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PO Small Savings Schemes Rates AXED AGAIN For Q2 '17-18

In line with the policy to reset interest rates applicable on the Post Office Savings Schemes on a quarterly basis, the Govt. has now declared the rates for the 2nd Quarter of the Financial Year 2017-18. 

The announcement of the same was made by Department of Economic Affairs, Ministry of Finance last week vide its Office Memorandum dated Jun 30, 2017

As you will note therefrom, it is the repeat performance of the previous quarter (when the rates for the quarter Apr-Jun 2017 were cut by 0.1%). In other words, all rates are AGAIN DOWN by 0.1% (except, of course, the Savings Account).

Accordingly, the revised interest rates on various Post Office Small Savings Schemes for Q2 2017-18 — i.e. July 1st to September 30th, 2017 — are detailed below:

Public Provident Fund (PPF) : Down from 7.9% to 7.8% p.a. [compounded annually]

5-year National Saving Certificate (NSC) : Down from 7.9% to 7.8% p.a. [compounded annually]

Monthly Income Scheme : Down from 7.6% to 7.5% p.a. [monthly compounding and paid out]

Senior Citizens Savings Scheme : Down from 8.4% to 8.3% p.a. [quarterly compounding and paid out]

Time Deposits
1-year Deposit : Down from 6.9% to 6.8% p.a.
2-year Deposit : Down from 7.0% to 6.9% p.a.
3-year Deposit : Down from 7.2% to 7.1% p.a.
5-year Deposit : Down from 7.7% to 7.6% p.a.
(All on quarterly compounding basis)

5-year Recurring Deposit : Down from 7.2% to 7.1% p.a. [compounded quarterly]

Kisan Vikas Patra : Down from 7.6% to 7.5% p.a. [compounded annually] 
(The scheme will now double your money in 115 months, as compared to 113 months earlier)

Sukanya Samriddhi Scheme : Down from 8.4% to 8.3% p.a. [compounded annually]

Savings Deposit : No change at 4% p.a. [compounded annually]

(I repeat) Your phones are smarter. Your investments are dumb.

This was naturally expected. Both the inflation and market interest rates, on various deposits, have eased considerably over the last 1-2 quarters.

The rate cut, however, is quite insignificant.

Therefore, they continue to comfortably beat the interest rates offered by the banks on their fixed deposits. As such, it is quite likely that the investors would continue to put their money in Post Office Schemes vis-a-vis the Bank Fixed Deposits.

Here, I repeat my earlier warning... THIS IS A BAD IDEA (especially if you pay income tax at higher rates).

You will find the Debt Mutual Funds to be lot more tax-friendly investments — and also with a lot less fuss  vis-a-vis both the fixed deposits and post office small savings schemes.

Moreover, even if by law they cannot give pre-fixed interest rates and the returns are market-linked, their performance over the last 15-20 years has been far (far) superior — without any compromise on safety and liquidity.

Must Read: How To Select The Low-Risk High-Yield Debt Funds.

For the benefit of those who might have missed my earlier blog posts, I reiterate... your phones have become infinitely smarter, but your investments are still thoroughly outdated and useless. 

So, unless you wish to become extinct like the dinosaurs, you should IMMEDIATELY upgrade your investments.

But if you still wish to stick to the fixed, assured-rate investments with 100% safety, you have one saviour... the 8% GOI Savings (Taxable) Bonds. You will surely love this dear old almost-forgotten scheme. It was once in great demand during the era of those black rotary dial phones.

The revised interest rates apply only to the "new accounts" opened during the respective period (except PPF and Sukanya Samriddhi Scheme, where the new rate is applied on the outstanding account balance). 

For the existing accounts under all other schemes, the contracted interest rate remains unchanged until maturity.

An Investment In Knowledge Pays The Best Interest ~ Benjamin Franklin

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