SMALL SAVINGS INSTRUMENTS

Subject : Economy

Context : The government has sharply slashed the rates on all small savings instruments for the first quarter of 2021-22.

Concept :

It has brought the rate of return on the Public Provident Fund down from 7.1% to 6.4% and effecting cuts ranging from 40 basis points (0.4%) to 110 basis points (1.1%) through a notification.
The sharpest cut was seen in the quarterly interest rate paid on one-year term deposits, from 5.5% in the January to March quarter to 4.4% in this quarter.
The rate of return on the Senior Citizen Savings’ Scheme was cut from 7.4% to 6.5%, while the SukanyaSamriddhi Account Scheme’s return was reduced from 7.6% to 6.9%.
The interest rate paid on National Savings Certificate and KisanVikasPatra were also reduced significantly, from 6.8% to 5.9%, and from 6.9% to 6.2%, respectively. Consequently, the KisanVikasPatra, which used to mature in 124 months, will now mature in 138 months.
While savings deposits earned the lowest rate of 4% till now, that return has now been further slashed to 3.5%. Among time deposits, the return on five year deposits has been reduced from 6.7% to 5.8%.
For savers, the option with the highest returns at this point is the SukanyaSamriddhi Account Scheme, followed by the Senior Citizens’ Savings Schemes and the Public Provident Fund.

About SukanyaSamriddhiYojana:

It is a small deposit scheme for the girl child launched as a part of the ‘BetiBachaoBetiPadhao’ campaign.
A SukanyaSamriddhi Account can be opened any time after the birth of a girl till she turns 10, with a minimum deposit of Rs 250 (Earlier it was Rs 1,000). In subsequent years, a minimum of Rs 250 and a maximum of Rs 1.5 lakh can be deposited during the ongoing financial year.
The account can be opened in any post office or authorised branches of commercial banks.
The account will remain operative for 21 years from the date of its opening or till the marriage of the girl after she turns 18.
To meet the requirement of her higher education expenses, partial withdrawal of 50% of the balance is allowed after she turns 18.