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The Reserve Bank of India (RBI) on Tuesday stated that by holding the interest rates on small savings schemes unchanged for the last six quarters, the government is paying 47-178 bps higher than its formula-based rates for Public Provident Fund, National Savings Certificate etc. 

As per the central bank's calculation, interest rate on the PPF scheme should have been 6.63% for the current October-December quarter instead of 7.10% that is being offered now. Similarly, for NSC VIII issue, the government should pay an interest of 6.14% as against its current interest of 6.8%.

“With the moderation in interest rates on bank deposits and unchanged interest rates on small savings, the latter have become attractive to depositors," RBI said in its monthly bulletin.

“The growth in accretions under small savings has consistently been above that of bank deposits since 2018 and the gap has widened, with implications for monetary transmission as and when credit demand picks up," the central bank further added. 

Here is the table: 

Source: RBI
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Source: RBI

Public Provident Fund (PPF) and National Savings Certificate (NSC) continued to carry an annual interest rate of 7.1% and 6.8%, respectively for the current quarter.

Interest rates for small savings schemes are notified on a quarterly basis.

One-year term deposit scheme will continue to earn an interest rate of 5.5%, while the girl child savings scheme Sukanya Samriddhi Yojana account will earn 7.6 per cent.

The interest rate on the five-year senior citizens savings scheme would be retained at 7.4%. The interest on the senior citizens' scheme is paid quarterly.

Interest rate on savings deposits will continue to be 4% per annum.

Term deposits of one to five years will fetch interest rate in the range of 5.5-6.7%, to be paid quarterly, while the interest rate on five-year recurring deposits will earn a higher interest of 5.8%.


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