New Delhi: Starting from April 1, the Kisan Vikas Patra small savings scheme will fetch a lower return of 7.6 percent percent, compared to the earlier 7.9 percent in the last quarter. The maturity duration has also been lowered to 113 months.

It has been cut by 70 basis points (bps). The Kisan Vikas Patra doubles the initial amount invested at the time of maturity so a reduction of interest rates also means that the scheme will give low returns.

The government has reduced the interest rates on other small savings schemes by 80-140 basis points. Savings schemes with a change in interest rates effective from April 1, 2020, include Senior Citizen Savings Scheme (SCSS) which has been reduced to 7.4 percent, Public Provident Fund (PPF) has been brought down by 80 bps.

It will now have an interest rate of 7.1 percent, Sukanya Samriddhi scheme will have an interest rate of 8.4 percent from 8.5 percent and National Savings Certificate (NSC) which will now have an interest rate of 7.9 percent as compared to 8 percent earlier.

The finance ministry offers nine types of small saving schemes and it revises the interest rate every quarter. The interest rate on small savings schemes including PPF, which are revised on a quarterly basis, had seen a sharp hike in October-December quarter and since then, they had remained steady.

According to report by IANS, the government hopes that cutting interest rates for small savings schemes will push banks to lower their rates which have so far been reluctant do so citing higher rates of small savings schemes.

According to IANS, the decision to reduce the interest rate was criticised by Former Finance Minister P. Chidambaram who said it may be "technically correct but it's wrong time" as the country is amid lockdown due to fear of Covid-19 and people have no way of income. He also demanded that the government should continue with the old rate at least until June 30.