postal interest rate: PPF, NSC, other postal regimes interest rates unchanged for the quarter to March 31, 2022

The government has decided to keep interest rates unchanged on small savings schemes or postal schemes for the January to March quarter of the 2021-22 financial year. The Ministry of Finance made this announcement via a circular dated December 31, 2021.

For the quarter ending March 31, 2022, investors in small savings schemes like the Public Provident Fund (PPF) and Sukanya Samriddhi Yojana (SSY) will continue to earn the same interest rate as in the quarter ending December 31, 2021. New investments made during the January to March 2022 quarter in these plans will also earn the same interest rates as in the previous quarter.

According to the circular, for the last quarter of the 2021-22 financial year, the Public Provident Fund (PPF) will continue to earn 7.10%. The Senior Citizens Savings Scheme (SCSS) will continue to yield 7.40% and term deposits at post offices between 5.5 and 6.7%. The interest rates will apply for the period from January 1, 2021 to March 31, 2022.

Here’s a look at interest rates on various small savings plans for the fourth quarter of fiscal year 2021-22.

Post Office Interest Rates:

Instrument Interest rate (%) from January 1, 2022 Dialing frequency
savings deposit 4 Annually
1 year term deposit 5.5 Quarterly
2 year term deposit 5.5 Quarterly
3 year term deposit 5.5 Quarterly
5 year term deposit 6.7 Quarterly
5 year recurring deposit 5.8 Quarterly
Senior savings 5 ​​years 7.4 Quarterly and Paid
5-year monthly income account 6.6 Monthly and Paid
National Savings Bond 5 years 6.8 Annually
Public provident fund 7.1 Annually
Kisan Vikas Patra 6.9 (will mature in 124 months) Annually
Sukanya Samriddhi Yojana 7.6 Annually

Source: Circular from the Ministry of Finance

Relief for bond investors

The government’s status quo on small savings scheme rates comes just under a month after the RBI’s bi-monthly monetary policy review. The apex bank has once again maintained its status on key rates, which is once again a reason to encourage investors in fixed income products. Indeed, with the RBI keeping rates unchanged, banks can no longer cut interest rates on FDs.

FD, bank savings account or small savings plan?

Although banks haven’t cut FD rates for a few months now, small savings plans are still, on the whole, enjoying higher interest rates.

Here is the math: an investment of Rs 1 lakh in the one-year FD of SBI will earn you Rs 1,04,991 (interest rate of 4.90%) while an investment in the term deposit of the post office will yield Rs 1.05,614 (5.5% interest rate), assuming quarterly compounding. That’s a difference of Rs 623.

Besides time deposits, even the interest rates on savings accounts offered by some of the larger banks are lower than the interest rate on the post office savings account.

The postal savings account currently offers 4% per annum, while SBI offers an interest rate of 2.70% per annum on its savings account. Similarly, ICICI Bank offers 3-3.5% per annum.

How interest rates are set for small savings plans

Interest rates for small savings plans are reviewed quarterly by the government. The formula for arriving at interest rates for small savings schemes was given by the Shyamala Gopinath committee. The committee had suggested that the interest rates of the different schemes should be 25 to 100 basis points higher than the yields of government bonds of similar maturity.

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