The government has cut interest rates on the General Provident Fund (GPF) and similar funds for government employees to 7.1 percent from 7.9 percent for April-June quarter of FY21, a cut of 80 basis points.

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A finance ministry notification said the new rate will be effective from April 1 till June 30 of FY21. In the previous Jan-March quarter the GPF rate was 7.9 percent.

Government officials say this is line with the cut in the Public Provident Fund or PPF rates under small savings. “The GPF rate is always equal to PPF rate,” the official explained. On March 31 the government cut small savings rates by a massive 140 basis points and the PPF rate was lowered from 7.9 percent to 7.1 percent for the current quarter.

Other funds that will be impacted by the latest rate revision include The State Railway Provident Fund, The General Provident Fund (Defence Services), The Indian Ordnance Department Provident Fund, The Indian Ordnance Factories Workmen’s Provident Fund, The Indian Naval Dockyard Workmen’s Provident Fund, The Defence Services Officers Provident Fund, The Armed Forces Personnel Provident Fund.

On March 27, the Reserve Bank had slashed the repo rate by 75 basis points, signalling a significant softening of interest rates, post which the government followed with a deep cut in the small savings rate on March 31.

With the cut in GPF rates the government in all probability has brought the softening of interest rates full circle.

First Published:Apr 11, 2020 9:58 PM IST