PPF, SCSS, SSY interest rates kept unchanged for Dec quarter: How are small savings rates set, why are they frozen?
The government on Wednesday kept interest rates unchanged across a dozen small savings schemes, including the Public Provident Fund (PPF) and Sukanya Samriddhi Yojana (SSY), for the October-December quarter. The rates have now been kept unchanged for 11 consecutive quarters.
Small savings schemes consist of government-backed deposit and certificate products which are operated through the post office and designated banks. They provide Indian households with a formal and safe savings avenue, as it comes with sovereign guarantee and tax benefits on select schemes.
How much interest is each scheme earning?
Deposits under the PPF and SSY accounts will continue to earn interest rates of 7.1% and 8.2%, respectively, which is credited on an annual basis.
The Senior Citizen Savings Scheme (SCSS) will offer 8.2%, while the National Savings Certificate (NSC) will continue to earn 7.7%. The interest rate on Kisan Vikas Patra (KVP), which matures in 115 months, remains at 7.5%.
For other small savings schemes, savings deposits will continue to earn 4%, while one-year, two-year and three-year deposits will offer 6.9%, 7% and 7.1%, respectively. The five-year deposit will earn 7.5%, while the five-year recurring deposit will offer 6.7%. The Monthly Income Account Scheme will continue to carry an interest rate of 7.4%.
Small savings schemes interest rates for Oct-Dec 2026 quarter
| Scheme | Interest rate |
|---|---|
| PPF | 7.1% |
| SSY | 8.2% |
| SCSS | 8.2% |
| NSC | 7.7% |
| KVP | 7.5% |
| Savings deposits | 4% |
| 1-year deposits | 6.9% |
| 2-year deposits | 7% |
| 3-year deposits | 7.1% |
| 5-year deposits | 7.5% |
| 5-year recurring deposits | 6.7% |
| Monthly Income Account Scheme | 7.4% |
Source: Department of economic affairs
How are interest rates decided?
The Ministry of Finance reviews small savings rates every quarter under the market-linked framework adopted following the 2011 Shyamala Gopinath Committee report, with quarterly resets introduced in 2016.
According to the Managing Partner of Singhania & Co. Rohit Jain, each scheme is benchmarked to the average yield on central government securities of comparable maturity during the relevant reference period, with a prescribed spread reflecting tenure and social-policy objectives.
For instance, the expert said the SCSS rate is linked to the five-year government security (G-sec) yield, with an additional 100 basis points, as the scheme has a five-year maturity period.
“The government may additionally consider monetary conditions, inflation, bank-deposit rates, protection of household savers, NSSF funding costs, fiscal implications and transmission of RBI policy,” he added.
Jain also explained that the formula is an administrative benchmark and not a self-executing statutory mandate. Therefore, the notified rate remains an executive determination of the competent authority, which in this case is the Union finance ministry.
Why have rates stayed same despite formula?
Interest rates on small saving schemes are reviewed quarterly, but a revision is not mandatory. The Gopinath framework is recommendatory, not an automatic reset mechanism for each quarter.
Since the government uses collections via small savings schemes to partly fund its fiscal deficit, the latest decision to keep the rates unchanged signals the Centre’s belief that such inflows will remain strong even without rate hikes.
“Rates have remained unchanged for 11 consecutive quarters because several prevailing rates already exceeded their formula-implied levels, while stability protected senior citizens and small savers, avoided abrupt income disruption, and supported predictable NSSF mobilisation,” Jain said.
He also noted that cutting rates could have been socially disruptive, while raising them would have increased the government’s effective borrowing cost and weaken monetary policy transmission. “Provided the decision is non-arbitrary and duly authorised, continuity is legally sustainable notwithstanding the benchmark methodology,” Jain added.
