In March, the government had announced reduction in small saving interest rates by up to 130 basis points.
While the interest rate on Post Office savings was retained at 4 per cent, the same for term deposits of one to five years was reduced. (File Photo)
Nearly 50 lakh transactions flooded Indian post offices during the first fifteen days of March this year against an average of 20-30 lakh transactions witnessed every year, a senior government official told The Indian Express. The increase in rush was primarily due to citizens making transactions in order to hedge before the reduction in small savings becomes effective from April 1, the official said.
In March, the government had announced reduction in small saving interest rates by up to 130 basis points.
“Unlike the savings instruments of banks, savings made in post offices offer interest rates prevalent at the time when a transaction is made. We saw nearly 13 lakh new accounts being opened in the last 15 days of March against a normal of 4-5 lakh during the month,” the official said, comparing the final rush with the one generally witnessed at petrol pumps the evening when oil marketing companies announce hike in fuel prices.
For example if someone opened an account in a post office for either a long-term instrument or even in a monthly income scheme before April 1, the account holder would earn higher interest rates that prevailed before the effective date of reduction.
The government had on February 16 announced moving small saving interest rates closer to market rates, but said that the interest rate and the spread that some of these schemes enjoy will remain untouched. However, on March 18 the government slashed rates across the board, including that on Public Provident Fund, Senior Citizen Savings Scheme and announced the highest reduction of 130 basis points in the case of one-year time deposit.
Interest rate on Public Provident Fund (PPF) scheme was cut to 8.1 per cent for the period April 1 to June 30, from 8.7 per cent earlier. Rate on Kisan Vikas Patra was lowered to 7.8 per cent from 8.7 per cent. Interest rates on Sukanya Samriddhi Account Scheme, which was lauched by Prime Minister Narendra Modi especially for the girl child, too was reduced to 8.6 per cent from 9.2 per cent.
Interest rate on five-year Senior Citizen Savings Scheme was also reduced to 8.6 per cent from 9.3 per cent. The popular five-year National Savings Certificates now earns an interest rate of 8.1 per cent as against 8.5 per cent before. A five-year Monthly Income Account fetches 7.8 per cent as opposed to 8.4 per cent earlier.
While the interest rate on Post Office savings was retained at 4 per cent, the same for term deposits of one to five years was reduced. Two-year time deposit now earns 7.2 per cent instead of 8.4 per cent, three-year time deposit earns 7.4 per cent instead of 8.4 per cent, five-year time deposit earns 7.9 per cent instead of 8.5 per cent. Five-year recurring deposit will earn 7.4 per cent instead of 8.4 per cent.
The Department of Posts, under the Ministry of Communications and Information Technology, is also in the process of upgrading its post offices to handle more electronic transaction. Also, on March 31, when 60,000 new accounts were opened in post offices across the country. The government had also announced keeping post offices open till 10 pm on March 31 to handle the last-minute rush of financial year ending.
Post dept wants to continue physical issue of NSC, KVP
Financial year-end rush at post offices has taken its toll on the systems and servers of Department of Posts, a senior government official told Indian Express, on condition of anonymity. Owing to the heavy traffic, the official said, post department took approval from the finance ministry to issue physical copies of National Savings Certificate (NSC) and Kisan Vikas Patra (KVP). The finance ministry, in a circular issued late March, mandated electronic issuance of the aforementioned savings instruments effective April 1.
“Post offices across the country undertook around 50 lakh transactions in the first 15 days of March itself. The load on our servers was too heavy, as a result of which we secured permission from the finance ministry to issue pre-printed certificates till such a time the system issue is resolved,” the official said.
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