Govt may cut interest rate on PPF, NSC, Senior Citizen Saving Scheme & Sukanya Samriddhi Yojana

The government is likely to reduce the interest rate on small savings schemes, a senior government official told CNBC-TV18.

This move is likely to affect interest rates of Public Provident Fund (PPF), National Savings Certificate (NSC), Senior Citizen Saving Scheme (SCSS) Sukanya Samriddhi Yojana (SSY) and other small savings schemes.

“The gap between the repo rate and the small savings rate needs to come down. Small savings rates are likely to be reduced,” a government official told the channel.

Wading into the debate on whether the Reserve Bank of India (RBI) should cut policy rates to stem the economic slowdown after the US Federal Reserve, Bank of England and other prominent central banks announced a similar cut, the official said, “There is scope to cut repo rates by 50 bps. The Reserve Bank may reduce its policy rate by 25 bps. The repo rate should ideally be reduced between two Monetary Policy Committee (MPC) meets,” the official added.  (100 bps=1 percentage point)

With coronavirus (COVID-19) battering global markets, the Federal Reserve on March 3 announced an emergency 50 bps rate cut in the 1-1.25 percent range, while the Bank of England on March 11 also cut interest rates by 50 bps to 0.25 percent. The pressure is now mounting on the RBI to do the same.

The official further said inflation is expected to be in the 4.6 percent range by July but there is “need to watch out for the real impact of COVID-19 in Q1 FY21.”

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