New Delhi: There may be big news this week for those investing in small savings schemes. The Finance Ministry will conduct a quarterly review of the interest rates of post office schemes (Small Saving Schemes Interest Rate) on September 30, 2026. The rates decided in this review will be applicable for the October-December 2026 quarter.
Actually, the central government reviews the interest rates of small savings schemes every three months. There has been no change in the interest rates of small savings schemes since December 2024, so investors are keeping an eye on the review this time, because this time the situation has changed a bit – inflation is rising rapidly and the yield of government bonds is also high. In such a situation, the question is arising whether the government will increase interest rates this time while giving relief to investors.
Small Saving Schemes Interest Rate: Inflation increases pressure?
Inflation figures are raising the possibility of increasing rates this time. Consumer Price Index (CPI) based inflation was 3.48 percent in April 2026, which increased to 4.82 percent in August. Although this is still far away from the RBI's upper limit of 6 per cent, an upward trend is clearly visible and inflation is expected to rise further in the coming months.
It is being said that the government wants to ensure that the real returns to investors remain attractive. Therefore, when inflation is high, rates for small savings schemes may be kept slightly higher. Also, when inflation rises, the RBI often raises the policy rate, which increases overall interest rates in the economy and also pushes up government bond (G-Sec) yields. Higher G-Sec yields put pressure on small savings rates.
What does the formula of Shyamala Gopinath Committee say?
To understand the impact of inflation and bond yields on small savings rates, one has to look at the market-linked formula suggested by the Shyamala Gopinath Committee in 2014. Accordingly, rates on small savings schemes should be based on the average yield of government bonds of similar maturity in the previous quarter, and a positive spread should be added to make them attractive to investors. This spread is usually 25 to 100 basis points.
This can be understood from the interest rate of PPF, which is 7.1 percent per annum. The nearly three-month average of the 10-year G-Sec yield is 6.870 per cent. By adding 25 basis points to this, the rate increases to 7.12 percent, which is higher than the current rate of PPF. This simply means that if the government wants, it can increase the interest rate of PPF.
Experts' opinion: What did Adil Shetty say?
BankBazaar CEO Adil Shetty says interest rates on small savings schemes are broadly linked to government bond yields of similar duration and a fixed margin is kept for each scheme. According to Shetty, yields are an important basis when rates are reviewed, and G-Sec yields have risen in recent months, which could help push rates higher under the current framework.
But there is also a strong possibility of rates remaining stable
However, this does not mean that the government will increase the rates. The formula of Shyamala Gopinath Committee is just a suggestion and the Finance Ministry is not bound to accept it. The government has many times ignored this formula to keep rates high. Rates have remained stable for nine consecutive quarters and this has become a habit of the government.
Moreover, the current rates are already quite attractive. The interest in Senior Citizen Savings Scheme (SCSS) and Sukanya Samriddhi is more than 8.2 per cent, while the interest in all other schemes is 6.7 per cent or more. These are the rates that give better returns than savings accounts and fixed deposits of public sector banks. Therefore, there is no major pressure on the government to increase the rates.
If we look at the current rates, the interest on post office savings account is 4.00 percent, on fixed deposit of one year it is 6.9 percent, on two years it is 7.0 percent, on three years it is 7.1 percent and on five years it is 7.5 percent. The interest on five-year recurring deposit is 6.70 percent, on monthly income account is 7.4 percent, on National Savings Certificate is 7.7 percent and on PPF is 7.10 percent. The real picture will become clear only after the quarterly review to be held on Wednesday.