Will interest rates on government post office small savings schemes, such as the Public Provident Fund (PPF), National Savings Certificate (NSC), and others, change? The question is on the minds of millions of customers who have parked their money in these small savings schemes. The Finance Ministry is scheduled to announce new rates for these schemes later today. The new interest rates will be applicable for the October-December 2025 quarter.
These small savings schemes can be divided into three types – social security schemes, savings certificates and postal deposits.
PPF, Senior Citizens’ Savings Scheme (SCSS) and Sukanya Samriddhi Yojana (SSY) are part of the social security portfolio. National Savings Certificate (NSC) and Kisan Vikas Patra (KVP) are two savings certificates.
When it comes to postal deposits, Post Office Savings Account, Post Office Time Deposits, Post Office Recurring Deposit (RD), and Post Office Monthly Income Scheme (MIS) are key plans.
The last change in interest rates on some schemes was seen in the last quarter of the financial year 2023-24 (January-March 2024). At that time, the government increased the interest rate on 3-year time deposits from 7% to 7.1% and on the Sukanya Samriddhi Yojana (SSY) from 8% to 8.2%. Rates on other small savings schemes were left unchanged.
Will PPF rate be changed?
The PFF rate was last changed on March 31, 2020. So now it’s been 66 months (5.5 years), and the rate has not been changed. Before April 1, 2020, PPF earned 7.9% interest, starting from July 1, 2019. Even before that, the scheme gave 8% interest during the period – October 1, 2018 to June 30, 2019.
Importance of G-Sec bond yields in PPF rate fixation
The interest rates on PPF and other post office small savings schemes are based on the recommendations of the Shyamala Gopinath Committee. The Committee recommended that the secondary market yield of Central Government Bonds (G-Secs) should be the basis for determining interest rates on savings schemes for the relevant period, with an additional margin of 25 basis points added.
For example, the average yield on a 10-year G-Sec from June 2025 to September 2025 was 6.411%. Adding 25 basis points to this yields a PPF interest rate of 6.66%. However, the PPF currently offers an interest rate of 7.1%. This means that a decline in G-Sec yields increases the likelihood of a reduction in interest rates on small savings schemes.
RBI repo rate reduction
So far this year, the Reserve Bank of India (RBI) has cut the repo rate three times. Despite this, the government has not made any changes to the interest rates on small savings schemes like PPF, SSA, and SCSS. Therefore, interest rates may decrease in the upcoming quarterly review.
Why could there be a cut in rates for small savings schemes?
This year, the RBI has cut the repo rate by a total of 1%. The repo rate was 6.5% at the beginning of January. The reduction was by 25 basis points each in February and April, and by 50 basis points in June. Following this reduction, many banks have also reduced fixed deposit (FD) interest rates. Some banks discontinued their special FD schemes, while others continued them but reduced the interest rates.
What does this mean for investors?
A large number of pensioners, retirees, senior citizens, and middle-class families hold their savings in these schemes. Any reduction could impact their income. However, the final decision will depend on other government policies and circumstances.
Therefore, today’s review is important for investors and everyone must carefully watch whether the government makes any changes in the interest rates of PPF, NSC and other post office savings schemes.