Govt Raises Interest Rate for 5-year RD

What is a Recurring Deposit?

RD is a savings plan provided by banks, NBFCs, & post offices. You deposit a fixed monthly amount for 6 months to 10 years.

Raised Interest Rates

For October-December, the interest rate for a 5-year RD has been hiked to 6.7% from 6.5%, a hike of 20 basis points.

How Does it Effect Other Schemes?

The interest rates of other small savings schemes remain same. For PPF, it is the same for the 14th consecutive quarter.

Why are Interest Rates Increased?

This occurred during a period of halted interest rates by the RBI despite rising yields in govt. securities from June to August.

Basis of Change in Interest Rates

Interest rates on small saving schemes are reset every quarter, in line with movement in benchmark govt. bonds of similar maturity.

What’s More?

The RBI has maintained the same repo rate for three consecutive monetary policy reviews since April, pausing any rate changes.