InvestorQ : How do you see the impact of the cut in small savings rate on retired persons and on banking stocks like SBI and ICIC Bank?
Riya Dwivedi made post

How do you see the impact of the cut in small savings rate on retired persons and on banking stocks like SBI and ICIC Bank?

Answer
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rhea Babu answered.
6 months ago


On the last day of the fiscal year, the government opted for aggressive cuts to small savings interest rates. The average cut ranged from 70 bps to 140 bps and included the rates paid on PPF, NSC and the Senior Citizens Savings Schemes (SCSS). PPF will earn just 7.1% against 7.9% in the March quarter. NSC will earn just 6.8% as against 7.9% earlier. The SCSS has also been slashed by 100 bps from 8.6% to 7.6%. Many senior citizens may not have to revisit their retirement portfolios. The rates on all post office schemes have also been cut by up to 100 bps. This rate cut on small savings was long overdue as the high rates were distorting the yield curve. It also acted as a barrier against banks cutting deposit rates beyond a point. This will ensure that banks can transmit rate cuts more seamless in the future. Banks like SBI and ICICI, which are major lenders, should benefit from this trend.