PPF

Small savings rates – what REALly matters?

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Small savings rates table new 2016

So, small savings rates across the spectrum have been cut including that of the ever popular PPF, Senior Citizens Savings Scheme and the Sukanya Samriddhi Yojana.

In fact, the rates will now be reset every quarter.

Here is the new rate structure applicable on Small Savings Instruments from April 1, 2016:

Small savings rates table new 2016

People are shocked and dismayed at this drastic cut.

Unfortunately, if you too are, then you are missing the real picture. To see this real picture, you would have to add another column to the above table, that of inflation rate. 

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Small Savings Schemes – Rates get further smaller

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small savings schemes, PPF, Bank FD

Why does bad news get more attention than good news? Not just that, it also triggers us into action.

I realised it yet again when my friend Vijay told me anxiously about a news he just heard.

“Did you read that the government is planning to reduce interest rates on small saving schemes?”

Small savings schemes include National Savings Certificates, Senior Citizen Savings Scheme, Post Office Monthly Income Scheme, PPF, etc.

“Yes, I heard that. But why are you bothered?” I said with my tongue-in-cheek.

“You know everything, yet you ask me that. Almost all my money is in these schemes, in fact most of it in Bank Fixed Deposits. Aren’t my returns going to suffer because of the reduction in interest rates?”

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