New Delhi: The government left a small savings rate that did not change for the quarter of July-September after a shower over sharp cuts in April had forced it to reverse the decision.
It is a one-in-law fifth where the tariff is left unchanged, giving investors to pause to the middle class that park their savings in public provident funds, senior savings schemes and national savings certificates, among other instruments.
However, the status quo will make a sticker interest rate for the bank, which will not be able to reduce deposit rates, fear of flight flight for high-income products such as PPF which also offers tax benefits.
It will make it difficult for banks to significantly reduce home loans and other loan interest rates.
At present, Indian state bank offers a 5.4% highest rate in fixed deposits with a ten to 10 years.
Instead, PPF deposits will offer 7.1% and will be tax free.
So, an investor in a 30% income tax bracket can expect to get more than 9% on this fund.
The last round of cutting tariffs, which come amid elections in West Bengal and other countries, must be reversed within a few hours.
Given the weak economic sentiment and concerns over price increases, especially after the gasoline and diesel rates cross the RS 100-A-liter in several parts of the country, the government may not want to disappoint the middle class.
In addition, in the past, money, the government loan flowing into a small small savings funds, it is also useful in meeting off-budget funding requirements, such as paying food subsidies or loans to India.
However, in the last budget, Minister of Finance Nirmala Sitharaman has cleared books by cleaning FCI and others directly.