PPF Interest Rate Hike Latest News September 13, 2023: The current situation, especially the need for economic stability, makes it seem unlikely that interest rates will be increased at this time
Public Provident Fund (PPF) Interest Rate News September 13: The quarterly review of interest rates for small savings schemes like PPF by the Ministry of Finance is due this month. Even as PPF account holders have been hoping for an interest rate hike, it has remained unchanged since April 2020.
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As the review of interest rates for small savings schemes is to take place again by the end of the current month, PPF and other small savings accountholders are hoping for a hike in interest rates. However, experts believe the status quo on interest rates is likely to be maintained under the current economic climate.
“For minor savings programmes like PPF, SCSS, and NSC, the status quo is likely to be maintained given the current economic climate and the fact that the interest rate cycle has not yet peaked,” Col. Rakesh Goyal (Retd), a Certified Financial Planner and Founder of Lets Invest Wisely, told FE Money.
“Even if there is always a chance of increases, the current situation, especially the need for economic stability, makes it seem unlikely that interest rates will be increased at this time. It is reasonable to assume that the rates will stay the same in order to support fiscal responsibility and economic recovery,” Col. Goyal added.
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The tax advantages of PPF make it an attractive scheme for investors. For instance, it is estimated that even at 7.1% interest, the effective the effective post-tax returns from PPF work out to be 10.32% for taxpayers in the highest (31.2) tax bracket. This is also one of the reasons why the Government has kept the PPF interest rate unchanged, even as rates of several other small savings schemes have gone up in the last two quarters.
“The difference between PPF and small savings schemes like SCSS and NSC is that the income from PPF is tax-free versus the rest. This means that even if PPF yields less than other schemes, your post-tax income could still be higher on withdrawal,” said Abhishek Banerjee, Founder and CEO of Lotusdew Wealth and Investment Advisors.
“So far, small saving schemes have enjoyed more support from the government as they typically assist people who are saving for others, for example, the Sukanya Samriddhi Scheme, or are in their retirement years and hence depend heavily on the interest income,” he added.
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Why PPF rate may not change
According to experts, it is anticipated that the Public Provident Fund (PPF) interest rate will remain stable for a time. This can be ascribed to a number of things, including the state of the financial markets generally, the government’s budgetary policies, and the general state of the economy.
“Given the significance of PPF as a long-term savings tool for millions of Indians, the government often keeps its rates constant to provide investors with a sense of dependability and security. Despite the possibility that the rate won’t be increased right away, it is still a desirable choice for conservative investors looking for long-term profits that are steady and secure,” Col. Goyal said.
While the PPF interest rate may not be increased once again, Banerjee thinks there is a good possibility of a hike in interest rates of other deposit instruments.
“We recently saw some banks increase lending rates but deposit rates have not moved in line. Given the lower than expected rainfall, few elections lined up and hence the associated spending feeding into inflation coupled increased default from unsecured credit of banks could mean that these interest rates could rise for all deposit instruments,” said Banerjee.
Have any queries related to Public Provident Fund (PPF), SCSS, Sukanya Samriddhi Account and other small savings schemes? Write to [email protected]. We will get relevant queries answered by personal finance experts.
