Small savings interest rates for Q3 may not see a big hike

Investors hoping for improved returns on their small savings may be in for some disappointment as a major reset in the rates of these highly popular instruments for the October to December 2023 quarter is unlikely.

According to sources, there will not be a significant revision in the returns for most small savings instruments although there could be a marginal increase of a few basis points. “Since there has not been a significant change in the government bond yield, it is unlikely that small savings rates will undergo a significant revision.”

The finance ministry is likely to notify the small savings rate for the October to December 2023 quarter in the coming days before October 1.

The interest rate on small savings instruments such as the National Savings Certificate, Sukanya Samriddhi Account Scheme, Kisan Vikas Patra and Public Provident Fund are revised every quarter in line with the market rate for the 10-year government security, based on a formula devised by a committee led by former Reserve Bank of India Governor Shyamala Gopinath.

For the current quarter ending September 30, the finance ministry had revised upwards the rates on a few small savings instruments including the post office term deposits of 1 and 2-year tenor and recurring deposits, by 10-30 basis points. The interest rate on small savings schemes for the July to September quarter is in the range of 4 per cent for savings deposits to 8.2 per cent for the senior citizens savings scheme.

However, the Centre has not changed the interest rate on the extremely popular Public Provident Fund since the April-June 2020 quarter, when it was reduced to 7.1 per cent from 7.9 per cent. Most investors have been hoping that the rate for this instrument would be hiked again.

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