PPF: What should be the PPF rates according to RBI 6.63% or 7.10%
The Reserve Bank of India (RBI) revealed on Tuesday that the government is paying 47-178 basis points greater than its formula-based rates for Public Provident Fund, National Savings Certificate, and other small savings programmes by keeping interest rates steady for the last six quarters.
Small savings scheme interest rates will be adjusted every quarter in accordance with an agreed-upon methodology that provides a spread above the average yield on government securities of equivalent maturity.
According to the central bank’s calculations, the PPF interest rate for the current October-December quarter should have been 6.63 percent instead of the current 7.10 percent. Similarly, for the NSC VIII issue, the government should pay 6.14 percent interest instead of the existing 6.8 percent.
For example, a 25-basis point spread is permitted in the extremely popular PPF, which has a 15-year lock-in period.
In its monthly bulletin, the RBI stated, “With the lowering in interest rates on bank deposits and unchanged interest rates on modest savings, the latter have grown appealing to depositors.”
“Since 2018, accretion growth has continuously outpaced that of bank deposits, and the difference has increased, with concerns for monetary transmission as and when credit demand ramps up,” the central bank stated.
Small savings scheme interest rates are announced on a quarterly basis.