Woes for Small Investors as the Interest Rates Drop

The government recently accounted a 10-basis point cut in the interest offered on small savings schemes such as PPF and FD, etc. which has raised the suspicion whether EPF rates will also get a cut.
Key points:

• The finance ministry has reportedly proposed a cut of 50 BPS to the labor ministry, which if implemented will drop the EPF rates from 8.65% to around 8.15%.
• On March 31, the finance ministry had cut the interest rates on all small savings schemes by 10 bps. Only the savings deposit scheme has been left unaffected, whose interest rate stays the same at 4%.
• The interest rate cuts made by the government is in line with the dropping FD interest rates offered by the banks. While the standard coupon rate on FD schemes is 7%, several banks are offering lower interest rates on 5-year term deposits: SBI at 6.5%, ICICI at 6.75%, etc.