Interest rate cut on state-run savings schemes
Of a half percentage point
Union Finance Minister Yashwant Sinha announced an interest rate cut of a half percentage point in government-promoted savings schemes on Thursday.
Most administered interest rates will be reduced by 50 basis points, Sinha said in his annual budget statement.
With inflation at a two-decade low, the government has been under pressure to bring down interest rates, which currently stand at between 10 and 12%.
Sinha told the Lok Sabha that the benefit of reduction in interest rates on small savings deposits will be fully passed on to the states.
He said the administered interest rates will now be benchmarked to the average annual yields of government securities of equivalent maturities in the secondary market.
The government relief bonds will also have a reduction of 50 basis points in interest rate. A ceiling of Rs 2 lakh per year has been put on investments in these bonds.
The entire net proceeds of small savings are to be transferred to state governments from April 1 this year, up from the current transfer of 80%.
He also proposed that the interest rate on the loan portion of central assistance to state plans will be reduced by 50 basis points.
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