In a move providing stability for small savings account holders, the government has announced that interest rates for the Public Provident Fund (PPF) and various post office schemes will remain unchanged for the July-September quarter of the financial year 2025-26. This marks the sixth consecutive quarter that the rates have remained static, offering a sense of security amidst a fluctuating economic landscape. The Ministry of Finance made the announcement on June 30, 2025, ensuring continuity from the rates notified for the first quarter of the fiscal year.
PPF and NSC
The Public Provident Fund (PPF), a popular long-term savings option known for its tax benefits, will continue to offer an annual interest rate of 7.1%. The National Savings Certificate (NSC) will also maintain its current interest rate of 7.7%.
Other Small Savings Schemes
Other notable schemes with unchanged interest rates include:
The stability in interest rates comes despite expectations of a potential decrease, especially considering the Reserve Bank of India (RBI) had reduced the repo rate by a total of 1% earlier in the year. This reduction in repo rates typically leads to a softening of bond yields, which, according to the Shyamala Gopinath Committee guidelines, are used as a benchmark for setting interest rates on small savings schemes.
Shyamala Gopinath Committee Formula
The Shyamala Gopinath Committee recommended that interest rates for small savings instruments be linked to the secondary market yields on Central Government Securities of similar maturities, with an additional spread of 25 basis points.
Based on this formula, some analysts had projected a decrease in PPF interest rates. For instance, calculations based on the average yield of 10-year G-Secs between April 1 and June 29, 2025, suggested a PPF rate of around 6.55%, significantly lower than the current 7.1%.
Implications of Unchanged Rates
The government's decision to maintain the existing rates provides a sense of relief and stability for small savings account holders. These schemes are particularly popular among vulnerable sections of society, including senior citizens and those in rural areas. The unchanged rates ensure that these individuals can continue to rely on these investments for steady returns.
Last Rate Revision
The last time interest rates on post office schemes were revised was in the last quarter of FY 2023-24 (January to March 2024). During that revision, the interest rates for the 3-year time deposit and Sukanya Samriddhi Yojana (SSY) were increased. The 3-year time deposit interest rate was hiked from 7% to 7.1%, and that of Sukanya Samriddhi Yojana (SSY) was raised from 8% to 8.2%.
The current decision to maintain the status quo reflects a commitment to providing stable returns on small savings, even amidst a changing economic environment.
