It was expected that the government will cut down the interest rates on its various saving schemes after the recent decision of RBI to reduce the Repo rate by 0.75%, but nobody expected a rate cut of up to 1.4%. We should keep in mind that the rate cut is for the period April-June.2020. This rate of interest can be increased, but looking at the current situation of the market it should be expected that this is long term changes to the economy.
The PPF rate has been reduced from 7.9% to 7.1% rate cut of 0.8%.
The Biggest rate cut is evident in Time deposit (Post Office etc.) for 1/2/3 Years where there is a deep cut of 1.4%. Even the recurring deposit interest rate has been reduced by 1.4%.
Is this the end of the road for PPFs and other small saving schemes?
Maybe or may not be but one thing is clear that investors will start moving to other schemes which can give them better returns albeit with a slightly high risk. This may be the push that was required for everyone to diversify their investments.
What can be done right now??
If you have short term fixed deposits go for the longer-term deposits if your bank is still offering them at higher interest.
Or
Just move to Debt funds which give you the significantly large interest difference for anyone who moves into them.
This will direct to the advancement of innovative products shortly, As well as the flow of people towards Mutual Funds may be Debt or Equity Funds. These funds provide investors at least 2% more return in short terms. Equity funds provide people a considerably high return in many cases as much as double the return on FDs in the long term (Above 5 Years).
13 Replies to “PPF and other Small Saving Schemes Interest Rates slashed by up to 1.4%: How it affects you?”
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