Govt may cut rate on small savings schemes in next quarter

New Delhi: The government is considering rate moderation for small savings schemes in the upcoming quarter, a development that could lead to speedier transmission of monetary policy rate cuts, sources said.

During the current quarter, the government refrained from cutting interest rates on small savings schemes, such as Public Provident Fund (PPF) and National Savings Certificate (NSC), despite moderating bank deposit rates.

Bankers have been complaining that high rates on small savings schemes prohibit them from cutting deposit rates.

Currently, there is a difference of nearly 100 basis points between deposit rate of banks and small savings rate for one-year maturity.

Earlier this week, RBI Governor Shaktikanta Das said the Monetary Policy Committee (MPC) will take a call on an interest rate cut and all options were on the table to counter the Coronavirus blow.

Last month, the Governor in an interview with a news agency said: "We have said it in MPC resolution that there is a case for reducing the small savings rates and aligning it more with the formula-based rate fixation. We have referred to it in the MPC resolution."