PPF interest rate: Small savings Interest rates unchanged | Business News in India

NEW DELHI: The government left small savings rates unchanged for the July-September quarter after an outcry over a sharp drop in April forced it to reverse its decision.
This is the fifth quarter in a row that rates have remained unchanged, providing respite for middle-class investors who put their savings into a public provident fund, a senior savings plan and a national savings certificate. , among other instruments.
However, the status quo will make interest rates stickier for banks, which will not be able to reduce deposit rates, fearing a flight of funds to higher paying products such as the PPF which also offer tax advantages. It will be difficult for banks to significantly reduce mortgage rates and other interest rates.
Currently, the State Bank of India offers the highest rate of 5.4% on term deposits with a term of five to 10 years. In contrast, PPF deposits will offer 7.1% and will be tax exempt. So, an investor in the 30% tax bracket can expect to earn more than 9% on these funds.
The latest round of rate cuts, which came amid elections in West Bengal and other states, had to be reversed within hours.
Given the weak economic sentiment and concerns over rising prices, especially following gasoline and diesel rates crossing the Rs 100 per liter mark in several parts of the country, the government has failed maybe not wanted to further upset the middle class.
In addition, in the past, the money, which is government borrowing from the National Small Savings Fund, has also been found useful in meeting off-budget financing needs, such as paying for food subsidies or loans to Air India. In the last budget, however, Finance Minister Nirmala Sitharaman cleaned up the books by directly clearing contributions from FCI and others.

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