Govt Hikes Interest Rates On Five-Year Recurring Deposit To 6.7%, Other Small Savings Schemes Rates Unchanged

Interest rates on all other post office small savings schemes, including Senior Citizens Savings Scheme, savings deposits, and National Savings Certificate were kept unchanged

The government on Friday increased the interest rate for the five-year recurring deposit scheme, raising it from 6.5 per cent to 6.7 per cent for the upcoming December quarter, reported PTI citing a Ministry of Finance circular. However, interest rates on all other post office small savings schemes were kept unchanged.

The key rates outlined in a finance ministry circular, as per the report are the following:

• The interest rate on savings deposits remains unchanged at 4 per cent.


• For one-year term deposits, the interest rate holds at 6.9 per cent.


• Both the two-year and three-year term deposits continue to offer a 7 per cent interest rate.


• The five-year term deposit now provides a 7.5 per cent interest rate.


• The Senior Citizens Savings Scheme maintains an interest rate of 8.2 per cent.


• The Monthly Income Account Scheme offers an interest rate of 7.4 per cent.


• The National Savings Certificate yields an interest rate of 7.7 per cent.


• The Public Provident Fund (PPF) scheme features an interest rate of 7.1 per cent.


• The Kisan Vikas Patra offers a 7.5 per cent interest rate, with investments maturing in 115 months.


• The popular girl child scheme, Sukanya Samriddhi Account, retains its interest rate at 8 per cent.

These interest rate adjustments are significant for various small savings schemes, primarily operated through post offices, and are reviewed by the government on a quarterly basis. 

Notably, small savings interest rates are also influenced by market yields on government securities. When market yields on government securities experience fluctuations during the given period, the interest rates on small savings schemes are also expected to move in alignment with the government's established formula.

During the June-August period, which serves as the reference timeframe for setting small savings interest rates for October-December, government bond yields rose approximately 24 basis points in five-year bond yields, according to a Moneycontrol report.

While the ten-year bond yield rose by around 18 basis points in June-August, the yield on the government's 364-day Treasury bill also registered a 14 basis points increase during the same period, the report further said. 

Notably, the finance ministry initiated a series of hikes in small savings interest rates starting from October-December 2022, following nine consecutive quarters of maintaining unchanged rates.