Small saving schemes that remain attractive despite the interest rate cut

Senior Citizens Savings Scheme, Sukanya Samriddhi Yojana and PPF continue to be attractive

The government reduced interest rates on small savings schemes (barring savings deposits) by 10 basis points last week. Senior citizens and other conservative investors, who flock to these instruments for sovereign guarantee, should stick to the more attractive small savings instruments, despite the cut.

Interest rates of small savings schemes are linked to the yields on government bonds of a similar maturity (though the government exercises considerable discretion in deciding them). During the April-June quarter, the 10-year G-Sec yield fell by about 40 basis points. The Reserve of India (RBI) has also cut the benchmark repo rate thrice in succession