01 Jul Small Government Savings Rate
Small Government Savings Rate – Today Current Affairs
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For the quarter of July to September in FY23, the Central Government maintained the interest rates for modest savings programmes at their current levels.
Today Current Affairs
Small Savings Schemes: What Are They?
Small Savings Schemes (SSS) are a collection of savings instruments run by the federal government with the goal of encouraging all residents, regardless of age, to save consistently.
The government, banks, and public sector financial organisations all introduce these programmes. The Hindu Analysis
The interest rates for modest savings schemes have been reviewed by the Finance Ministry every three months since 2016.
The National Small Savings Fund (NSSF), which is utilised by the central government to pay its fiscal deficit, collects all deposits made under various small savings programmes. The Hindu Analysis
Classification: The programmes can be divided into three categories: social security plans, savings certificates, and post office deposits.
Post Office Deposits: These include monthly income accounts, time deposits with maturities of 1, 2, and 3 years, recurrent deposits, and savings deposits.
National Savings Certificates and the Kisan Vikas Patra are two examples of savings certificates. The Hindu Analysis
Public Provident Fund, Sukanya Samriddhi Account, and Senior Citizens Savings Scheme are examples of social security programmes.
Returns that are typically higher than bank fixed deposits are made available
has tax advantages and a sovereign guarantee.
They are very trustworthy since the government supports them.
not impacted by stock market fluctuations
Encourage people to develop a habit of saving money
How does the government feel about the low savings rates? The Hindu Analysis
Calculating the tiny savings rate Small savings rates and benchmark government bond yields are related.
However, the government hasn’t lowered interest rates in the past two years despite changes in G-Sec (government securities) yields.
At this time, the government has chosen to maintain the same interest rates on modest savings instruments. The Hindu Analysis
The National Savings Certificate (NSC) and Public Provident Fund (PPF), for example, will continue to offer yearly interest rates of 7.1 percent and 6.8 percent, respectively, in accordance with the recent decision.
One to five-year term deposits will provide interest rates between 5.5 and 6.7 percent, while five-year recurring deposits would yield a higher rate of 5.8 percent.
What does this entail for savers and banks? The Hindu Analysis
Negative real rate of return: The decision was made at a time when bond yields have increased to over 7.4 percent and inflation is over 7 percent.
After accounting for inflation, the choice might give savers and pensioners a negative real rate of return. The Hindu Analysis
Technically speaking, negative real rates encourage spending rather than conserving, which may drive greater inflation and further negative real rates.
Slow down the deposit rate increase: Banks are currently less inclined to pursue a significant increase in deposit rates.
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