The government has raised the interest rates for a few small savings programmes after almost four years. The interest rates of three small savings plans have increased for the quarter of October to December 2022, per a circular released by the Finance Ministry on September 29. The increases range from 10 basis points to 30 basis points. (100 basis points are equal to one percentage point.)
Both the Kisan Vikas Patra and Senior Citizen Savings Scheme interest rates have increased by 20 basis points to 7.6% and 7%, respectively. The interest rate for post office time deposits with a 3-year tenure has increased by 30 bps to 5.8%, and for deposits with a 2-year tenure, it has increased by 20 bps to 5.7%. The interest rates for the remaining microsavings programmes, including PPF and Sukanya Samriddhi Yojana, remain unaltered.
As government bond rates have increased, the most recent interest rate increase was anticipated. Small savings rates are based on yields on bonds with the same duration and are updated every three months. Political pressures forced the government to maintain the interest rates on small savings plans unchanged even as fixed income products like the FD had their rates reduced. Bond yields decreased steadily in 2020–21.