PPF rate unchanged for 25 quarters
The PPF interest rate currently stands at 7.1% and has remained unchanged for 25 consecutive quarters. The last revision came in April 2020, when the rate was cut from 7.9% to 7.1%.
Under the framework recommended by the Shyamala Gopinath Committee, PPF is benchmarked to the 10-year government security yield with a spread of 25 basis points. However, the framework is a recommendation and the government does not have to mechanically follow the formula.
Current small savings interest rates
| Small savings scheme | Current interest rate | Rate unchanged for |
|---|---|---|
| Public Provident Fund (PPF) | 7.1% | 25 consecutive quarters |
| Sukanya Samriddhi Yojana (SSY) | 8.2% | 10 consecutive quarters |
| Senior Citizen Savings Scheme (SCSS) | 8.2% | Since April 2023 |
SSY rate: What parents should watch
The SSY currently offers 8.2% per annum. The rate was last increased from 8% to 8.2% from January 1, 2024. If the government leaves it unchanged in Wednesday’s notification, the scheme will have gone through 11 consecutive quarters without a revision.
The current SSY rate is broadly supported by the bond-market formula. The scheme is benchmarked to long-term government securities with a 75-basis-point spread. Recent 15-year and 30-year government securities have yielded around 7.2% and 7.55%, respectively, putting the formula-implied range at roughly 8%-8.3%.\
SCSS: Formula suggests a lower rate
SCSS currently pays 8.2% and has not seen a rate change since April 2023. Based on the five-year G-sec’s July-September average yield of around 6.5% and the prescribed 100-basis-point spread, the formula-implied rate is around 7.5%.
That leaves a gap of roughly 70 basis points between the formula-implied rate and the actual SCSS rate.
SCSS: Formula-implied rate vs current rate
| SCSS indicator | Approximate value |
|---|---|
| 5-year G-sec average yield | 6.5% |
| Prescribed spread | +100 bps |
| Formula-implied rate | 7.5% |
| Current SCSS rate | 8.2% |
| Difference | 70 bps |
What investors should know
PPF, SSY and SCSS rates are reviewed every quarter and are not permanently locked when an account is opened. The rate declared for a quarter applies to the outstanding balance. Therefore, a change in the October-December rate would also affect existing balances from that quarter.
PPF, SSY and SCSS: Key facts
| Scheme | Benchmark/spread | Key point |
|---|---|---|
| PPF | 10-year G-sec + 25 bps | Rate at 7.1% for 25 quarters |
| SSY | Long-term G-sec + 75 bps | Current 8.2% is within the formula-implied range |
| SCSS | 5-year G-sec + 100 bps | Current 8.2% is above the formula-implied 7.5% |
The September 30 notification will therefore determine whether the long-running freeze continues or whether the government changes rates in response to the evolving bond-market environment.
