PPF, NSC interest rates to be slashed? This is what may happen soon

The Government of India is under huge pressure from the Indian commercial banks over the interest rate disparity between the debt-funds like PPF, NSC and bank deposits. The Indian government is going to sit down to decide on the quarterly interest rate on PPF, NSC and other debt-fund investments. Banks are of the opinion that after the Reserve Bank of India (RBI) guidelines to link lending with Repo Rates, they are under pressure to cut down interest rates on bank deposits and bank savings. In such a case, there will be lesser savings in banks as people may switch to PPF, NSC etc options. So, they are demanding from the Modi 2.0 Government to cut down the interest rates in PPF, NSC etc.

Public sector banks are asking the government to cut down the interest rates on PPF, NSC citing, "It is not feasible to link deposits to repo rate in a falling rate situation. Plus, we will lose deposits to small savings schemes." Asked about the bank's demand on the interest rate cut in PPF and NSC PK Gupta, Managing Director at SBI said that SBI has an idea about the developments and the largest Indian commercial bank would soon take a decision in this regard.

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Speaking on these developments SEBI registered tax and investment expert Manikaran Singh said, "After the Repo Rate Linked Lending (RRLL) instruction from the RBI to various Indian banks, some of the India Banks like SBI, Bank of Baroda has changed their retail loan lending pattern. In fact, the SBI is giving a home loan at the cheapest rate. However, these banks will have to make a balance with their borrowing rates, especially on bank deposits and bank savings. So, their demand would definitely have some impact on the government and I am expecting some cut in the PPF, NSC interest rates in the upcoming quarterly review meeting. However, I don't expect many cuts in PPF, NSC interest rates, but yes, in a calibrated manner, there can be 0.5 to 0.75 per cent rate cut in one year to more than one year time." He said that such demands are not new to the Indian government and our experience suggests that they are not going to go for a mass rate cut in near future as fas as debt-investment tools like PPF and NSC are concerned.