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Will Small Savings Schemes Interest Rate Be Slashed After EPF Rate Cut For Q1Fy23?


The interest rate on small savings scheme such as PPF, post office term deposit, MIS etc. are pegged to the yield on 10-year benchmark bonds and as these schemes are due for interest rate revision soon, there are projections being made as to what the likely stance be on small savings scheme interest rate.

Will Small Savings Schemes Interest Rate Be Slashed After EPF Rate Cut?

Importantly, for EPF or Employees' Provident Fund, the CBT- the apex decision making body of the EPFO slashed the rate to 8.1% for Fy 2021-22, a 4-decade low rate, from the earlier 8.5%. Earlier defending the rate cut, the country's Finance Minister Nirmala Sitharaman said the rate is still higher than the rates of some of the other pension organisations.

Small Savings scheme interest rate for January-March quarter of Fy22 are as below:

Sukanya Samriddhi Accounts7.60%
Senior Citizen Savings Scheme (SCSS)7.40%
Post Office Savings Account4%
5-year PO RD account5.80%
PO Time deposit6.70%

Will the small savings instruments interest rate be slashed in April-June quarter of Fy23?

As per the RBI's "State of the Economy" report, the current interest rates on SSIs or small saving instruments are 42-168 bps more than the formula based rates for Q4:2021-22. This is even as banks both public sector and private sector have begun to hike interest rate on fixed or term deposits.

"Across domestic banks, private banks continue to exhibit higher pass-through to term deposit rates compared to their public sector counterparts. In recent months, a few major banks have started raising interest rates on deposits, anticipating a pick-up in credit demand,"RBI said in its report.

So, as the government that is likely to review interest rates on small savings scheme for the first quarter of FY23 on March 31, it may as claimed by RBI may see interest rate cut. Notably, the RBI's State of the Economy report suggested that that to bring current rates at par with the formula based rates, " the existing rates of interest on SSIs need to be reduced in the range of 9-118bps for Q1:2022-23". 1 bps is one-hundredth of a percentage point.

Read more about: small savings schemes ppf epf
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