Small savings rates today: PPF, NSC, SCSS, KVP, POMIS -- which schemes are most mispriced against G-sec yields?
The Finance Ministry is set to announce small savings interest rates for October-December 2026 today, September 30, amid a prolonged rate freeze. G-sec yields show wide gaps between formula-implied and actual rates across schemes, with NSC among the most notable.
- Sep 30, 2026,
- Updated Sep 30, 2026 3:20 PM IST
The Finance Ministry is set to announce small savings interest rates for the October-December 2026 quarter today, September 30, with investors watching whether the prolonged rate freeze will continue. A comparison with government bond yields shows that some schemes are paying substantially above their formula-implied rates, while others are closely aligned with the benchmark.
Under the Shyamala Gopinath Committee framework, small savings rates are generally linked to government securities of comparable maturity, along with a prescribed spread. However, the government has not applied the formula mechanically in recent quarters. This has created varying gaps between the rates suggested by the benchmark and the rates actually offered to savers.
NSC has the widest gap
The National Savings Certificate (NSC) currently offers 7.7%. Against an average five-year G-sec yield of around 6.5% during the July-September reference quarter, the formula-implied rate is about 6.75%, including the 25-basis-point spread.
This puts the actual NSC rate around 95 basis points above the formula-implied level — the widest gap among the small savings schemes covered in the source material. The five-year G-sec ended September around 6.5%-6.7%, following a six-week bond sell-off.
Small savings rates vs formula-implied rates
| Scheme | Current rate | Formula-implied rate | Approx. gap |
|---|---|---|---|
| NSC | 7.7% | 6.75% | +95 bps |
| 5-year Post Office TD | 7.5% | 6.75% | +75 bps |
| SCSS | 8.2% | 7.5% | +70 bps |
| POMIS | 7.4% | 6.75% | +65 bps |
| Post Office RD | 6.7% | 6.75% | -5 bps |
SCSS and Post Office deposits also carry premiums
The Senior Citizen Savings Scheme (SCSS) currently pays 8.2%. With the five-year G-sec averaging around 6.5% and a prescribed spread of 100 basis points, the formula-implied rate is approximately 7.5%. That leaves the actual rate around 70 basis points higher.
The five-year Post Office Time Deposit offers 7.5%, against a formula-implied rate of about 6.75%. The three-year deposit is at 7.1%, while its benchmark-based rate was estimated at around 6.55%.
The Post Office Monthly Income Scheme (POMIS), meanwhile, pays 7.4%, compared with an estimated formula rate of around 6.75%. The scheme is designed to provide regular monthly income, with deposits currently capped at ₹9 lakh for a single account and ₹15 lakh for a joint account.
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RD is closest to the formula
The Post Office Recurring Deposit stands out because its 6.7% rate is almost exactly aligned with the benchmark. Based on an average five-year G-sec yield of roughly 6.5% and a 25-basis-point spread, the implied rate is approximately 6.75% — just 5 basis points above the existing rate.
This means the RD is materially different from schemes such as NSC, where the gap is much wider. If the formula were applied mechanically, the RD has a small case for a higher rate, although the final decision rests with the government.
DO READ: Special FD vs regular FD: The extra interest may not be worth the lock-in
What happens to existing investments?
Another important distinction is whether a rate change affects existing investments or only fresh deposits. NSC and KVP rates are locked when the certificate is purchased, while Post Office Time Deposits and MIS also retain the terms applicable when the account or deposit is opened.
What happens to existing investments?
| Scheme | Current rate | Impact of today's rate notification |
|---|---|---|
| NSC | 7.7% | Existing certificates retain purchase rate |
| KVP | 7.5% | Existing certificates retain purchase rate |
| POMIS | 7.4% | Existing accounts retain opening terms |
| Post Office TD | 6.9%-7.5% | Existing deposits retain booking rate |
| PPF | 7.1% | New quarterly rate applies to outstanding balance |
| SSY | 8.2% | New quarterly rate applies to outstanding balance |
The divergence between formula-implied and actual rates highlights why today's notification matters. A change in G-sec yields does not automatically translate into an equivalent change in small savings rates, as the government retains discretion over the final rates. For investors, the key takeaway is that the headline rate alone does not tell the full story: the benchmark, spread and whether the rate is locked or floating all determine the impact of today's decision.
DON'T MISS: Child’s PPF account: Parents cannot deposit ₹1.5 lakh each — Know the combined limit
The Finance Ministry is set to announce small savings interest rates for the October-December 2026 quarter today, September 30, with investors watching whether the prolonged rate freeze will continue. A comparison with government bond yields shows that some schemes are paying substantially above their formula-implied rates, while others are closely aligned with the benchmark.
Under the Shyamala Gopinath Committee framework, small savings rates are generally linked to government securities of comparable maturity, along with a prescribed spread. However, the government has not applied the formula mechanically in recent quarters. This has created varying gaps between the rates suggested by the benchmark and the rates actually offered to savers.
NSC has the widest gap
The National Savings Certificate (NSC) currently offers 7.7%. Against an average five-year G-sec yield of around 6.5% during the July-September reference quarter, the formula-implied rate is about 6.75%, including the 25-basis-point spread.
This puts the actual NSC rate around 95 basis points above the formula-implied level — the widest gap among the small savings schemes covered in the source material. The five-year G-sec ended September around 6.5%-6.7%, following a six-week bond sell-off.
Small savings rates vs formula-implied rates
| Scheme | Current rate | Formula-implied rate | Approx. gap |
|---|---|---|---|
| NSC | 7.7% | 6.75% | +95 bps |
| 5-year Post Office TD | 7.5% | 6.75% | +75 bps |
| SCSS | 8.2% | 7.5% | +70 bps |
| POMIS | 7.4% | 6.75% | +65 bps |
| Post Office RD | 6.7% | 6.75% | -5 bps |
SCSS and Post Office deposits also carry premiums
The Senior Citizen Savings Scheme (SCSS) currently pays 8.2%. With the five-year G-sec averaging around 6.5% and a prescribed spread of 100 basis points, the formula-implied rate is approximately 7.5%. That leaves the actual rate around 70 basis points higher.
The five-year Post Office Time Deposit offers 7.5%, against a formula-implied rate of about 6.75%. The three-year deposit is at 7.1%, while its benchmark-based rate was estimated at around 6.55%.
The Post Office Monthly Income Scheme (POMIS), meanwhile, pays 7.4%, compared with an estimated formula rate of around 6.75%. The scheme is designed to provide regular monthly income, with deposits currently capped at ₹9 lakh for a single account and ₹15 lakh for a joint account.
ALSO READ: After digital gold, JioFinance expands precious metals offering with JioSilver: What investors get
RD is closest to the formula
The Post Office Recurring Deposit stands out because its 6.7% rate is almost exactly aligned with the benchmark. Based on an average five-year G-sec yield of roughly 6.5% and a 25-basis-point spread, the implied rate is approximately 6.75% — just 5 basis points above the existing rate.
This means the RD is materially different from schemes such as NSC, where the gap is much wider. If the formula were applied mechanically, the RD has a small case for a higher rate, although the final decision rests with the government.
DO READ: Special FD vs regular FD: The extra interest may not be worth the lock-in
What happens to existing investments?
Another important distinction is whether a rate change affects existing investments or only fresh deposits. NSC and KVP rates are locked when the certificate is purchased, while Post Office Time Deposits and MIS also retain the terms applicable when the account or deposit is opened.
What happens to existing investments?
| Scheme | Current rate | Impact of today's rate notification |
|---|---|---|
| NSC | 7.7% | Existing certificates retain purchase rate |
| KVP | 7.5% | Existing certificates retain purchase rate |
| POMIS | 7.4% | Existing accounts retain opening terms |
| Post Office TD | 6.9%-7.5% | Existing deposits retain booking rate |
| PPF | 7.1% | New quarterly rate applies to outstanding balance |
| SSY | 8.2% | New quarterly rate applies to outstanding balance |
The divergence between formula-implied and actual rates highlights why today's notification matters. A change in G-sec yields does not automatically translate into an equivalent change in small savings rates, as the government retains discretion over the final rates. For investors, the key takeaway is that the headline rate alone does not tell the full story: the benchmark, spread and whether the rate is locked or floating all determine the impact of today's decision.
DON'T MISS: Child’s PPF account: Parents cannot deposit ₹1.5 lakh each — Know the combined limit