regular-article-logo Friday, 14 June 2024

Post office savings pick up pace

The interest rates on SSIs had remained unchanged for nine consecutive quarters

PTI New Delhi Published 10.04.23, 05:25 AM
Representational file image

Representational file image

Post office term deposits, which were fetching lesser returns than bank FDs, have again become competitive with the government effecting three back-to-back increases in interest rates on small savings schemes.

The return on post office term deposits of two years under the small savings schemes is 6.9 per cent, the same as offered by most banks on deposits of similar maturity.


After a series of repo rate hikes by the RBI since May 2022, the transmission to retail deposit rates gathered pace in the second half (H2) of the last fiscal after remaining subdued in April-September (H1) period as banks intensified their efforts to garner retail deposits to fund credit growth, according to an RBI analysis.

The weighted average domestic term deposit rate ( WADTDR) on fresh deposits (including retail and bulk) of banks increased 222 basis points (bps) from May 2022 to February.

During H1, banks had focussed on mobilising bulk deposits. This was reversed in H2 with the increase in fresh retail deposit rates (122 bps) outpacing that in fresh bulk deposit rates (77 bps).

The transmission to WADTDR on outstanding deposits is picking up, albeit gradually, reflecting the longer maturity profile of term deposits contracted at fixed rates, the RBI said.

As regards the small savings instruments (SSIs), the government has increased the interest rates by 10-30 bps for the October-December quarter of 2022-23, 20-110 bps for January-March quarter of 2022-23 and 10-70 bps for the first quarter of the current fiscal.

The interest rates on SSIs had remained unchanged for nine consecutive quarters — from the second quarter of 2020-21 to the second quarter of 2022-23.

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