There is likely to be much breast-beating among savers when the government cuts small savings rates – that is, rates on products like National Savings Certificates (NSCs), Kisan Vikas Patras, post office fixed deposits, or the hugely popular public provident fund (PPF). This move will be another signal that rates of all savings instruments – from bank deposits to government and corporate bonds – will trend downwards. Savers will have a tough time maintaining their interest incomes.
A Times of India report suggests that small savings rates are likely to be cut by 50 basis points (100 basis points make 1 percent), and that in future rates will be determined quarterly, not annually. Moreover, the rates may be pegged to yields on government securities with similar maturities.
