Investors in small savings schemes may face a major setback. Interest rates on post office small savings schemes, such as the Public Provident Fund (PPF) and National Savings Certificate (NSC), are expected to be reduced in the next quarter. The Finance Ministry is scheduled to review the interest rates on these schemes tomorrow, September 30th. Following this review, new interest rates will be announced. These new rates will be applicable for the quarter from October to December 2025.

The repo rate has been revised several times this year. The RBI has reduced the repo rate several times. Despite this, the government has not yet reduced the interest rates on small savings schemes such as the Sukanya Samriddhi Account (SSA) and the Senior Citizens Savings Scheme (SCSS). Interest rates on these schemes have remained stable. However, there are now fears that the Finance Ministry may reduce these interest rates in the upcoming quarterly review. This would be a major decision that would directly impact the income of millions of investors.

A major reason for the interest rate cut

One of the biggest reasons for the decline in interest rates is the RBI’s reduction in the repo rate. The central bank has significantly reduced the repo rate this year. At the beginning of the year, the repo rate was 6.50%. This is the rate at which banks borrow money from the RBI. When this rate is lower, money becomes cheaper for banks.

The RBI cut the repo rate by 25 basis points (bps) in its Monetary Policy Meetings in February and April. Subsequently, in the June review meeting, the RBI reduced the repo rate by another 50 bps. Thus, the total repo rate reduction this year has been 1%. Following this significant repo rate cut, many banks have also reduced interest rates on their fixed deposit (FD) schemes. This clearly indicates that market interest rates are falling.

Impact of Declining Government Bond Yields

The bond yield of government securities is also an important factor. G-Secs, or government securities, are loans taken by the government from individuals or institutions, and the government pays interest on them. Bond yields indicate the return on a bond.

According to available data, the 10-year G-Sec bond yield was 6.779% on January 1, 2025. However, it fell to 6.483% by September 24, 2025. This means that bond returns have declined during this period. Although the yield has seen a slight increase in the last three months, it is still 0.296 points below its January 1 level. Interest rates on small savings schemes are often linked to G-Sec yields, so a decline in these rates directly means that interest rates on PPF, NSC, etc., may also decrease.

Current Small Savings Scheme Interest Rates

Here are the current interest rates for small savings schemes that are at risk of a cut:

Savings Deposit: 4.0%

1-Year Fixed Deposit: 6.9%

5-Year Fixed Deposit: 7.5%

Senior Citizen Savings Scheme: 8.2%

Monthly Income Account Scheme: 7.4%

National Savings Certificate (NSC): 7.7%

Public Provident Fund (PPF): 7.1%

Sukanya Samriddhi Account: 8.2%a