In a rising interest rate environment, the expectations were high for the small savings interest rates to be increased by the government. However, contrary to the expectations, the government has decided to keep the small savings interest rates unchanged for the July to September quarter.
All post office schemes such as National Savings Certificates, KVP, Time-deposits, Public Provident Fund, Senior Citizens Savings Scheme, Sukanya Samriddhi Yojana will continue to fetch a similar rate of interest as that of the previous quarter. The government has decided to maintain the interest rate of small savings schemes for Q2 of the financial year 2022-23. For the quarter July 2022 to September 2022, there will be no change in the post office small savings interest rates. As per the PTI tweet, “the government keeps interest rates on small savings schemes unchanged for July-Sept quarter.”
At the start of every quarter of the financial year, the government sets the interest rates on post office schemes for the next three months.
The interest rate on PPF will continue to be 7.1 per cent per annum while for the Senior Citizen Savings Scheme, the interest rate is 7.4 per cent per annum. Sukanya Samriddhi Account holders will continue to get 7.6 per cent compounded annually on their account balance.
The 5-year Monthly Income Account Scheme is offering 6.6 per cent payable monthly, while the 5-year NSC continues to offer 6.8 per cent compounded annually.
On the 1-year time deposit, the rate of interest stands at 5.5 per cent while on the 5-year deposit, the rate is 6.7 per cent per annum.
SBI bank fixed deposit rate for 1-year is 5.3 per cent while 5-year deposit is offering 5.5 per cent. ICICI Bank FD offers 5.35 per cent and 5.75 per cent for 1-year and 5-year FD.
Even if the rates are changed, the new rates do not apply to all investors of all post office schemes. For NSC, KVP, Time deposits, Senior Citizens Savings Scheme (SCSS), the rate of interest remains fixed for investors until maturity. PPF and Sukanya Samriddhi Yojana (SSY) are the two prominent small savings schemes that witness a revision in the rate as and when the government revises them.
From the level of around 6 per cent, the Indian 10-year G-Sec yield has risen nearly 150 basis points to touch 7.5 per cent recently. With rising inflation, RBI had to hike the repo rate leading to the increase in yields.
Interest rates on small saving schemes are administered interest rates and are linked to market yields on G-secs with a lag and are fixed on a quarterly interval at a spread ranging from 0-100 bps over and above G-sec yields of comparable maturities.