The appeal of Senior Citizen Savings Scheme (SCSC), Kisan Vikas Patra, Public Provident Fund (PPF), Sukanya Samriddhi Yojana (SSY) has gone down owing to multi-year low rates and rising interest rates. While schemes such as SCSC and SSY are targeted at niche investors, these schemes continue to return sub-par rate of interest.
SCSC is a government-backed social security scheme aimed at providing a safety net with quarterly interest payments. The scheme is availed by aged citizens to build substantial funds for post retirement life.
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Most small savings schemes remain unchanged for years
The current SCSC interest rate of 7.6%, applicable for the third quarter of 2022, was raised by 20 basis points from 7.4% by the Finance Ministry in a circular issued on September 29. Interest rate on two other small savings schemes—Kisan Vikas Patra (KVP) and Post Office (PPO) time deposit—were increased between 10 bps to 30 bps. Other popular schemes such as Public Provident Fund (PPF) and Sukanya Samriddhi Yojana (SSY) were kept untouched at 7.1% and 7.6% respectively. The PPF rates, which touched high of 8% in 2019, were slashed to 7.1% in April-June 2020 quarter and have been kept unchanged since.
SCSC, PPO, KVP recent interest rate hike
The government raised the interest rates by measure 10-30 bps on SCSC, KVP and PPOs in October 2022 following back to back repo rate hikes by RBI. Since then, the central bank has further raised interest rates by another 35 basis points.
The latest SCSC interest rate for the October-December would be applicable in the first quarter of Financial Year 2023-23 (FY23) if no revision is made in the next review. The government reviews interest rates offered on small savings schemes on a quarterly basis.
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SCSC investors enjoyed 8.7% for three quarters from October-December 2018 till April-June 2019. After that, the interest rates on small savings schemes was reduced in line with declining repo rates, which touched a historic low of 4% in May 2020. Since then the RBI has increased repo rate by a whopping 225 basis points, but the Central government has kept rates of small savings largely unchanged barring a token hike in October 2022 on the three schemes mentioned above.
PPF, SCSC, SSY interefintfst rates in 2023
The interest rates of PPF, SCSC, SSY for 2023 will be decided by the government in the upcoming quarterly review by December 2022 end. The same shall be applicable in first three months of 2023, until the next quarterly review.
