Latest Small Savings Schemes Interest Rates for Jan-March 2024

Key Takeaways:

1. Sukanya Samriddhi Account interest rate has been increased to 8.2% for the Jan-March 2024 quarter.

2. 3-year post office FD rates have been hiked up to 20 basis points.

3. The interest rates for various small savings schemes and post office schemes have been increased for the Jan-March 2024 quarter.

The latest interest rates for various small savings schemes and post office schemes for the fourth quarter of FY 2023-24 have been announced by the government. The interest rates for the period ending March 31, 2024, have witnessed an increase, as declared by the government through a circular released on December 29, 2023. The interest rates for the Public Provident Fund (PPF) remain constant at 7.1 percent.

Here are the interest rates on various small savings schemes for the fourth quarter of FY 2023-24:

The interest rates of small savings schemes are determined based on the recommendations of the Shyamala Gopinath Committee. According to the committee’s recommendations, the interest rates for various schemes should range from 25 to 100 basis points above the yields of government bonds with corresponding maturities. The interest rates of small savings schemes are linked to yields of 10-year Government Securities in the secondary market, and there are set formulae for mark-ups over the previous three months’ average yield of relevant G-Secs of comparable maturity.

As per the formula notified by the Finance Ministry in 2016, the PPF interest rate in a given quarter has a spread of 25 basis points over the benchmarked yield of the preceding three months. The benchmark 10-year bond yield has averaged 7.28% from September to October 2023. According to the formula, the interest rate of PPF should ideally be around 7.53% for the January-March quarter. However, the Central Government has not raised the PPF rate despite the formula suggesting a higher rate in many previous quarters.

The last time interest rates were hiked was for the quarter ending December 31, 2023, where the interest rates of certain small savings schemes or post office schemes were increased by the government. Since May 2022, the Reserve Bank of India (RBI) has implemented a series of key rate hikes, leading to banks increasing FD interest rates. However, in the most recent four policy meetings, the RBI has chosen to maintain a status quo by refraining from further adjustments to the key rates.

Despite banks increasing FD interest rates, many small savings schemes are still earning higher interest rates. For example, SBI’s FDs across 7 days to 10-year tenors, as of December 27, 2023, earn 3.5% to 7%, while the post office savings account is currently offering 4% per annum.

FAQ

Q1: How are the interest rates for small savings schemes determined?

A1: The interest rates for small savings schemes are determined by the government on a quarterly basis. The methodology for determining these rates was proposed by the Shyamala Gopinath Committee. According to the committee’s recommendations, the interest rates for various schemes should range from 25 to 100 basis points above the yields of government bonds with corresponding maturities.

Q2: What is the link between PPF interest rates and government securities yields?

A2: The interest rates of small savings schemes, including the Public Provident Fund (PPF), are linked to yields of 10-year Government Securities in the secondary market. The interest rates are determined based on a set formula that includes mark-ups over the previous three months’ average yield of relevant G-Secs of comparable maturity.

Q3: When were the last interest rate hikes implemented?

A3: The interest rates of certain small savings schemes or post office schemes for the quarter ending December 31, 2023 were increased by the government. The interest rates of all schemes except the recurring deposit rate have been kept unchanged. The interest rate on the Public Provident Fund (PPF) was kept unchanged at 7.1 percent.

Q4: How do small savings schemes compare to FDs and bank savings accounts?

A4: Despite banks increasing FD interest rates, many small savings schemes are still earning higher interest rates. For example, SBI’s FDs across various tenors earn 3.5 percent to 7 percent, while the post office savings account is currently offering 4 percent per annum.