Small Saving Interest Rate: Can the government reduce the interest rate of Public Provident Fund (PPF). The government will review the interest rate of Public Provident Fund (PPF), National Savings Certificate (NSC), Senior Citizen Savings Scheme (SCSS) and other small savings schemes on 30 June 2025. These new interest rates will be applicable for the July-September quarter. The interest rates of these schemes have been stable so far this year, but it is expected to change from 1 July. After decreasing the repo rate, it is expected that the government may reduce the interest rate on the small savings scheme.
RBI has reduced repo rate by 1%
Since the beginning of 2025, the Reserve Bank of India (RBI) has cut the repo rate three times. RBI has 0.25%in February, 0.25%in April and 0.50%in June. In this way, there has been a cut of 1% in total. It has also affected the interest rates of fixed deposits (FD) of banks, which has seen a shortage. Many banks have also stopped their special FDs, which were getting more interest.
Repo rate cuts have also reduced the yield of Government Security (G-SEC). The 10-year-old G-Sick yield was 6.779% on 1 January 2025, which declined to 6.247% by 24 June. Due to the decline in the yield, there is a possibility of cutting interest rates of small saving schemes.
How is the interest rate of small savings scheme?
The interest rates of small savings schemes are based on a yield of government bonds in the secondary market, with an additional margin of 0.25%. For example, the PPF interest rate can be 6.575% on the average yield (March-June) 6.325% of the 10-year government bond, while it is 7.10% right now. That is, it is possible to cut the rate up to 0.5%.
Is the interest rate cut fixed?
Experts believe that interest rates may have a slight cut. In view of the reduction in repo rate, the interest rates of small savings schemes can be reduced. However, these schemes are especially necessary for senior citizens and middle class, so the government will not cut much.
What should investors do?
If you want to invest in schemes like PPF, NSC, SCSS, Time Deposit or Kisan Vikas Patra, then invest before 30 June 2025. By doing this, you will be able to invest at current interest rates. Further interest rate cuts will not affect your capital. After investing in these schemes, the interest rate is fixed and remains the same till maturity. However, the interest rate in PPF and Sukanya Samriddhi Yojana (SSY) changes every quarter, so they can be affected.
There may be a slight decrease in interest rates from July, but the government will take a decision only keeping in mind the interests of investors. If you want to invest in these schemes, it would be better to invest before June 30 so that you can get the benefit of the current high interest rate.
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