This means that investors in small savings schemes like Public Provident Fund for the quarter ended March 31, 2022 (PPF) and Sukanya Samriddhi Yojana (SSY) will continue to earn the same interest rate as was being earned during the quarter ended December 31, 2021. Fresh investments made in these schemes during the January-March 2022 quarter will also earn the same rate of interest as in the previous quarter.
According to the circular, the Public Provident Fund (PPF) will continue to earn 7.10 per cent in the last quarter of the financial year 2021-22. Senior Citizen Savings Scheme (SCSS) will continue to earn 7.40 per cent, and post office fixed deposits will receive 5.5-6.7 per cent. The interest rates will be applicable for the period from 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
|Machine||Interest Rate (%) w.e.f. 1st January, 2022||compounding frequency|
|savings deposit||4||every year|
|1 year time deposit||5.5||quarterly|
|2 years time deposit||5.5||quarterly|
|3 years time deposit||5.5||quarterly|
|5 years 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 payment|
|5 Year National Savings Certificate||6.8||every year|
|public provident Fund||7.1||every year|
|Kisan Vikas Patra||6.9 (will mature in 124 months)||every year|
|Sukanya Samriddhi Yojana||7.6||every year|
Source: Ministry of Finance Circulars
Relief for debt investors
The government’s status quo on small savings scheme rates comes less than a month after the RBI’s bi-monthly monetary policy review. The apex bank again maintained its position on key rates, which is again a reason to cheer for the investors of fixed income products. This is because RBI has not made any change in the rates, banks cannot further cut interest rates on FDs.
FD, Bank Saving Account or Small Saving Scheme?
Despite banks not cutting FD rates for a few months, small savings schemes, on the whole, still earn high interest rates.
Here is the math: Investing Rs 1 lakh in SBI’s 1-year FD will fetch you Rs 1,04,991 (interest rate 4.90%), while investing in post office fixed deposit will fetch you Rs 1,05,614 (interest rate) 5.5 %), assuming quarterly compounding. This is a difference of Rs 623.
Apart from fixed deposits, even the interest rate on savings accounts offered by some large banks is lower than the interest rate on post office savings account.
Post Office Savings Account is currently offering 4% p.a while SBI is offering 2.70% p.a. interest rate on its savings account. Similarly, ICICI Bank is offering 3-3.5% per annum.
How interest rates are determined for small savings schemes
The interest rates on small savings schemes are reviewed by the government every quarter. The formula for arriving at the interest rates for the small savings scheme was given by the Shyamala Gopinath Committee. The committee had suggested that the interest rates of various schemes should be 25-100 bps higher than the yield of government bonds of similar maturity.