For the ninth consecutive quarter, the Center maintained the status quo regarding interest rates on well-known modest savings plans including the Public Provident Fund (PPF) and the National Savings Certificate (NSC).
Current Interest Rates on Modest Savings Plans
The finance ministry said on Wednesday that the Post Office Savings Account would pay 4% interest while the PPF will continue to yield 7.1%. The three-year term deposit remains at 7.1%, while the Sukanya Samriddhi Yojana will continue to provide its higher yield of 8.2%.
The five-year Post Office Monthly Income Scheme stays at 7.4%, the NSC stays at 7.7%, and the Kisan Vikas Patra (KVP) gives 7.5% with a 115-month maturity.
Impact of RBI Monetary Policy
In its monetary policy review earlier in December, the Reserve Bank of India lowered the repo rate by 25 basis points to 5.25% in response to declining inflation in 2025–2026. The central bank actually lowered its benchmark rates by a total of 125 basis points at four of the six monetary policy reviews in 2025. This led to rate cuts across the banking industry and increased anticipation that even modest savings rates would be lowered. One tenth of a percentage point is equivalent to one basis point.
Significance for Indian Families
For Indian families, small savings plans—which are mostly provided by banks and post offices—are among the most reliable and risk-free investing choices. When interest rates are stable, investors may plan for long-term objectives like asset preservation, retirement, and children’s education without worrying about unexpected rate reductions.
Government Review and Market Comparison
Based on market developments and bond yields, the government assesses and announces interest rates on these plans on a quarterly basis. The fourth quarter of 2023–2024 saw the announcement of the most recent change to modest savings rates.
In contrast, fixed deposit rates typically range from 6.5% to 7.5% annually for terms of one to three years, while many private banks provide savings accounts for regular clients at around 3.0% annually. For certain tenures or deposit quantities, several banks provide rates of up to 7.75% or more.
