Source: ET quoting Ministry of Finance
Consequently, the Public Provident Fund (PPF) will maintain its interest rate of 7.1% for the period from July to September 2024.
According to an ET report, the interest rates for small savings schemes are reviewed by the government on a quarterly basis, following the methodology proposed by the Shyamala Gopinath Committee.
According to the committee’s recommendations, the interest rates for various schemes should be set between 25 to 100 basis points higher than the yields of government bonds with corresponding maturities. This strategy is intended to keep the interest rates of small savings schemes competitive and appealing to investors.
In the December 31, 2023 quarter, the government increased the interest rates for certain small savings or post office schemes. However, with the exception of the recurring deposit rate, the interest rates for all other schemes have remained unchanged. Notably, the PPF interest rate has stayed at 7.1 percent since the April-June 2020 quarter.
The Reserve Bank of India (RBI) has implemented a series of significant interest rate hikes since May 2022. Consequently, banks have followed suit by increasing the interest rates on fixed deposits (FD), which is a positive development for FD investors who have experienced a prolonged period of low interest rates. However, the RBI has maintained the status quo by refraining from further adjusting the key rates in the last five policy meetings.