Small savings interest rates for Jan-Mar 2024 may see slight increase

The government had, on September 29, increased the rate of interest rate on the five-year recurring deposit by 20 basis points to 6.7 percent for October-December, while keeping other small savings rates unchanged.

The interest rates on small savings schemes for January-March 2024 could be hiked for the sixth quarter in a row, according to the underlying numbers on the basis of which the finance ministry is supposed to take the final call.

The government is expected to notify small savings interest rates for the first quarter of 2024 on December 29.

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Interest rates on these schemes are linked to market yields on government securities at a spread of 0-100 basis points over the yield of these securities of similar maturity. When market yields on government securities rise, interest rates on small savings schemes should also be increased.

In September-November 2023, which is the reference period for small savings interest rates for January-March 2024, the yield on five-year government bonds rose by around 10 basis points, while 10-year bond yields rose by 15 basis points. One basis point is one-hundredth of a percentage point.

Moneycontrol had reported in October, quoting a senior government official, that the government has "consciously" not increased the rate of interest on the PPF in line with changes in market interest rates due to the tax benefit the scheme offers.

On September 29, the finance ministry had announced an increase in the rate of interest rate on the five-year recurring deposit by 20 basis points to 6.7 percent for October-December, while keeping other small savings rates unchanged. This was the sixth quarter in a row that small savings rates had been increased after they were left unchanged for nine straight quarters. Over these six quarters, the interest rates have been increased by 40-150 basis points.