Govt Holds Interest Rates Steady for PPF, NSC & Post Office Schemes Despite RBI's 1% Repo Rate Cut
Despite a 1% cut in the RBI’s repo rate, the government retains interest rates on PPF, NSC, SCSS, and other post office schemes for July–September 2025. Here's why it matters for your savings.
Introduction: No Changes in Post Office Scheme Rates Despite RBI’s Rate Cut
On June 30, 2025, the Government of India made a key announcement that brought relief to millions of small savers. The Ministry of Finance declared that the interest rates for all small savings schemes—including the Public Provident Fund (PPF), National Savings Certificate (NSC), Senior Citizen Savings Scheme (SCSS), and Sukanya Samriddhi Yojana (SSY)—will remain unchanged for the second quarter of FY 2025-26 (July to September 2025).
This announcement came even after the Reserve Bank of India (RBI) reduced its benchmark repo rate by a full 1% over the past six months. Let’s understand why the government decided to hold these rates steady, what the latest rates are, and how this impacts you as a saver or investor.
Latest Interest Rates for Small Savings Schemes (July to September 2025)
According to the circular issued by the Department of Economic Affairs (DEA), the rates for various post office schemes are as follows:
| Scheme | Interest Rate (Jul–Sep 2025) |
|---|---|
| Savings Deposit | 4.0% |
| 1-Year Time Deposit | 6.9% |
| 2-Year Time Deposit | 7.0% |
| 3-Year Time Deposit | 7.1% |
| 5-Year Time Deposit | 7.5% |
| 5-Year Recurring Deposit | 6.7% |
| Senior Citizen Savings Scheme | 8.2% |
| Monthly Income Account Scheme | 7.4% |
| National Savings Certificate | 7.7% |
| Public Provident Fund (PPF) | 7.1% |
| Kisan Vikas Patra (matures in 115 months) | 7.5% |
| Sukanya Samriddhi Account | 8.2% |
What’s Behind the Decision to Hold Rates Steady?
The government’s decision to maintain interest rates despite the Reserve Bank of India's aggressive easing of the monetary policy is a calculated one.
RBI Repo Rate Cut: A Quick Recap
Over the first half of 2025, the RBI has reduced the repo rate—a key policy tool used to control liquidity and inflation—by 1% in total:
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February 2025: 0.25% cut
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April 2025: 0.25% cut
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June 2025: 0.50% cut
These cuts are aimed at stimulating economic growth as inflation moderates and global economic uncertainty persists.
Impact on Bond Yields
Following the repo rate cuts, bond yields also softened. The 10-year Government Security (G-sec) yield dropped from 6.779% on January 1, 2025, to 6.283% by June 25, 2025—a significant decline of nearly 50 basis points.
Such a decline in yields typically influences the interest rates of small savings schemes, especially since their rate-setting methodology is linked to G-sec yields.
How Post Office Scheme Interest Rates Are Calculated
As per the recommendations of the Shyamala Gopinath Committee, interest rates on small savings schemes are reviewed quarterly and are usually pegged 25–100 basis points above the yield of comparable government securities.
The objective is to ensure:
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Fair returns for savers
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Interest rate parity with market instruments
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Stability in long-term financial planning
However, this formula is not binding. The government reserves the right to deviate from this methodology based on socio-economic and political considerations.
Why No Cut This Time?
While market-based models suggested a possible rate reduction, the government held off for several key reasons:
1. Protection of Household Savings
Many Indian households, especially senior citizens and low-income families, rely on schemes like PPF, NSC, and SCSS as safe, long-term instruments for retirement, children's education, and emergency corpus. Lowering rates might have risked public backlash and financial insecurity.
2. Election-Year Sensitivity
With multiple state elections and growing public concern over inflation and employment, the government likely chose to support the middle-class sentiment by not touching savings returns.
3. Bank FD Rates Already Down
Most banks have already slashed their fixed deposit rates due to the RBI’s monetary easing. Reducing post office scheme rates, too, would further reduce investment avenues for conservative savers.
4. Encouraging Domestic Savings
Stable interest rates help maintain the inflow into small savings schemes, which are an important part of internal government borrowing and public finance.
When Were Rates Changed Last?
The last revision in post office interest rates was seen in Q4 of FY 2023-24 (January–March 2024):
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3-Year Time Deposit: Increased from 7.0% to 7.1%
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Sukanya Samriddhi Yojana (SSY): Raised from 8.0% to 8.2%
Since then, the government has chosen to maintain the status quo through FY 2024-25 and into FY 2025-26.
What Should Savers Do Now?
For cautious and long-term savers, the unchanged rates come as a relief and an opportunity:
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Lock in long-term deposits now while the rates are still attractive.
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Continue contributing to PPF and SSY as they offer EEE tax benefits (Exempt-Exempt-Exempt).
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Senior citizens can still get up to 8.2% on SCSS—a very lucrative option compared to current FD rates.
Author’s Note:
In an era of falling interest rates and volatile markets, the government’s decision to maintain small savings scheme rates for the July–September 2025 quarter is a stabilizing move for millions of Indian households. It shows a clear intent to protect household earnings, especially for fixed-income groups, despite pressures from falling bond yields and rate-cut models.
While this may add a slight cost to government borrowing, the political and social benefits far outweigh the economic arguments for reducing rates right now.
As always, savers are advised to diversify their portfolios and plan investments based on goals, not just interest rates.
If you're someone who relies on PPF, NSC, or SCSS for building your future, you can breathe easy—your nest egg continues to grow safely and steadily.
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