The Indian government is expected to review and possibly increase the interest rates of small savings schemes, including the Public Provident Fund (PPF), Senior Citizen Saving Scheme (SCSS), National Savings Certificate (NSC), and Sukanya Samriddhi Yojana (SSY) for the October-December quarter of 2024. This move comes as the country’s deposit growth in banks has slowed down, prompting the need to encourage more savings.
The interest rates for these schemes have remained unchanged for the last two quarters. PPF, in particular, has seen no rate changes for the past four years, with the current rate standing at 7.1%.
Why an Increase in Interest Rates is Expected
One of the primary reasons for the expected hike in interest rates is the declining rate of deposit growth in banks across the country. This drop in savings deposits has made it difficult for banks to issue loans. To encourage more people to save, especially in post offices and banks, the government is likely to raise the interest rates of these schemes.
Recent reports from TransUnion CIBIL Credit Market Indicator (CMI) indicate that banks have reduced lending in the first quarter of this financial year. Loans, including home, auto, and personal loans, have all seen a significant decline. Home loans have been the most affected, showing a 9% drop compared to last year.
Current Interest Rates for Small Savings Schemes
At present, the government offers 12 small savings schemes, with the following interest rates:
- Senior Citizen Saving Scheme (SCSS): 8.2%
- Sukanya Samriddhi Yojana (SSY): 8.2%
- National Savings Certificate (NSC): 7.7%
- Post Office Monthly Income Scheme: 7.4%
- Kisan Vikas Patra (KVP): 7.5%
- Public Provident Fund (PPF): 7.1%
These rates have remained the same for the last two quarters of the current financial year. If increased, it would provide an incentive for people to save more, especially since savings have been stagnant in recent years.
Government’s Review Every Three Months
The government regularly reviews interest rates on small savings schemes every quarter, with adjustments made to offer long-term benefits to investors. The last change in PPF rates occurred in April-June 2020, when the rate was reduced from 7.9% to 7.1%. With the upcoming review for the October-December quarter, experts believe that the rates may rise, providing a boost to savings.
As the government continues to monitor the country’s economic conditions, an increase in small savings scheme interest rates could provide a much-needed boost to both investors and banks looking to increase deposits.
