Small Saving Schemes: Interest Rates Likely to Be Cut from July 1 – What Investors Should Know

Updated: 28-06-2025, 03.15 PM

If you’re an investor or planning to invest in government-backed small savings schemes, there’s a key development you should be aware of. The Ministry of Finance will review the interest rates of schemes such as the Public Provident Fund (PPF), Sukanya Samriddhi Yojana (SSY), and the National Savings Certificate (NSC) on June 30, 2025. Any revision will take effect from July 1 for the July–September 2025 quarter.

PPF Investment

This change comes amid expectations of a possible rate cut, following a series of repo rate reductions by the Reserve Bank of India (RBI).

Why Are Interest Rates Expected to Be Cut?

The RBI has reduced the repo rate by 100 basis points in total this year — 25 bps each in February and April, followed by a sharper 50 bps cut in June 2025. As a result, commercial banks have slashed their Fixed Deposit (FD) interest rates, and some have even withdrawn special high-interest FDs.

Given this trend, it’s anticipated that the government may also revise interest rates downward for its small savings schemes, which are usually adjusted in line with market movements and government bond yields.

PPF Interest Rate May Dip Below 7%

The Public Provident Fund (PPF) currently offers a 7.1% annual interest rate. If calculated as per the Gopinath Committee formula, which suggests keeping PPF rates 25 basis points above the average yield on 10-year government bonds (currently ~6.3%), the rate could fall to 6.55% in the next quarter.

If this happens, it would mark the first time in over five decades that the PPF rate dips below 7%.

However, it’s worth noting that the government is not bound to follow the Gopinath formula strictly. In the past, rates have remained stable even when market yields fluctuated significantly.

Current Interest Rates on Popular Small Savings Schemes

Scheme	Current Interest Rate (% per annum)
Senior Citizen Savings Scheme (SCSS)	8.2%
Sukanya Samriddhi Yojana (SSY)	8.2%
Public Provident Fund (PPF)	7.1%
National Savings Certificate (NSC)	7.7%
Kisan Vikas Patra (KVP)	7.5%
Post Office Monthly Income Scheme	7.4%
Post Office Term Deposit (1-5 years)	6.9% – 7.5%
Post Office Recurring Deposit (5 years)	6.7%

Will the Government Actually Cut Rates?

While the economic indicators suggest a rate cut is likely, the final decision may also be influenced by social and political considerations. These schemes are popular among retirees, salaried individuals, and small investors. Given their sensitivity, the government may avoid a steep cut and instead go for a modest reduction of 25 to 50 basis points.

What Should Investors Do Now?

If you’re considering investing in small savings schemes, now is the time. Investing before June 30, 2025, can lock in current higher interest rates for fixed-tenure instruments like:

National Savings Certificate (NSC)
Kisan Vikas Patra (KVP)
Senior Citizen Savings Scheme (SCSS)
Post Office Monthly Income Scheme
Post Office Fixed Deposits

Note: In the case of PPF and Sukanya Samriddhi Yojana, interest rates are subject to quarterly revision and apply to existing accounts. So even investing before the deadline won’t guarantee a fixed return for the future.

Final Takeaway

The upcoming interest rate revision is crucial for anyone relying on small savings schemes for safe and steady returns. With rate cuts looming, it makes financial sense to act before July 1 to safeguard your investments at the currently attractive rates.

Author Profile

Kuldeep Singh Chundawat: My name is Kuldeep Singh Chundawat. I am an experienced content writer with several years of expertise in the field. Currently, I contribute to Daily Kiran, creating engaging and informative content across a variety of categories including technology, health, travel, education, and automobiles. My goal is to deliver accurate, insightful, and captivating information through my words to help readers stay informed and empowered.