Small savings interest rates to be announced today: Will PPF rates be hiked for September quarter?

The small savings schemes’ interest rates are due for revision today. While declaring small savings interest rates for the previous quarter, the government announced up to 70 bps interest rate hikes for various small saving schemes. The small savings schemes’ interest rates are backed by the central government and depend on the market yields on government securities.

In the last two quarters, the government increased rates of the Sukanya Samriddhi Account Scheme, Senior Citizen Savings Scheme, National Savings Certificate, Kisan Vikas Patra, Monthly Income Savings Scheme and all post office time deposits.

However, the government kept the Public Provident Fund (PPF) interest rate unchanged at 7.1 per cent. Now, investors are wondering if it will increase the PPF interest rate in the July-September quarter of the financial year 2023-24 (FY24).

Since the Reserve Bank of India (RBI) has kept the repo rate unchanged, there is a possibility of a hike in the PPF interest rate today. “PPF typically follows the benchmark ten-year G-Sec yield in the secondary market for the last quarter. During the Jan-March quarter, this yield was in the range of 7.3-7.5%. It further declined to the 7-7.1% range in the Apr-June quarter. Given the 25 bps fall in the benchmark, it is unlikely that we will see any hike in the PPF interest rates in the upcoming review,” said Anshul Gupta, Co-founder and Chief Investment Officer of Wint Wealth.

Echoing similar views, Amol Joshi, Founder of Plan Rupee Investment Services, said, “We are close to peaking in the rising interest rates cycle. Rates may stabilize for some time and then decline. In such an environment, PPF is unlikely to see a rate hike. PPF remains an attractive option to invest given its Exempt-Exempt-Exempt (EEE) status.”

According to the Union Finance Ministry notification, the government increased the interest rate for 1-year, 2-year, 3-year, and 5-year term deposits from 6.6 per cent, 6.8 per cent, 6.9 per cent, 7.0 per cent in the last quarter to 6.8 per cent, 6.9 per cent, 7.0 per cent, and 7.5 per cent, respectively for April-June quarter. Besides this, for the same quarter, it has also increased the interest rate for Senior Citizens’ Savings Scheme, Monthly Income Scheme, and National Savings Certificate from 8 per cent, 7.1 per cent, 7.0 per cent to 8.2 per cent, 7.4 per cent, and 7.7 per cent, respectively.