The center, on March 28, 2025, reviewed interest rates in several small savings instruments, which are linked to secondary yields of the market in G-SEC of comparable maturities and kept it unchanged for Q1Fy26
The highest small savings rates can be a potential source of concern for the growth of bank deposits in a rate relief cycle when the deposit rates are expected to decrease, it warned the employees of the Bank of the Reserve of India (RBI).
The Government of India, on March 28, 2025, reviewed the interest rates of several small savings instruments, which are linked to the secondary yields of the market in government values (G-SEC) or comparable maturities and keep it unchanged for Q1Fy26.
As a result, rates in most instruments are now rates based on simulating in the range 16-66 basic points (BPS), RBI employees said in the article of the “state of the economy” in the newsletter. A basic point equals a percentage point of a percentage point.
Average G-SEC performance
For example, the duration of the period from December 2024 to February 2025, the average 5-year G-SEC of tenor was 6.62 percent. The interest rate based on the applicable formula for Q1Fy26 for a five-year-old small savings tank, which is one of the small savings instruments, is 6.87 percent (which has a 25 bp propagation on the average G-SEC or corresponding to Cortres). But the government has announced that the rate of this deposit is 7.50 percent.
In addition, the interest rate based on the application formula for Q1Fy26 for the citizens saving scheme over five years is 7.62 percent (which has a propagation of 100 bp on the average yield of G-SEC or the corresponding expiration). But the rate announced by the government for this deposit is 8.20 percent.
Therefore, the banks of the banks to transmit the 50 cumulative basic points cut at the repo rate since February 2025 to the term deposit rates (TD) could face serious obstacles. If they reduce TD rates at a time when deposits are delaying credit growth, savers could increase implementations in small savings schemes.
As of April 4, 2025, the Programmed Commercial Deposit Deposits (SCB) deposits decelerated 10.4 percent of 13.3 percent a year ago. SCB -not fed bank credit increased at a slowdown or 12.0 percent (year -on -year) such as March 21, 2025, compared to 16.3 percent a year ago
Posted on April 22, 2025
