Interest rates

PPF, other small savings deposit interest rates may rise. here’s why

With the rising yield on government securities (G-sec), interest rates on the Public Provident Fund (PPF) and other small savings deposits may soon rise. These rates are reviewed quarterly and are due for review by the end of this month. Currently, the PPF interest rate stands at 7.1% while that of the government securities yield has already crossed 7.3%. “The Public Provident Fund (PPF) interest rate may be increased soon,” said Amit Gupta, MD, SAG Infotech.

The interest rate on small savings has not been revised for 27 months. Rates were last lowered in the April-June 2020 quarter.

Amit Gupta said there is a direct relationship between small savings investments and government-sec returns. “That is why this increase in the yield of the G-Sec will not only increase the interest rate on the PPF, but will also have an impact on the rates for small savings investments,” he said.

Vivek Iyer, Partner, Grant Thornton Bharat, said rising global inflation is eating away at people’s savings, globally. Monetary policy requires that interest rates be raised to effectively manage inflation. If inflation is transitory, then rate increases are not passed on to savers.

However, inflation appears to be here to stay for a while and increasing PPF rates is the right approach bearing in mind the inherent purchasing power that inflation erodes, he added. .

Apart from PPF, other small savings products include National Savings Certificates (NSC), KVP, Term Deposits, Savings Scheme for the Elderly and Sukanya Samriddhi Yojana.

Interest rates for these small savings plans are distributed rates and are tied to market yields on government securities with an interval, and are set at quarterly intervals around and above g-sec yields of comparable maturity and spread of 0 to 100 basis points. “It is expected that with the rising yield of G-sec, investors in small savings products including National Savings Certificate, Time Deposit, KVP, Public Provident Fund , Sukanya Samriddhi Yojana and the Savings Scheme for the Elderly, are also seeing an increase in their investment rate,” added Amit Gupta.

PPF, SSY and other small savings plans latest interest rates

Public Provident Fund (PPF) – 7.1%

National Savings Certificate (NSC) – 6.8%

1 year term deposit -5.5%

Savings Scheme for Senior Citizens (SCSC) – 7.4 percent.

Sukanya Samriddhi Yojana -7.6%.

Five-year recurring deposit – 5.8%

Savings deposit interest rate – 4%

One to five year term deposits – 5.5-6.7%

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