PPF, Post Office FD, SSY, NSC Interest Rates: Will Govt Cut Rates On Small Savings Schemes Next Week?

Last Updated:June 26, 2025, 15:18 IST

The government will review interest rates on small savings schemes like PPF, NSC, and Sukanya Samriddhi Yojana on June 30, 2025. Rates may change due to falling bond yields.

The government is set to review interest rates on small savings schemes, including PPF, NSC, Sukanya Samriddhi Yojana, and others, next week, on Monday, June 30, 2025. The revised rates, if any, will apply to the July-September quarter of FY 2025-26.

So far in 2025, the finance ministry has kept interest rates unchanged across most post office saving instruments. But, with a sharp fall in bond yields and a series of repo rate cuts by the Reserve Bank of India (RBI), this status quo could change in the upcoming review.

Bond Yields Mirror the Fall in Repo Rate

The RBI recently cut the key repo rate by 50 bps to 5.5%. Alongside repo rate cuts, bond yields have also declined. As of June 26, 2025, the 10-year government bond yield stood at 6.269%, down from 6.779% at the beginning of the year — a drop of 0.510%.

This decline matters because small savings rates are indirectly linked to government bond yields. According to the methodology set by the Shyamala Gopinath Committee, the interest rate on small savings instruments should be aligned with the average yield on comparable-maturity government securities, with a 25 basis point positive spread.

Based on investing.com data, the average 10-year G-sec yield between March 24 till now, is 6.325%. Adding the standard 25 bps spread, the PPF rate — if adjusted strictly by the formula — should come down to 6.575%, significantly lower than the current 7.10% being offered.

As per this calculation, small savings rates should be cut, in line with the fall in market rates. However, the final decision lies with the government, which may consider other macroeconomic and political factors before making a move — especially since small savings serve as a key savings instrument for the masses.

While market conditions are pointing towards a potential cut in small savings rates for Q2 FY26, the final decision will be announced by the Ministry of Finance on June 30, 2025. Investors should closely monitor the announcement, especially if they are planning to lock in current rates for long-term deposits.

RBI Slashes Repo Rate by 1% This Year

The RBI has cut its benchmark repo rate three times in 2025, bringing it down by a full 1 percentage point. The rate was lowered by 25 bps in February, 25 bps in April, and 50 bps in June.

These rate cuts have prompted commercial banks to lower their fixed deposit (FD) interest rates. Many lenders have also withdrawn their special FDs that offered temporarily higher returns. This signals a shift to a softer interest rate environment across the financial system.

What Are Small Savings Schemes?

Small savings schemes are government-backed deposit schemes designed to promote savings among Indian citizens, especially those with low to moderate incomes. They are considered safe investments and are offered through post offices and select banks. Popular schemes include Public Provident Fund (PPF), National Savings Certificate (NSC), Sukanya Samriddhi Yojana (SSY), Senior Citizen Savings Scheme (SCSS), Post Office Monthly Income Scheme (POMIS), Time Deposits and Recurring Deposits, Interest rates on these schemes are reviewed quarterly by the government and are influenced by the yield trends in the secondary market for government securities.

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