Small Savings Interest Rate Update: The government may cut the interest rate on the Public Provident Fund (PPF). A review of interest rates for PPF, National Savings Certificate (NSC), Senior Citizen Savings Scheme (SCSS), and other small savings schemes will take place on June 30, 2025.
New rates will apply for the July–September quarter. So far in 2025, the interest rates have remained unchanged, but a cut is expected from July 1, especially after the recent repo rate cuts by the RBI.
RBI Has Cut Repo Rate by 1%
Since January 2025, the Reserve Bank of India (RBI) has reduced the repo rate three times—0.25% in February, 0.25% in April, and 0.50% in June—a total cut of 1%.
Due to this, banks have also reduced their fixed deposit (FD) interest rates, and many banks have withdrawn special FDs that offered higher interest.
G-Sec Yield Has Fallen Too
This cut in repo rate has led to a drop in the yield of government securities (G-secs). For example, the 10-year G-sec yield was 6.779% on January 1, 2025, which dropped to 6.247% by June 24.
With this decline in yields, the interest on small savings schemes is likely to come down as well.
How Are Small Savings Interest Rates Fixed?
Small savings scheme interest rates are linked to government bond yields in the secondary market. An additional 0.25% margin is usually added.
For example, if the average 10-year bond yield from March to June is 6.325%, the PPF rate could be 6.575%, but it is currently 7.10%. So, a cut of up to 0.5% in the PPF rate is possible.
Is a Rate Cut Guaranteed?
Experts think there may be a small cut in the interest rate. With falling repo rates, the government could reduce small savings interest rates.
But since these schemes are important for senior citizens and middle-income investors, a major cut is unlikely.
What Should Investors Do Now?
If you are planning to invest in PPF, NSC, SCSS, Time Deposit, or Kisan Vikas Patra, it is better to invest before June 30, 2025.
Doing so will lock in the current higher interest rate. Later reductions won’t affect your investment if the rate is fixed at the time of investing.
Note: In PPF and Sukanya Samriddhi Yojana (SSY), the interest rate is revised every quarter. So, these schemes may still be affected even after investing.
Final Advice
There could be a minor interest rate cut from July, but the government is likely to keep investor interests in mind. If you want to invest, do it before June 30 to enjoy the current high rates.
