The stock market is falling continuously and the cryptocurrency has been badly affected. In such a situation, people investing in the post office small savings scheme can get great news, because small savings schemes can get more interest. Government bond yields have risen sharply in the past one year, which is expected to raise interest rates on small savings schemes linked to these bonds.
According to the Gopinath Committee in 2011, small savings rates should be 25-100 basis points higher than the average yield of government securities of the same duration. Due to this, interest rates may increase. According to an ET report, the benchmark 10-year bond yield has risen 140 basis points in the last 12 months. During this period, it has increased from 6.04 percent to 7.46 percent and in the April-June quarter its average has been 7.31 percent.
According to the report, if small savings rates are hiked, investors in RBI’s floating rate bonds will also benefit, as the interest rate of these bonds is linked to NSC. Which offer 35 bps more than NSC. The rate of NSC is 6.8 and RBI is offering floating rate bond at 7.15 per cent.
At the same time, it has also been said that this rule has not been followed all the time. The average 10-year bond yield in the January-March 2021 quarter was less than 6 per cent, which means the PPF rate should be around 6.25 per cent, while the senior citizens’ savings scheme interest rate should not exceed 6.75 per cent.
Similarly, interest rates were reduced in March 2021. The PPF rate is 6.4 percent, then the Senior Citizen Savings Scheme has been reduced to 6.5 percent and Sukanya Yojana to 6.7 percent. This caused a huge uproar, forcing the government to roll back the cuts. There has been no change in the small savings rates since then.
Now that government bond yields have risen significantly, the government may increase small savings rates. Whether this increase will be according to the formula of Gopinath Committee or not, it is not decided.