Banks may just reduce interest on long-term deposits

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In a move so one can deliver down interest rates in the device, the government has decreased the return on small financial savings schemes by way of 10 basis factors (100bps equals one share level). These include schemes akin to public provident fund (PPF), Kisan Vikas Patra and the senior electorate saving scheme.

The interest rate on the PPF scheme is now 7.8%, Kisan Vikas Patra 7.5% and 8.3% on the 5-yr senior citizen financial savings scheme. The rates, notified with the aid of the finance ministry on Friday, can be effective for the 2d quarter ending September 30. the speed revision does no longer impression the mandatory worker provident fund (EPF) scheme which has an interest rate of 8.65% for FY17 for the four crore-plus PF bills in the organised sector.

The reduction will enable banks to carry down rates of interest on long run deposits. "because the benchmark marginal price of lending price will depend on the cost of dollars for a financial institution, any significant reduction in deposit charges will end in a drop in the cost of cash and can help bring down the lending fee," said a senior reliable with a public sector bank.

State bank of India (SBI) at present bargains 6.25% on time period deposits of up to five years, which is on a par with the yield on 10-12 months bonds.

From 2016, the rates of interest on small financial savings are reset each quarter. This revision is consistent with the motion typically rates of interest. The return on the 10-12 months govt bonds has dropped from 6.68% in end-March 2017 to 6.51% in finish-June.

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  1. Free- MCX_Market-Tips1 July 2017 at 00:25

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