Interest rates on small savings schemes may be cut:Rates unchanged since April 2024; government to decide by December 31

The start of 2026 could bring changes for millions of investors across the country, as the central government reviews interest rates on small savings schemes for the January–March 2026 quarter. Experts suggest that interest rates on popular schemes such as the Public Provident Fund (PPF), Sukanya Samriddhi Yojana (SSY), and Senior Citizen Savings Scheme (SCSS) may be reduced. The Finance Ministry is expected to take a final decision and make an official announcement by December 31, 2025. Falling Government Bond Yields Behind the Review Interest rates on small savings schemes are determined using the Shyamala Gopinath Committee formula, which links them to government bond (G-Sec) yields. Over the past few months, yields on 10-year government bonds have declined. Between September and December 2025, the average yield hovered around 6.54%. As per the formula, adding a 0.25% spread would place the PPF rate near 6.80%, compared to the current 7.1%. This growing gap has strengthened expectations of a possible rate cut. Rates Unchanged Since April 2024; RBI Policy Impact Now Visible The government last revised interest rates on small savings schemes in April 2024, and since then, rates have remained unchanged. However, the impact of the Reserve Bank of India’s monetary easing is now becoming evident. In 2025, the RBI cut the repo rate by nearly 1.25%, prompting banks to lower fixed deposit (FD) rates. A decline in retail inflation has further strengthened the case for a possible reduction in small savings interest rates. Typically, when market interest rates fall, the government revises post office scheme rates to reduce its interest burden. Middle Class and Senior Citizens Likely to Feel the Impact Post office savings schemes remain a key source of safe investment for millions, particularly senior citizens who depend on the Senior Citizen Savings Scheme (SCSS), currently offering 8.2%, for regular income. Sukanya Samriddhi Yojana, also offering 8.2%, is widely used for securing daughters’ futures. Any reduction in interest rates would directly impact monthly earnings of middle-class households, retirees, and pensioners. Current Interest Rates on Small Savings Schemes At present, PPF offers 7.1% interest, while Sukanya Samriddhi Accounts and SCSS provide 8.2% each. National Savings Certificate (NSC) carries an interest rate of 7.7%, and Kisan Vikas Patra (KVP) offers 7.5%. The Post Office provides 7.5% on five-year fixed deposits and 7.4% under the Monthly Income Scheme (MIS). These rates have remained stable since the last revision in April 2024. Experts: Final Call Lies with the Government