at lower rate.

However interest rate on Sukanya Samriddhi Yojana and Senior citizen savings scheme will be unaltered.
Interest rates on small savings scheme will be in the range of 8.4% – 9.3% whereas for schemes in bank the rates would be in the range of 7.5% – 8%. This will ease the roads for the banks to give loans.

Here are the schemes on which interest rates will be lowered:

• 5 year public provident fund. Check out PPF vs Sukanya Samriddhi Scheme.
• Post office term deposit which is for 1 to 5 years
• National savings certificate with tenure of 5 and 10 years
• Kisan vikas patra which has tenure of 100 days