Is the government going to increase the interest rate of the Public Provident Fund (PPF) soon? The interest rates of small savings schemes are going to be reviewed by the end of this month. These schemes include the PPF, Sukanya Samriddhi Yojana account (SSY), Senior Citizen Savings Scheme (SCSS), National Savings Certificates (NSC), and others.
How is interest calculated for PPF, Sukanya Samriddhi yojana?
The interest rates of small savings schemes are connected to the market yields of Government Securities in the secondary market. The interest rates are evaluated every quarter by the central government based on the average yield of comparable maturity G-Secs of the previous three months, according to a set formula. This procedure is consistent with the Shyamala Gopinath Committee’s recommendations from 2011 to ensure that small savings schemes’ interest rates are in line with the market.
Will PPF and Sukanya Samriddhi Yojana interest rates increase in April 2023 review?
The government has set a formula that determines the interest rates for various small savings schemes. The spread, or the additional percentage rate over the 10-year G-Sec yield, is 25 basis points for PPF, 75 basis points for Sukanya Samriddhi Yojana, and 100 basis points for Senior Citizens Savings Scheme. The average yield of the 10-year G-Sec from December to February was 7.37%. Based on the formula, the interest rate for PPF can increase to 7.6% in the upcoming quarter, while Sukanya Samriddhi Scheme’s interest rate can increase to 8.1%.
Although the government has increased the interest rates of some small savings schemes, PPF and Sukanya Samriddhi Yojana’s rates have not been revised. According to experts, small savings rates are still below desired levels, considering high inflation and interest rates. The government is expected to review the interest rates for small savings schemes on March 31, 2023, for the April-June quarter of FY2023-24. However, the government does not always adjust interest rates based on the recommended formula.