The post office has finally reduced the interest rates on its savings schemes. This decision came much later compared to when the Reserve Bank of India (RBI) cut the repo rate. As soon as the repo rate was lowered, banks across the country started reducing their fixed deposit (FD) rates.
To give some background, the RBI has cut the repo rate by a total of 1.00% this year. These cuts were made in three phases—first by 0.25% in February, then again by 0.25% in April, and finally by 0.50% in June.
New Interest Rates on Post Office Time Deposits (TD)
The post office has made changes to the interest rates of its Time Deposit (TD) scheme. TD accounts can be opened for periods of 1 year, 2 years, 3 years, and 5 years. Earlier, the interest rates were:
6.9% for 1-year TD
7.0% for 2-year TD
7.1% for 3-year TD
7.5% for 5-year TD
After the revision, the post office will now offer only 6.9% interest on TDs for 1 year, 2 years, and 3 years. The 5-year TD rate remains unchanged at 7.5%.
Still Better Than Bank Fixed Deposits
Despite the rate cuts, post office TDs still offer better interest than many bank FDs. For example, India’s largest public sector bank, SBI, currently offers:
6.25% to 6.75% on 1-year FDs
6.45% to 6.95% on 2-year FDs
6.30% to 6.80% on 3-year FDs
It’s also worth noting that banks give 0.50% extra interest to senior citizens, while the post office gives the same interest rate to everyone, regardless of age.