Small savings schemes' interest rates: Will the govt go for another rate hike in April-June?

Small savings schemes: The Centre on Friday will be revising the interest rates on small savings schemes for the first quarter of FY2022-23. The revised interest rates will be revealed later today, March 31. If the government decides to increase the interest rates on small savings schemes this time it would be its third quarter in a row. 

The government had kept the rates unchanged for nine straight quarters during the Covid period. In the last six months, the savings schemes saw a hike in interest rates by 30-140 basis points. At present, the interest rates on small savings schemes range from 4.0 per cent to 7.6 per cent. 

The interest rates of small savings schemes, which are backed by the Central government, depend on the market yields on government securities.  

In the January-March period, the Centre hiked the interest rates on some of small savings schemes. The government increased the interest rate for 1-year, 2-year, 3-year, 5-year term deposits. Besides this, it has also increased the interest rate for Senior Citizens' Savings Scheme, Monthly Income Scheme, and the National Savings Certificate.  

The interest rates for government-backed small savings schemes, like Public Provident Fund (PPF), and Sukanya Samriddhi Yojana (SSY), were not revised for the January-March quarter. 

Savings deposit  4.0% 

One-year time deposit          6.6% 

Two-year time deposit         6.8% 

Three-year time deposit       6.9% 

Five-year time deposit          7.0% 

Five-year recurring deposit  5.8% 

Senior Citizen Savings Scheme      8.0% 

Monthly Income Account    7.1% 

National Savings Certificate 7.0% 

Public Provident Fund Scheme     7.1% 

Kisan Vikas Patra          7.2% 

Sukanya Samriddhi Account Scheme    7.6% 

What’s expected this time? 

As market yields on government securities have been rising during the reference period, December 2022-February 2023, the Centre may hike the interest rates on some of the small savings schemes. 

The yield on five-year government bonds rose by around 30 basis points, while 10-year bond yields rose by just under 20 basis points in the December 2022-February 2023 period, as per the government data.  

However, the Centre in the recent past has not always followed the above formula to revise the interest rates. 

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