Rupakumar Pradhan, CFPCM, CWM®

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Interest Rates Cut On Small Savings Schemes

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Interest Rates Cut On Small Savings Schemes

Interest Rates Cut On Small Savings Schemes
May 13
07:23 2020

Indians will earn less from their small savings schemes in the April-June 2020 quarter, with the government slashed interest rates on popular schemes – PPF, SCSS, NSE, SSY etc. in a falling rate cycle.

The interest rate cut on small savings schemes such as PPF and post office deposits may hit depositors’ incomes especially retired persons, senior citizen deposits or regular income need depositors, but will likely make loans cheaper for borrowers, as the move could prompt banks to cut lending rates in line with RBI’s Monetary Policy Committee (MPC) meet. The decision to cut small savings schemes interest rate by 70-140 basis points was taken for the first quarter of the current financial year.

For instance, The Public Provident Fund (PPF) will now fetch 7.1% returns, after an 80 bps cut in its interest rate. It used to earlier give 7.9% returns to all PPF depositors.

The interest rate on National Savings Certificate has been slashed by 110 bps to 6.8%.

The interest rate for 5-year Senior Citizens Savings Scheme was slashed by 120 bps to 7.4% as against 8.6% earlier, while that for savings deposits was kept unchanged at 4% a year.

The Sukanya Samriddhi Yojana (SSY) will offer 7.6% in the April-June 2020 quarter as against 8.4% during the January-March 2020 quarter.

What are the interest rate changes in small saving schemes?

Yes, you could see the % change in Small Savings schemes interest rates.  Just see the table

How interest rates are set on small savings schemes

The interest rates on small savings schemes are reviewed every quarter by the central government as per the recommendations of 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.

The History of Interest Rates of Small Savings Schemes over 10/15 years.

In future, we are going to live in a low-interest-rate environment and also the impact of inflation and taxation on our money. Did you know the interest rate history of small savings schemes in India?

Yes, you should know the history of interest rates of small savings schemes over last 10-15 years in India.

Keep reading. You will understand the historical interest rates for PPF, EPF, SCSS, NSC and SSY.

Public Provident Fund (PPF)

  • PPF is a long-term investment for a period of 15 years. The government will review the PPF rates quarterly.
  • Interest rates on PPF Scheme have been brought down by 80 bps from 7.9% to 7.1% for the 1st quarter of FY2020-21 (April-June)
  • Compounding Frequency : Annually

Employee Provident Fund (EPF)

  • Employee Provident Fund is a long term investment tool. Interest rate on EPF contributions is revised every year.
  • The interest rate on investments in EPF was 8.65% per annum for FY2018-19, the EPF interest rates have come down from 8.65% to 8.50% for FY2019-20. It is lowest since FY2012-13.

Senior Citizen Savings Scheme (SCSS)

  • The government will review the SCSS rates quarterly. But, once a subscriber has enrolled, the rates will remain unchanged for the tenure. Deposit has a maturity period of 5 years.
  • The interest rate for Senior Citizens Savings Scheme is slashed by 120 bps from 8.6% to 7.4% per annum for 1st quarter of FY2020-21 (April-June)
  • Compounding Frequency : Quarterly and Paid

National Savings Certificate (NSC)

  • From FY2016–17 onwards, the interest rate on the NSC will be revised every quarter as per the prevailing government-bond rates. However, once you have invested in the NSC, the rate applicable that time will remain the same throughout the tenure of the investment. Certificate comes with the maturity period of 5 years.
  • The interest rate on National Savings Certificate ie. NSC (5 year VIII Issue) has been slashed by 110 bps from 7.9% to 6.8% for 1st quarter of FY2020-21 (April-June).
  • It is compounded annually but is payable at maturity.
  • The 10 year option of the NSC has been discontinued.

Sukanya Samriddhi Yojana (SSY)

  • The interest rate for the SSY is to be 75 basis points over the ten year government bond yield. The rates will be revised every quarter and the new rates will be applicable to all the subscribers.
  • Scheme will continue to offer the same interest rate of 8.40% per annum for 1st quarter of FY2020-21 (April-June) compounded annually which is calculated on a yearly basis.

What should I do?

Those who depend primarily on income from these schemes may now need to revisit their portfolio. Individuals with investments in fixed deposits or small savings schemes should consider the real rate of return (Inflation adjusted return) from these instruments before investing.

Small savings schemes interest rates have been reduced by Government to bring them in consonance with the interest rates prevailing in the economy. As an investor, you have to review your small savings portfolio and also check the impact of inflation & taxation.

Remember, Interest Rates on small savings schemes are revised on quarterly basis.

Stay safe and stay invested.

Plan Well To Live Well!

“Many people take no care of their money till they come nearly to the end of it, and others do just the same with their time.” ~Johann Wolfgang von Goethe


I am a CERTIFIED FINANCIAL PLANNERCM, CHARTERED WEALTH MANAGER®. For the moment, I have shared my experience growing up with you because it had a tremendous impact on how I do what I do.

If you have a question about your own financial situation please connect with me.  I’d be delighted to try to be of service.

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About Author



Mr. Pradhan has over 22 years of experience in financial services industry. He was previously working with leading Life Insurance Companies, Broking Firms, Distribution Company, Financial Planning Company and Health Insurance Company. He has cleared several NCFM modules & is also AMFI Certified. His expertise is in Comprehensive Financial Planning, Technical Analysis, Portfolio Management, Investment Advisory, Wealth Management & Business Development.

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