Small savings rates remain unchanged for 10th consecutive quarter
The Centre has retained interest rates on all small savings schemes for the July-September quarter, extending the status quo for the 10th consecutive quarter despite policy rate cuts
 "Small savings rates remain unchanged for 10th consecutive quarter")
The government has left interest rates on all small savings schemes unchanged for the July-September quarter for the 10th consecutive quarter.
The government had last raised interest rates on small savings schemes by 10-20 basis points for the quarter ended March 31, 2024. Between October 2022 and March 2024, it had cumulatively increased interest rates on the schemes by 60-160 bps.
Interest rates on small savings schemes are administered by the government, although the prescribed formula links them to yields on government securities of comparable maturity. Under the formula, rates are to be aligned with prevailing yields on government securities, with a spread of 0-100 bps added depending on the scheme. Typically, a decline in yields would warrant a corresponding reduction in small savings rates.
In March-May, which was the reference period for interest rates on small savings schemes for July-September, the yield on 10-year government bonds rose more than 30 bps, and the yield on five-year securities rose more than 50 bps. However, the government had also maintained interest rates at the same level even when the Reserve Bank of India's Monetary Policy Committee cut the policy repo rate by 125 bps in 2025.
Some small savings schemes currently offer returns of up to 8.2 per cent, significantly higher than the weighted average domestic term deposit rate of around 6 per cent on fresh rupee deposits at public sector banks in April.
Small savings collections play a crucial role in financing the government's fiscal deficit, alongside net market borrowings and drawdowns from cash balances. In FY26, the attractive interest rates led to net inflows into the government-run savings schemes exceeding the revised estimate of Rs 3.42 trillion and rising to Rs 4.45 trillion.
The Central government also borrowed Rs 1.14 trillion more from the National Small Savings Fund (NSSF) than estimated in the Budget. The government had estimated borrowing of Rs 3.72 trillion from the NSSF to finance its fiscal deficit.
The schemes receive an additional boost from tax incentives under the old income tax regime, which allows deductions of up to Rs 150,000 on eligible investments, making them more attractive for savers.