PPF Interest Rate: Can the interest on Public Provident Fund be reduced? Currently, PPF is getting 7.1 percent interest. Will the effect of reduction in repo rate and other reasons be seen on the interest rate of small savings scheme. Will the government reduce the interest on PPF from 7.1% to 6.50%?
PPF Interest Rate: Can the interest on Public Provident Fund be reduced? Currently, PPF is getting 7.1 percent interest. Will the effect of reduction in repo rate and other reasons be seen on the interest rate of small savings scheme. Will the government reduce the interest on PPF from 7.1% to 6.50%? The government is going to review the interest rates of small savings schemes on 30 June 2025. This includes many schemes like Public Provident Fund (PPF), National Savings Certificate (NSC), Senior Citizen Savings Scheme (SCSS). There has been no change in the interest rates of these schemes since the beginning of the year, but now there is a possibility of a cut in them. The reason for this is that so far this year, the Reserve Bank has cut the repo rate by a total of 1%, due to which the bond yield along with fixed deposits has come down.
Currently, 7.1% interest is being given on PPF, which is near the lowest level in the last 50 years. The last time the interest rate was less than 7% was before 1974. If it is cut this time, then this rate can go below 6.5%, which can be disappointing for investors.
Will 6.5% interest be available on PPF?
To decide the interest rate of PPF, the government considers the average yield of 10-year government bonds as the basis and adds a margin of 0.25% to it. In the last quarter, the 10-year bond yield has been around 6.319%. If we add 25 basis points to this, the new rate of PPF becomes 6.569%. However, it is not necessary to accept this formula. That is, whether the government implements it or not, it depends on the government.
Will the scheme remain attractive for the middle class?
Meanwhile, it is also important to note that PPF is a long term scheme, in which the money is locked for 15 years. The government wants to keep it a stable and reliable investment option, so that this scheme remains attractive for the middle class and those planning for retirement.
Will the government cut small savings schemes?
Some experts believe that even though the bond yield has come down, the government can avoid a huge cut in the interest rate. The reason for this is that already the return of PPF is less than other schemes such as Senior Citizen Scheme (8.2%), Sukanya Yojana (8.2%) and Kisan Vikas Patra (7.5%). If the PPF rate decreases further, investors can turn to other options.
When did PPF get less than 7% interest?
Also, the interest rate on PPF has remained constant at 7.1% since 2020, while there have been many changes in market rates during this period. This can also mean that the government did not want to affect the savings of the general public despite market pressure. Talking about history, PPF was started in 1968 and in the first few years the interest rate was around 5%. From 1974 this rate went above 7% and then it kept increasing for the next several decades. Between 1986 and 1999, the interest rate had reached 12%. But after that it kept falling continuously.
Now the government will take a decision on interest rates on June 30, looking at the latest situation. If you are planning to invest in PPF or any other small savings scheme, it would be a wise decision to invest before June 30, so that the profits can be locked at the current rate.
