Small savings rates may go up after a gap of 8 quarters

The small savings rates could see upward revision this time considering the government bond yields are ruling high and the RBI is likely to raise lending rate further to douse high inflation.

As the 10-year government bond yield has moved in the range of 7.364 and 7.617 during the last one month period, small savings schemes rate could go up after a gap of eight quarters.

The 10-year government bond yield hit 7.5 per cent earlier this month, the highest since March 2019, and closed at 7.459 per cent on Wednesday, June 29, after touching a high of 7.617 on June 16, and the lowest was 7.364 on May 30.

Small savings rates track government bond yields movement.

As banks have raised saving account rates for higher deposits only and are delaying savings account interest rate hike for smaller deposits (less than Rs 1 crore or Rs 50 lakhs) despite RBI's rate hikes by 90 basis points, small savers now wait for government decisions on small savings rate for the next quarter.

Small savings instruments like public provident fund (7.10 per cent) and various post office savings schemes' like National Savings Certificate (6.8 per cent), Kisan Vikas Patra (6.9 per cent), Monthly Income Plan (6.6 per cent), Sukanaya Samriddhi (7.6 per cent) interest rates are recalibrated at the end of every quarter and it has remained unchanged for last eight quarters after the rates were revised lower between January 2018 to April 2020 from around 8 per cent for PPF.

Low savings account rates are bothering small savers like retired persons as their emergency funds earn very little at a time when inflation is very high and cost of living is going up.