Small Savings Scheme Interest Rates 2024: The government has declared the interest rates for small savings schemes for the January-March 2024 quarter. In a circular released by the finance ministry on December 29, 2023, it was revealed that certain small savings schemes and post office schemes will experience an increase in their interest rates for the three month period ending March 31, 2024.
The determination of interest rates for small savings schemes is done quarterly by the government. The Shyamala Gopinath Committee proposed a methodology for setting these rates. According to their recommendations, the interest rates for various schemes should be 25 to 100 basis points higher than the yields of government bonds with corresponding maturities, states an ET report.
As is evident from the table above, for the period from January 2024 to March 2024, the interest rate for Sukanya Samriddhi Account and 3 year post office fixed deposits has been hiked by up to 20 basis points to 8.2% and 7.1% respectively. However, the interest rate for the Public Provident Fund (PPF) and other small savings schemes like NSC, Kisan Vikas Patra will remain unchanged.
The interest rates of small savings schemes are linked to the yields of 10-year Government Securities in the secondary market. The central government reviews these rates every quarter based on the previous three months’ G-Secs yields. This ensures that the interest rates of small savings schemes are market-linked, as suggested by the Shyamala Gopinath Committee in 2011.
Based on the formula notified by the Finance Ministry in 2016, the PPF interest rate for the January-March quarter should ideally be around 7.53 per cent. However, despite this calculation, the government has chosen to keep the PPF rate unchanged, as they have done in previous quarters, the ET report said.
While banks have started increasing interest rates on fixed deposits (FD) due to key rate hikes by the Reserve Bank of India (RBI), many small savings schemes continue to offer higher interest rates. State Bank of India (SBI) offers FDs across various tenors, earning 3.5 per cent to 7 per cent as of December 27, 2023. Senior citizens receive an additional 0.5 per cent, with interest rates ranging from 4 per cent to 7.5 per cent for these tenors.
In comparison, the interest rates on savings accounts offered by some larger banks are lower than the interest rate on post office savings accounts. The post office savings account currently offers 4 per cent per annum, while SBI offers 2.70 per cent per annum on its savings account. Similarly, ICICI Bank offers 3-3.5 per cent per annum.
