What are basis points and how increasing it will affect the small investors? - letsdiskuss
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Ram kumar

Technical executive - Intarvo technologies | Posted on | Share-Market-Finance


What are basis points and how increasing it will affect the small investors?


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Entrepreneur | Posted on


The government has recently announced to increase the interest rate on small savings scheme by up to 40 basis points. This is a good news for all the retail, middle-class investors who have been hit hard by the rising fuel price.


But first, what are the basis points?

Often referred to as bps, basis points are nothing but the percentage change in the value of any financial instrument. 100 basis points are equivalent to 1 percentage.

Here 40 basis point increase means 0.40 percent increase in the interest rate.

This hike will come into effect in the third-quarter of 2018-2019, starting from October to December. It is applicable to small savings schemes, which includes Public Provident Fund (PPF), Kisan Vikas Patra (KVP), Sukanya SamridhiYojana (SSY), Monthly Income Scheme (MIS), and more. For instance, PPF interest rate was 7.6 percent, now it’s 8 percent; interest rate for Senior Citizens Savings Scheme was 8.7 percent, now it’s 8.7 percent.

All in all, with a recession looming high and Indian economy showing signs of a slowdown (and not to forget the soaring price of petrol and diesel), the lower and middle-class families are struggling a lot. This increase in the interest rate of the small savings scheme can be a breather for them.

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