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.
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.
The RBI in its recent report on ‘State of the economy’ had stated – “The existing rates of interest on small savings instruments need to be reduced in the range of 9-118 bps for Q1:2022-23 to align them with the formula-based rates.”
For Q1 of 2022-23, the post office small savings schemes such as National Savings Certificates, KVP, Time-deposits, Public Provident Fund, Senior Citizens Savings Scheme, Sukanya Samriddhi Yojana will keep offering same rate of interest as that of previous quarter.
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.
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.
The status quo on rates of small savings schemes comes at a time when the Central Board of Trustees, EPF has recommended 8.10 per cent annual rate of interest to be credited on EPF accumulations in members’ accounts for the financial year 2021-22. For the year 2020-21, EPF interest rate was set at 8.5 per cent