Big news for small investors. The interest rates of the Fixed Public Provident Fund (PPF) for the last nine quarters may increase soon. Currently, PPF is getting an interest rate of 7.1% per annum. Actually, the interest rates on government securities are increasing continuously and in view of this, speculations are being made to increase the interest on PPF as well.
The current interest rate on government securities is 7.3 per cent, which is higher than PPF. The interest rate on securities was 6.5 per cent in January 2022 and 7.6 per cent in June. There has been no change in interest rates on small savings schemes for nine consecutive quarters till September. After the increase in interest rates on government securities, the interest rates of many small savings schemes, including PPF, have gone negative. Therefore, in the meeting to be held at the end of this month, it is almost certain to increase their interest rates.
What is the relationship of securities and PPF There is a direct relationship between the interest rates of government securities and PPF. There is a provision to pay interest up to 1 percent more than the average interest rate of securities on PPF. It is decided by the government in the meeting held every quarter. The higher the market yield of government securities, the interest rates of small savings schemes like PPF will also be increased in the same proportion.
Benefit on other savings schemes will also be available Along with PPF, investors can get the gift of increase in interest rates of other small savings schemes. In this, interest rates can also be increased on National Saving Certificate, Kisan Vikas Patra (KVP), Fixed Deposit, PPF, Senior Citizen Savings Scheme and Sukanya Samriddhi Yojana. It is expected that a decision on this can be taken in the meeting to be held later this month.
In case of PPF, the interest rate can be 25 basis points higher than the average yield. It can be understood that if the average yield of government securities in a quarter was 6.75 percent, then the interest rate of PPF for the next quarter should be 25 basis points higher, ie 7 percent.
The interest rate was not reduced even when the yield fell, , despite there being a direct relationship between the yield of securities and the PPF interest rates, the government did not cut the interest rates even after the fall in the yield. There have been times during the pandemic when the yield of government securities has declined, but the government did not cut the interest rates of PPF, NSC and other small savings schemes.
