Sukanya Samridhhi Yojana, PPF, NSC: Will these govt-backed schemes see a rate revision in 2023?

Central government-backed small savings schemes, which include Public Provident Fund (PPF), National Saving Certificates (NSC), and Sukanya Samriddhi Yojana (SSY), have not seen a great year despite Reserve Bank of India’s (RBI) repo rate revision throughout the year. The RBI in 2022 revised its repo rate four times and increased it by 225 bps from 4.40 per cent to 6.25 per cent.  

But in comparison, the central government hiked the interest rate of several small saving schemes by 10-30 basis points just once this year. In September, the government increased the interest rates on two-year time deposits to 5.7 per cent, three-year deposits to 5.8 per cent, Senior Citizens Savings Scheme (SCSS, 7.6 per cent), monthly income account (6.7 per cent), and Kisan Vikas Patra (7 per cent). Rates on certain schemes were kept unchanged. These were the popular ones, like the Public Provident fund (PPF, 7.1 per cent), Sukanya Samriddhi Yojana (SSY, 7.6 per cent) and National Savings Certificate (NSC, 6.8 per cent). 

Table 1: RBI’s repo rate revision in 2022

Updated On	Repo Rate
7 December 2022	6.25%
30 September 2022	5.90%
8 August 2022	5.40%
8 June 2022	4.90%
4 May 2022	4.40%

 Table 2: Savings scheme current interest rates 

Savings Scheme	Interest rate
Post Office Savings Account	4.00%
Post Office Recurring Deposit	5.80%
Post Office Monthly Income Scheme	6.70%
Post Office Time Deposit (1 year)	5.50%
Post Office Time Deposit (2 years)	5.70%
Post Office Time Deposit (3 years)	5.80%
Post Office Time Deposit (5 years)	6.70%
Kisan Vikas Patra (KVP)	7%
Public Provident Fund (PPF)	7.10%
Sukanya Samriddhi Yojana	7.60%
National Savings Certificate	6.80%
Senior Citizens’ Saving Scheme (SCSS)	7.60%

 The interest rates for government small savings schemes are revised on a quarterly basis. Before September, the interest rate on small savings schemes was revised during the first quarter of 2020-21, when rates were slashed due to the pandemic. 

 Why do investors prefer small savings schemes? 

Just like fixed deposits offered by public sector banks, small savings schemes offered by the government are risk-free and disciplined ways of investing money. The schemes do not offer huge returns on investment as compared to stocks and mutual funds. 

The Postal Department of India offers several such deposit schemes that come with a sovereign guarantee and tax benefits. Apart from this, the government operates schemes such as the PPF via public sector banks. 

What’s in store for 2023? 

With inflation around 6 per cent through 2022 and interest rates rising, many experts are hoping that the Centre might revise the interest rates of small savings instruments such as the Public Provident Fund (PPF) in the first quarter of 2023.  

As per Reserve Bank of India guidelines, the rates on these small savings schemes are calculated on the yields on government securities (G-secs). Currently, RBI calculates that the government can allow an interest rate hike of 44 to 77 basis points (bps) below their formula-implied rates. Going by the formula, the investors of the PPF scheme may see the interest rates go up to 7.72 per cent from the present rate of 7.1 per cent.