THE NEWS DOSE BUSINESS DESK

Chandigarh|June27,UPDATED:11.10AM

The government will review interest rates on small savings schemes — including PPF, NSC, and Sukanya Samriddhi Yojana — on June 30, 2025, for the July–September quarter of FY 2025–26. The review comes amid falling bond yields and multiple repo rate cuts by the Reserve Bank of India (RBI), raising the possibility of a rate cut across these instruments.

Bond Yields Down, Pressure Builds on Rates

In 2025, the RBI has slashed the repo rate by 100 basis points — 25 bps each in February and April, and 50 bps in June — bringing it down to 5.5%. This has pushed down government bond yields, with the 10-year G-sec yield falling from 6.779% in January to 6.269% by June 26, a drop of over 50 bps.

Since small savings rates are indirectly linked to bond yields, the pressure is mounting. As per the Shyamala Gopinath Committee formula, these rates should align with the average yield on comparable G-secs plus a 25 bps spread. Based on the average 10-year yield of 6.325%, the formula suggests a PPF rate of 6.575%, well below the current 7.1%.

Status Quo So Far, But Change Likely

The Finance Ministry has maintained interest rates on small savings schemes through 2025 so far. However, the recent sharp fall in market rates could prompt a downward revision this time. Still, the final decision may factor in political and economic considerations, especially with small savings playing a key role for middle- and lower-income households.

What Are Small Savings Schemes?

These are government-backed savings options, mainly operated through post offices and select banks, offering secure returns. Popular schemes include:

• Public Provident Fund (PPF)

• National Savings Certificate (NSC)

• Sukanya Samriddhi Yojana (SSY)

• Senior Citizen Savings Scheme (SCSS)

• Post Office Time & Recurring Deposits

• Monthly Income Scheme (POMIS)

Rates are revised quarterly and typically reflect government bond trends with a lag.

What Investors Should Watch

With banks already cutting fixed deposit (FD) rates and rolling back high-return special FDs, the broader interest rate environment is clearly softening. Those looking to invest in small savings schemes may want to act before any potential rate cut is announced on June 30.