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Small savings will continue to be attractive despite Coronavirus outbreak

While banks have been cutting fixed deposit (FD) rates, small savings rates have not been revised for some time, and that has created an abnormal differential between them

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Coronavirus

Mumbai 

Small savings will continue to be attractive despite Coronavirus outbreak

Interest rates on small savings schemes may be reduced from the April-June quarter. News reports suggest the government is contemplating this step to facilitate faster transmission of interest rates, thereby assisting an economy that is rapidly approaching stall speed in the wake of lockdowns triggered by the COVID-19 pandemic.

Experts are of the view that a cut in small savings rates has become inevitable. “Thirty-eight central banks have already cut rates, 11 of them twice. The Reserve Bank of India will also follow suit. We are likely to be in a low-rate regime for some time, so small savings rates are also bound to come down,” says Ankur Maheshwari, chief executive officer, Equirus Wealth Management.

While banks have been cutting fixed deposit (FD) rates, small savings rates have not been revised for some time, and that has created an abnormal differential between them.

Investors still have the opportunity to lock into the prevailing rates of several small savings schemes. “In case of (PPF) and Sukanya Samriddhi Yojana (SSY), the interest rate changes for existing investors as soon as a rate change is announced. In the other small savings instruments, it remains unchanged for the entire tenure,” says Deepesh Raghaw, founder, PersonalFinancePlan, a Securities and Exchange Board of India-registered investment advisor. Make use of the window of opportunity still available.

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First Published: Fri, October 23 2020. 19:35 IST
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