During the quarter of April through June, the government announced an increase in small savings interest rates of up to 70 basis points. However, the Public Provident Fund (PPF) plan has not received the same treatment. So, for the remainder of this fiscal year, the PPF interest rate will remain at 7.1 per cent. The main concern at this point is whether this will make PPF less alluring than other small savings plans or not.
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Importantly, the well-known Senior Citizens’ Saving Scheme (SCSS), National Savings Certificate (NSC), and Sukanya Samriddhi Yojana (SSSY) each give 8.2%, 7.7%, and 8% for the aforementioned quarter.
Also, the recently introduced Mahila Samman Savings Certificates (MSSC) give 7.5 per cent, which is 0.4 per cent higher than PPF. Certain fixed deposit (FD) schemes are also providing respectable returns under the high-interest rate environment.
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The PPF rate, on the other hand, hasn’t been altered since April through June 2020, when it was lowered from 7.9 to 7.1 per cent. It was previously cut in July–September 2019. The last increase was from 7.6 per cent to 8 per cent between October and December of 2018.
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Is there any scope for increasing PPF rates?
The benchmark for PPFs is typically 25 basis points over the current 10-year G-Sec bond rates. But, according to Adhil Shetty, CEO of BankBazaar.com, who was speaking to CNBC-TV18.com, “the G-Secs were well over 7.25 per cent last quarter, and there is space to boost the PPF rates in the future months.”
Sometimes it is necessary to keep or raise these schemes’ interest rates while keeping an eye on public opinion or other factors that have no bearing on the economy. PPF rates have already been increased in the past and cannot be increased at this time, according to experts.
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One of the finest debt options is PPF, which is accessible to everyone and has tax-free returns. Other debt options may have higher rates, but their post-tax returns will not compare to PPF’s.
