The Central Government has offered a significant benefit to ordinary investors by raising interest rates on small savings schemes for the fifth consecutive quarter.
Rates for the October-December 2023 period have been hiked by 0.20%, as announced in a Finance Ministry notification on September 29.
The adjustment only affects the five-year recurring deposits (RD), which see their rates rise from 6.5% to 6.7%.
Other small savings schemes remain unaffected, maintaining the same interest rates as in the previous July-September 2023 quarter.
This move follows nine consecutive quarters without any rate changes until the government started its recent pattern of quarterly increases in October-December 2022.
Current Interest Rates for All Small Savings Schemes
Here’s how the government determines these rates.
The government determines the interest rates for small savings schemes based on market yields of government securities.
When market yields on government securities rise or fall, small savings scheme interest rates are adjusted accordingly using the government’s formula.
The reference period for the December 2023 quarter is June-August, during which the interest rates for the December quarter have been determined, factoring in market yield fluctuations.
In June-August, government bond yields increased, with five-year bond yields rising by 0.24%. This led to the increase in rates for five-year RDs.
However, it’s worth noting that while five-year RD rates were adjusted, rates for other small savings schemes remained unchanged, despite increased yields across all government securities.
During June-August, 10-year bond yields rose by 0.18%, and 364-day treasury bill yields increased by 0.14%.
