The government has announced that it will maintain the current interest rates for small savings schemes for the October-December 2024 quarter. This means that the existing rates will remain unchanged during this period. The post office savings schemes affected by this decision include the Public Provident Fund, Senior Citizen Savings Scheme (SCSS), Sukanya Samriddhi Yojana (SSY), National Savings Certificate (NSC), Post Office Time Deposits (POTD), Mahila Samman Savings Certificate, and Post Office Monthly Income Scheme (POMIS).
“The rates of interest on various Small Savings Schemes for the third quarter of FY 2024-25 starting from 1st October , 2024 and ending on 31st December, 2024 shall remain unchanged from those notified for the second quarter of FY 2024-25,” the finance ministry said in a press release dated September 30, 2024.
This means that the Public Provident Fund (PPF) will continue to earn an interest rate of 7.1% from October to December 2024.
Here is a look at the post office schemes interest rates for the October-December 2024 quarter
| Instrument | Rates of interest from October-December 2024 (%) |
| Savings Deposit | 4 |
| 1 Year Time Deposit | 6.9 |
| 2 Year Time Deposit | 7 |
| 3 Year Time Deposit | 7.1 |
| 5 Year Time Deposit | 7.5 |
| 5 Year Recurring Deposit | 6.7 |
| Senior Citizen Savings Scheme | 8.2 |
| Monthly Income Account Scheme | 7.4 |
| National Savings Certificate | 7.7 |
| Public Provident Fund Scheme | 7.1 |
| Kisan Vikas Patna | 7.5 (will mature in 115 months) |
| Sukanya Samriddhi Account | 8.2 |
Source: Ministry of Finance
How small savings scheme interest rates are determined
The post office provides a range of deposit schemes for individuals interested in investing, also known as small savings schemes. These schemes are backed by the central government, providing a sovereign guarantee. Some schemes like NSC, SCSS, PPF, etc., also offer tax-saving benefits under section 80C of the Income-tax Act, 1961. The government reviews and sets interest rates on small savings schemes every quarter.
The government regularly assesses the interest rates of small savings schemes every quarter. The Shyamala Gopinath Committee proposed the methodology for determining these rates. According to the committee’s recommendations, the interest rates for different schemes are projected to be established within a range of 25 to 100 basis points above the yields of government bonds with corresponding maturities. This approach is designed to ensure that the interest rates offered by the small savings schemes remain competitive and appealing to investors.
Post office schemes: The last time interest rates were increased
The government has decided to raise the interest rates for certain small savings and post office schemes for the quarter ending on December 31, 2023. However, it’s important to note that the interest rates for all schemes, except the recurring deposit rate, have been kept the same as before. The interest rate for the Public Provident Fund (PPF) has remained steady at 7.1 percent since the April-June 2020 quarter.
When will the interest rate of small savings schemes start to reduce?
The government’s possible reduction of small savings scheme rates is the next question. The consideration of lowering the rates comes after an extended period of peak rates and the recent rate cut by the United States Federal Reserve. The interest rate of PPF has remained unchanged since the April-June quarter of 2020, while the central government increased the interest rates of most small savings instruments by 40 bps to 150 bps during the same period. Investors are now curious whether the Reserve Bank of India (RBI) will follow a similar route in its next monetary policy, especially after the recent 50 bps rate cut by the United States Federal Reserve.
With the Reserve Bank of India (RBI) keeping interest rates unchanged in recent meetings, it is anticipated that the government will adopt a careful stance when adjusting rates for small savings schemes. As we approach the end of the period of rate hikes, it is improbable that the government will significantly lower interest rates in the near future, particularly considering that small savings rates have either remained steady or experienced slight increases in the last few quarters.
Experts predict that interest rates will decrease over six months to a year. The US Federal Reserve has already begun to lower the interest rate, indicating a downward trend. This suggests that the central bank will also begin to decrease interest rates in the long term, leading to an eventual decrease in the interest rates of small savings schemes.
