Alerts : Small savings rates cut again

The government has trimmed the interest rates on small savings schemes to the extent of 20 basis points for the last quarter of fiscal 2017-18. However, Post Office savings deposits and the Senior Citizen Savings Scheme have been spared the axe. It has been a testing time for small savers this year as rates have gone downhill steadily. With the latest cuts, most schemes will now offer about 40 basis points lower than what they did a year ago.

The government decided to change the rate reset frequency on small savings schemes to every quarter, from April 2016. While rates were changed only twice in 2016-17, they have been revised in three out of the four quarters of 2017-18. In earlier times, rates were being reset only on an annual basis.

This change in the reset mechanism intends to align rates on small savings schemes more dynamically with market-linked rates — that is, in sync with changes on government securities (G-Secs).

For instance, the 10-year G-Sec yield dropped steadily from 7.7 per cent on January 1, 2016, to well below 7 per cent throughout most part of 2017, although there has been a rebound in recent times. The rates of interest for various instruments after the recent change are given in the accompanying table.

SEBI’s investor-friendly move

The Securities and Exchange Board of India (SEBI) has announced that it will allow convergence of stock and commodities bourses from October 2018.

This implies that exchanges can offer stocks as well as commodities on a single platform.

This is good news for investors as it will help them hold a single account for buying and selling stocks and commodities instead of the multiple ones they hold now.

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