1% drop in small savings' rate may cut income by 15%. Measures are needed to save these schemes

The interest rates on small sovereign savings products have been reduced sharply. This is a result of the sharp reduction in the repo rate that the Monetary Policy Committee decided in its meeting on 26 March. The way savings rates are determined now, this linkage is more or less automatic as the rates on such savings schemes are fixed every quarter based on yields on government bonds. The sharp reduction is a result of the RBI’s move to cut interest rates by 0.75 %, taking the repo rate to 4.4%. 

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