The interest rate on the Sukanya Samriddhi scheme was increased by 20 basis points and the three-year term deposit scheme by 10 basis points for the January-March quarter while retaining the rates for all other small savings schemes.

According to a finance ministry circular, the deposit under the Sukanya Samriddhi scheme would attract an interest rate of 8.2 per cent from the existing 8 per cent, while the 3-year term deposit would fetch 7.1 per cent from 7 per cent at present.

However, the interest rates for popular PPF and savings deposits have been retained at 7.1 per cent and 4 per cent, respectively. The rates were the same during the December quarter.

The interest rate on the Kisan Vikas Patra is 7.5 per cent and the investments will mature in 115 months.

The interest rate on the National Savings Certificate (NSC) remained unchanged at 7.7 per cent.

There is no increase in the interest rate for the Monthly Income Scheme, and this will earn 7.4 per cent for the investors. The government notifies the interest rate on small savings schemes, majorly operated by post offices, every quarter.

The Reserve Bank since May 2022 has raised the benchmark lending rate by 2.5 per cent to 6.5 per cent, prompting banks to raise interest rates on deposits as well.

However, the RBI has maintained the status quo on policy rate in the last five Monetary Policy Committee meetings since February this year.

The interest rates of small savings schemes are intricately tied to the yields of 10-year government securities in the secondary market.

The established formula dictates mark-ups over the average yield of relevant G-Secs with comparable maturity from the preceding three months.

The Centre reviews small savings scheme interest rates on a quarterly basis. Its aligns them with the G-Secs yields observed in the preceding three months.

This practice adheres to the recommendations of the Shyamala Gopinath Committee in 2011, ensuring that the interest rates of small savings schemes remain market-linked.

BoB rate hike

Bank of Baroda (BoB) has increased the interest rate on fixed deposits for various maturities by up to 125 basis points, days after SBI hiked interest rates on some term deposits.

Interest rate on term deposits up to Rs 2 crore was hiked from 10 basis points to up to 125 basis points on various maturity buckets with effect from December 29, 2023, BoB said in a statement.