Forced to withdraw taxation on retirement funds, the government has decided to lower interest rates on small savings, including on the Public Provident Fund (PPF), by 60-130 basis points.
The PPF will now fetch 8.1 per cent against the current rate of 8.7 per cent. The interest rate on Kisan Vikas Patra has brought down to 7.8 per cent from the current 8.7 per cent, while that on the five-year National Saving Certificate has been reduced to 8.1 per cent from 8.5 per cent.
The five-year Monthly Income Scheme will also get to 7.8 per cent instead of the present 8.4 per cent.
The move will hit the middle class, specially the retired people, who rely on small savings schemes.
The interest rates on the Sukanya Samriddhi Account and the Senior Citizens Savings Scheme have been reduced to 8.6 per cent each from the current 9.2 per cent and 9.3 per cent, respectively.
Post office savings, however, will continue with the same rate, 4 per cent.