Centre keeps interest rate on small savings schemes unchanged for April-June period

This is the first instance in seven quarters where rates on these schemes have remained stable.

The finance ministry had initiated a series of interest rate hikes on small savings schemes from October-December 2022, breaking a trend of nine consecutive quarters without any changes.

"The rates of interest on various Small Savings Schemes for the first quarter of FY 2024-25 starting from 1st April, 2024 and ending on 30th June, 2024 shall remain unchanged from those notified for the fourth quarter (1st January, 2024 to 31st March, 2024) of FY 2023-24. This has the approval of the competent authority," a government notification said.

While small savings interest rates are determined by the government, they are typically tied to market yields on government securities with a spread of 0-100 basis points over the yields of comparable maturities.

This means that when the market yields on government securities decrease, small savings interest rates should also be lowered.

However, despite a decline in government bond yields, the small savings interest rates have remained unchanged for the second quarter of 2024.

During the reference period of December 2023 to February 2024, which determines the rates for April-June 2024, the yields on five- and ten-year government bonds decreased by approximately 20 basis points.

The yield on the government's 364-day Treasury bill experienced a marginal decrease of 3 basis points.