What this means is that for the quarter ending March 31, 2022, investors in small savings schemes like the Public Provident Fund (PPF) and Sukanya Samriddhi Yojana (SSY) will continue to earn the same interest rate as they were earning during the quarter ending December 31, 2021. New investments made during the January-March 2022 quarter into these schemes will also earn the same interest rates as in the previous quarter.
According to the circular, for the last quarter of FY 2021-22, the Public Provident Fund (PPF) will continue to earn 7.10 per cent. The Senior Citizens Savings Scheme (SCSS) will continue to earn 7.40 per cent, and post office time deposits will fetch 5.5-6.7 per cent. The interest rates will be applicable for the period January 1, 2021 to March 31, 2022.
Here is a look at the interest rates on various small savings schemes for the fourth quarter of FY 2021-22.
Interest rates on post office deposit schemes
|Instrument||Interest rate (%) from January 1, 2022||Compounding frequency|
|1 year Time Deposit||5.5||Quarterly|
|2 year Time Deposit||5.5||Quarterly|
|3 year Time Deposit||5.5||Quarterly|
|5 year Time Deposit||6.7||Quarterly|
|5-year Recurring Deposit||5.8||Quarterly|
|5-year Senior Citizen Savings Scheme||7.4||Quarterly and Paid|
|5-year Monthly Income Account||6.6||Monthly and Paid|
|5-year National Savings Certificate||6.8||Annually|
|Public Provident Fund||7.1||Annually|
|Kisan Vikas Patra||6.9 (will mature in 124 months)||Annually|
|Sukanya Samriddhi Yojana||7.6||Annually|
Source: Finance ministry circular
Relief for debt investors
The government’s status quo on small savings schemes rates comes a little less than a month after RBI’s bi-monthly monetary policy review. The apex bank yet again maintained status on key rates, which is again reason to cheer for investors of fixed income products. That is because with the RBI keeping rates unchanged, banks may not cut interest rates on FDs any further.
FDs, bank savings accounts or small saving schemes?
Despite banks not cutting FD rates for a couple of months now, small savings schemes are, by and large, still earning higher interest rates.
Here’s the math: An investment of Rs 1 lakh in SBI’s 1-year FD will fetch you Rs 1,04,991 (interest rate of 4.90%) whereas investment in the post office time deposit will fetch Rs 1,05, 614 (interest rate of 5.5%), assuming quarterly compounding. This a difference of Rs 623.
Apart from fixed deposits, even the interest rates on savings accounts offered by some of the bigger banks is lower than the interest rate on the post office savings account.
Post office savings account is currently offering 4% per annum whereas SBI is offering 2.70% per annum interest rate on its savings account. Similarly, ICICI Bank is offering 3-3.5% per annum.
How interest rates are set for small savings schemes
The interest rates on small savings schemes are reviewed every quarter by the government. The formula to arrive at the interest rates for small savings scheme was given by the Shyamala Gopinath Committee. The committee had suggested that the interest rates of different schemes should be 25-100 bps higher than the yields of the government bonds of similar maturity.