For the quarter ending September 30, 2022, investors in small savings schemes like the Public Provident Fund (PPF) and Sukanya Samriddhi Yojana (SSY) will continue to earn the same interest rate as they were earning till now. New investments made during the July-September 2022 quarter into these schemes will also earn the same interest rates as in the previous quarter.
According to the circular, the Public Provident Fund (PPF) will continue to earn 7.10 per cent. The Senior Citizens Savings Scheme (SCSS) will continue to earn 7.40 per cent, and post office time deposits will fetch 5.5-6.7 per cent.
Here is a look at the interest rates on various small savings schemes for the second quarter of FY 2022-23.
Interest rates on post office deposit schemes:
|Instrument||Interest rate (%) from July 1, 2022||Compounding frequency|
|1 year Time Deposit||5.5||Quarterly|
|2 year Time Deposit||5.5||Quarterly|
|3 year Time Deposit||5.5||Quarterly|
|5 year Time Deposit||6.7||Quarterly|
|5-year Recurring Deposit||5.8||Quarterly|
|5-year Senior Citizen Savings Scheme||7.4||Quarterly and Paid|
|5-year Monthly Income Account||6.6||Monthly and Paid|
|5-year National Savings Certificate||6.8||Annually|
|Public Provident Fund||7.1||Annually|
|Kisan Vikas Patra||6.9 (will mature in 124 months)||Annually|
|Sukanya Samriddhi Yojana||7.6||Annually|
Source: Finance ministry circular
Tide is turning for fixed income investors
The government’s status quo on small savings schemes rates comes a little less than a month after RBI’s bi-monthly monetary policy review. The apex bank has increased the repo rate by 90 bps over two MPC meetings in May and June 2022. Due to this, banks have been increasing interest rates on fixed deposits (FD). This is a reason to cheer for FD investors who have been sitting with decadal low interest rates.
FDs, bank savings accounts or small saving schemes?
Even though banks have started increasing FD interest rates, many small savings schemes are still earning higher interest rates.
SBI’s FDs across 1-10-year tenors, as on June 14, 2022, earn 5.3 percent to 5.5 percent. Senior citizens, who earn 0.5 percent more, will get 5.8 percent to 6.3 percent for these tenors.
Apart from fixed deposits, even the interest rates on savings accounts offered by some of the bigger banks is lower than the interest rate on the post office savings account.
Post office savings account is currently offering 4% per annum whereas
is offering 2.70% per annum interest rate on its savings account. Similarly, is offering 3-3.5% per annum.
How interest rates are set for small savings schemes
The interest rates on small savings schemes are reviewed every quarter by the government. The formula to arrive at the interest rates for small savings scheme was given by the Shyamala Gopinath Committee. The committee had suggested that the interest rates of different schemes should be 25-100 bps higher than the yields of the government bonds of similar maturity.