Will govt change PPF, SCSS, NSC, MIS interest rates?
Small savings schemes are a key source of investment for many retail investors in India. Such investors keep a sharp eye when the government announces the quarterly interest rates of small savings schemes such as Public Provident Fund (PPF), National Savings Certificate (NSC), Senior Citizen Small Savings Scheme (SCSS), Sukanya Samriddhi Account (SSA), etc.
The Finance Ministry will announce the interest rates of these schemes after the quarterly review meeting on Tuesday (March 31, 2026). These rates will be applicable for the April-June 2026 quarter. Despite many indicators suggesting rate changes in the past, the government didn’t change the rate since December 31, 2024, when rates for SSA and the 3-year saw a rise. With inflation on the rise in the present scenario suggesting the possibility of rate change, will the Ministry go for it on Tuesday?
Interest rates of small savings schemes at present
Source: India Post website
Which factors determine interest rates of small savings schemes in India?
Adhil Shetty, CEO, BankBazaar.com, told ET Wealth Online the underlying principle is that if the government can borrow at a certain rate through Government Securities (G-Secs), small savings schemes are calibrated around those borrowing costs, with a modest premium to make them attractive to retail savers. This framework was formalised in February 2016, when the government moved from annual resets to quarterly revisions linked to G-Sec yields from the previous quarter.
Chartered accountant Foram Naik Sheth, KMP, Wealth Management Solutions, NPV Associates LLP, highlights three key factors that determine interest rates of small savings schemes directly and indirectly.
G-Sec yields
This is the most important factor. Higher bond yields lead to higher small savings rates.
Inflation
The government ensures that the real return that investors get remain attractive. So, if inflation is higher, small savings schemes’ rates are kept slightly higher and vice versa.
RBI’s monetary policy
Changes in the Reserve Bank of India (RBI) repo rate and liquidity affect G-Sec yields and thus small savings rates.
Shyamala Gopinath Committee recommendations are important
Sheth explains small savings schemes’ rates are determined using a market-linked formula recommended by the Shyamala Gopinath Committee.
According to the formula, rates are benchmarked to the average yields on Government Securities (G-Secs) of similar maturity periods from the previous quarter with a small positive spread (usually 25–100 basis points) added to make them more attractive for investors.
For example, the PPF interest rate is 7.1%. The 3-month G-Sec yield (from January 1, 2026, to March 28, 2025) is 6.693%, as per Investing.com. If we add 25 basis points to it, the rate becomes 6.943%. The interest rate is still 0.157% lower than the PPF rate. It means, the government can reduce the interest rate if it wants.
However, these are recommendations and the government is not bound to abide by them while deciding on small savings schemes' interest rates.
Inflation rate can impact small savings scheme interest rates
Sheth says inflation plays an indirect but important role in determining small savings interest rates.
“When inflation rises, the RBI often may increase the repo rate which pushes G-Sec yields upward, which, in turn, results in higher small savings rates. When inflation is low, G-Sec yields tend to soften, which may lead to lower rates,” says Sheth.
Consumer Price Index (CPI) inflation in India for February 2026 stood at 3.21%, up from 2.74% in January 2026 and a historic low of 0.25% in October 2025.
Inflation has risen sharply over the last five months, but it is still within the 4% target of the RBI. A 3.21% rate also doesn’t show inflationary pressure. Since many small savings scheme interest rates are in the range of 7%-8.2%, investors are still getting attractive returns on their investment despite a 3.21% inflation. So, the government may not change small savings schemes’ interest rates.
Why government defies parameters to retain small savings scheme interest rates
Shetty says the framework recommended by the Shyamala Gopinath committee was designed to bring transparency and reduce discretion by linking rates to market benchmarks.
However, in practice, the government may not always fully align rates with the formula in every quarter, due to some practical considerations, Shetty elaborates.
Sheth says the main reason is to protect small savers especially senior citizens and retirees who depend on these schemes for safe and steady income.
“It also helps encourage household savings and ensures steady inflows into the National Small Savings Fund which the government uses to partly finance its borrowing needs,” Sheth reveals.
Highlighting the fiscal dimension angle to rates, Shetty says small savings schemes form a significant part of the government’s borrowing programme and abrupt changes in rates can alter borrowing costs.
“This is why rate movements are often smoothened, with the final outcome reflecting a calibrated balance between market conditions, financial stability and the interests of small savers,” Shetty sums up.
Rates remain unchanged for a long time
The Finance Ministry last changed the interest rates of post office small savings schemes in the last quarter of the Financial Year (FY) 2023-24, i.e., for the January-March 2024 quarter.
In December 2023, the ministry hiked the interest rates of 3-year time deposits and Sukanya Samriddhi Yojana (SSY). The 3-year time deposit interest rate increased from 7% to 7.1%, while the Sukanya Samriddhi Yojana (SSY) interest rate was raised from 8% to 8.2%.
Will the government change small savings schemes’ interest rates this time? Wait for a day!
The Finance Ministry will announce the interest rates of these schemes after the quarterly review meeting on Tuesday (March 31, 2026). These rates will be applicable for the April-June 2026 quarter. Despite many indicators suggesting rate changes in the past, the government didn’t change the rate since December 31, 2024, when rates for SSA and the 3-year saw a rise. With inflation on the rise in the present scenario suggesting the possibility of rate change, will the Ministry go for it on Tuesday?
Interest rates of small savings schemes at present
Source: India Post website
Which factors determine interest rates of small savings schemes in India?
Adhil Shetty, CEO, BankBazaar.com, told ET Wealth Online the underlying principle is that if the government can borrow at a certain rate through Government Securities (G-Secs), small savings schemes are calibrated around those borrowing costs, with a modest premium to make them attractive to retail savers. This framework was formalised in February 2016, when the government moved from annual resets to quarterly revisions linked to G-Sec yields from the previous quarter.
Chartered accountant Foram Naik Sheth, KMP, Wealth Management Solutions, NPV Associates LLP, highlights three key factors that determine interest rates of small savings schemes directly and indirectly.
G-Sec yields
This is the most important factor. Higher bond yields lead to higher small savings rates.
Inflation
The government ensures that the real return that investors get remain attractive. So, if inflation is higher, small savings schemes’ rates are kept slightly higher and vice versa.
RBI’s monetary policy
Changes in the Reserve Bank of India (RBI) repo rate and liquidity affect G-Sec yields and thus small savings rates.
Shyamala Gopinath Committee recommendations are important
Sheth explains small savings schemes’ rates are determined using a market-linked formula recommended by the Shyamala Gopinath Committee.
According to the formula, rates are benchmarked to the average yields on Government Securities (G-Secs) of similar maturity periods from the previous quarter with a small positive spread (usually 25–100 basis points) added to make them more attractive for investors.
For example, the PPF interest rate is 7.1%. The 3-month G-Sec yield (from January 1, 2026, to March 28, 2025) is 6.693%, as per Investing.com. If we add 25 basis points to it, the rate becomes 6.943%. The interest rate is still 0.157% lower than the PPF rate. It means, the government can reduce the interest rate if it wants.
However, these are recommendations and the government is not bound to abide by them while deciding on small savings schemes' interest rates.
Inflation rate can impact small savings scheme interest rates
Sheth says inflation plays an indirect but important role in determining small savings interest rates.
“When inflation rises, the RBI often may increase the repo rate which pushes G-Sec yields upward, which, in turn, results in higher small savings rates. When inflation is low, G-Sec yields tend to soften, which may lead to lower rates,” says Sheth.
Consumer Price Index (CPI) inflation in India for February 2026 stood at 3.21%, up from 2.74% in January 2026 and a historic low of 0.25% in October 2025.
Inflation has risen sharply over the last five months, but it is still within the 4% target of the RBI. A 3.21% rate also doesn’t show inflationary pressure. Since many small savings scheme interest rates are in the range of 7%-8.2%, investors are still getting attractive returns on their investment despite a 3.21% inflation. So, the government may not change small savings schemes’ interest rates.
Why government defies parameters to retain small savings scheme interest rates
Shetty says the framework recommended by the Shyamala Gopinath committee was designed to bring transparency and reduce discretion by linking rates to market benchmarks.
However, in practice, the government may not always fully align rates with the formula in every quarter, due to some practical considerations, Shetty elaborates.
Sheth says the main reason is to protect small savers especially senior citizens and retirees who depend on these schemes for safe and steady income.
“It also helps encourage household savings and ensures steady inflows into the National Small Savings Fund which the government uses to partly finance its borrowing needs,” Sheth reveals.
Highlighting the fiscal dimension angle to rates, Shetty says small savings schemes form a significant part of the government’s borrowing programme and abrupt changes in rates can alter borrowing costs.
“This is why rate movements are often smoothened, with the final outcome reflecting a calibrated balance between market conditions, financial stability and the interests of small savers,” Shetty sums up.
Rates remain unchanged for a long time
The Finance Ministry last changed the interest rates of post office small savings schemes in the last quarter of the Financial Year (FY) 2023-24, i.e., for the January-March 2024 quarter.
In December 2023, the ministry hiked the interest rates of 3-year time deposits and Sukanya Samriddhi Yojana (SSY). The 3-year time deposit interest rate increased from 7% to 7.1%, while the Sukanya Samriddhi Yojana (SSY) interest rate was raised from 8% to 8.2%.
Will the government change small savings schemes’ interest rates this time? Wait for a day!
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