Will PPF, Sukanya Samriddhi, Senior Citizen Savings Scheme, other small savings schemes' interest rates increase in December quarter?
SCSS), National Savings Certificate (NSC), and Sukanya Samriddhi Yojana (SSY) and Post Office Monthly Income Scheme (POMIS) in the past couple of quarters.
However, the interest rate of the Public Provident Fund (PPF) has been unchanged since April 2020. Will the Central Government hike interest rates of post office schemes, including the PPF, for the October-December quarter? Let's find out what experts suggest.
How are the interest rates of PPF, Senior Citizen Savings Scheme, and Sukanya Samriddhi Account calculated?
To know whether there will be a hike in post office schemes for the October-December quarter, you need to understand how the interest rates are calculated first. The interest rates of these small savings (PPF, SCSS and SSY) schemes are linked to market yields of the 10-year Government Securities in the secondary market. There are set formulae for mark-ups over the previous three months’ average yield of relevant G-Secs of comparable maturity.
The Central Government reviews the interest rates of small savings schemes every quarter based on the G-Secs yields of the previous three months.
This is in line with the recommendations of the Shyamala Gopinath Committee, 2011 to ensure that the interest rates of small savings schemes are market-linked.
As per the formula notified by the Finance Ministry in 2016, PPF has a spread of 25 basis points over the benchmark yield. The benchmark 10-year bond yield has averaged 7.14% from June to August 2023, according to data from Investing.com. Going by the formula, the interest rate of PPF will be 25 basis points higher than the average 10-year G-sec yield of the corresponding maturity.
