Updated 01.01.2021
The Finance Ministry of Government of India on December 31 said in a statement, “The rates of interest on various small savings schemes for the fourth quarter of 2020-21, starting from January 1 and ending March 31, 2021, shall remain unchanged from those notified for the third quarter (October to December). The interest rates on the small savings schemes basket which comprises 12 instruments such as the National Saving Certificate (NSC), Public Provident Fund (PPF), Kisan Vikas Patra (KVP), and Sukanya Samridihi Scheme will be the same as the previous 3 quarters. It was only in the April to June 2020 quarter that saw a revision in the rates.
The rate of interest for the present quarter and rate of interest in the previous year for the same period are as under.
| Scheme | Rate of Interest January 2021 to March 2021 | Rate of interest January 2020 to March 2020 | Interest rate compounded at |
| Savings account | 4.00% | 4% | Annual rest |
| 1-year-time deposit | 5.50% | 6.90% | |
| 2-years-time deposit | 5.50% | 6.90% | Quarterly rest |
| 3-years- time deposit | 5.50% | 6.90% | Quarterly rest |
| 5-years- time deposit | 6.70% | 7.70% | Quarterly rest |
| 5-years Recurring Deposit | 5.80% | 7.20% | Quarterly rest |
| 5yearsr Senior Citizen Saving Scheme | 7.40% | 8.60% | Interest paid quarterly, (Quarterly rest) |
| 5- years Monthly Income Account Scheme | 6.60% | 7.60% | Interest paid monthly |
| 5 -years NSC | 6.80 % | 7.90% | Annual rest |
| PPF (Public Provident Fund) | 7.10% | 7.90 | Annual rest |
| KVP (Kissan Vikas Patra) | 6.90 %(matures 124 months) | 7.60 %(matures 113 months) | Annual rest |
| Sukanya Samriddhi Account Scheme | 7.60% | 8.40% | Annual rest |
The government resets the interest rate at the beginning of every quarter since 2016 based on yields of government securities of the corresponding maturity with some spread on the scheme for senior citizens, as advised by the Shyamala Gopinath Committee. The Economic Survey had earlier suggested that the interest rates on the small savings schemes be reduced to bring them in consonance with the interest rates prevailing in the economy, as the Yields on dated Government Securities (G-Secs) continuously on the decline. The commercial banks have also been complaining that high rates of small savings schemes prohibit them from cutting deposit rates, it was expected a downward revision in interest rates for small savings schemes for the ensuing quarter, but the government preferred to keep them unchanged.
Other important news on Small savings instruments:
During the announcement of interest for the quarter April -Jun 18, the Ministry withdrew the earlier restrictions for credit of interest in respect of small savings to basic Savings Bank account. Now all the interest and maturity proceeds of small savings instruments operated by the Department of Posts may be paid to the depositors through the depositor’s savings account standing at a post office or any commercial bank, by cheque or in cash.
The PPF account rules are recently modified by the Government for the benefit of account holders. As per modified PPF account holders can now make deposits in multiples of ₹50 any number of times in a financial year with a maximum of ₹1.5 lakh a year. Earlier, a maximum of 12 deposits was permitted in a period of 1 year. Read: New rules of PPF
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