The central government has raised the rate of interest on two small savings scheme for January-March 2024 by 10-20 basis points, making it the sixth quarter in a row that rates on these instruments have been increased.
The finance ministry started raising small savings interests in October-December 2022 after leaving them unchanged for nine consecutive quarters.
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As per a notification by the finance ministry on December 29, the rate of interest on the three-year time deposit has been increased by 10 basis points 7.1 percent from 7.0 percent. Further, the rate of interest on the Sukanya Samriddhi Account Scheme has been hiked by 20 basis points to 8.2 percent for January-March 2024. One basis point is one-hundredth of a percentage point.
All other small savings schemes will continue to offer the same rate of interest as they did in October-December.
Moneycontrol had reported on December 28 that interest rates on small savings schemes for January-March 2024 could see a small increase.
| SMALL SAVINGS INSTRUMENT | INTEREST RATE FOR JAN-MAR 2024 | INTEREST RATE FOR OCT-DEC 2023 |
| Savings deposit | 4.0% | 4.0% |
| One-year time deposit | 6.9% | 6.9% |
| Two-year time deposit | 7.0% | 7.0% |
| Three-year time deposit | 7.1% | 7.0% |
| Five-year time deposit | 7.5% | 7.5% |
| Five-year recurring deposit | 6.7% | 6.7% |
| Senior Citizen Savings Scheme | 8.2% | 8.2% |
| Monthly Income Account | 7.4% | 7.4% |
| National Savings Certificate | 7.7% | 7.7% |
| Public Provident Fund Scheme | 7.1% | 7.1% |
| Kisan Vikas Patra | 7.5% (115 months) | 7.5% (115 months) |
| Sukanya Samriddhi Account Scheme | 8.2% | 8.0% |
Small savings interest rates, while set by the government, are linked to market yields on government securities at a spread of 0-100 basis points over the yield of these securities of comparable maturities. As such, when market yields on government securities rise, interest rates on small savings schemes should also be increased.
In September-November 2023, which is the reference period for small savings interest rates for January-March 2024, the yield on five-year government bonds rose by around 10 basis points, while 10-year bond yields rose by 15 basis points.
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