PPF, NSC, SCSS Interest Rates Remain Unchanged: Where to invest now for higher returns?
Contrary to expectations, the rates of interest on small savings schemes, including that of Public Provident Fund (PPF), National Savings Certificate (NSC) and Senior Citizen Savings Scheme (SCSS), for the fourth quarter of financial year 2023-24 were left unchanged by the government recently, and only the rates on 3-Year Time Deposit and Sukanya Samriddhi Account Scheme have been marginally increased from 7.0% and 8.0% to 7.1% and 8.2%, respectively.
This move has left a majority of individual investors in a quandary as they are unable to decide where to invest now for higher returns. For, a majority of investment avenues giving assured returns are not lucrative enough for investment and those which promise higher returns are either not safe for investment or are a bit risky. So, what to do now and where to invest one’s hard-earned money?
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Industry experts say that although the PPF, NSC and SCSS interest rates have not been hiked, but they have remained stable, distinguishing them as reliable schemes offering consistent returns devoid of risks. SCSS even experienced a rise in interest rate from 8% to 8.2% in the preceding June quarter, maintaining this rate since then. So, both of them still remain very reliable and lucrative investment schemes for a majority of investors.
However, for those looking for other schemes still have various other options to explore in the financial landscape for the coming quarters. Post office deposits, for instance, have seen a marginal increase in their interest rates, with 3-year term deposits rising from 7% to 7.1%. Similarly, the Sukanya Samriddhi Scheme’s interest rate has climbed from 8% to 8.2% for the fourth quarter.
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“In the realm of mutual funds, returns have been promising, averaging between 12% and 20%. However, the returns vary based on the scheme’s type and associated risks, occasionally surpassing this bracket. For those eyeing retirement savings, the National Pension System (NPS) stands as a long-term, retirement-focused investment vehicle. Additionally, the Kisan Vikas Patra (KVP), a Post Office small savings scheme, currently offers 7.5% interest rate compounded annually, appealing to many investors. Another option lies in fixed deposits (FDs) issued by highly-rated companies (typically AAA or AA+), ensuring a higher safety net for deposited funds,” informs Adhil Shetty, CEO, Bankbazaar.com.
The National Savings Certificate (NSC), a secure investment scheme available through post offices, has also maintained its rate at 7.7%. Geared towards average and low-income earners, the NSC primarily facilitates easy savings options.
For investors looking for higher returns than fixed deposits, PPF or small saving schemes also have the following options:
1. Fixed Deposits or Bonds of State Government Enterprises. These are fully secured and guaranteed by the respective State Governments. “They usually fetch 9% or more returns. Investors have to be wary of the nature of the guarantee. They should check if the guarantee extends to the particular series or not. They should also see if the time period of the bonds and interest payment schedule matches their requirements,” says Ashish Kapur. CEO, Invest Shoppe.
2. Secured Bonds of Well Established Corporates: These are available at interest rates of 8% and above. Again the investors need to check the guarantee details as well as the duration of the bonds.
3. Balanced Mutual Funds: These are equity schemes which invest in a mix of equity and debt. “Equity creates the maximum capital appreciation over the long run and the debt component offers stability and downside protection. In addition to this, these bonds attract lower tax rates as they are treated at par with equity funds for tax purposes. These schemes have been giving double digit returns and additionally the lower taxes of 10% on units held for more than a year and 15% for the short run is a significant advantage,” observes Kapur.
4. Equity Funds: These are invested fully in the share market. Here the returns are likely to be even higher than the balanced funds but being fully invested in the equity market, the volatility and downside risks are higher. This option is suitable for investors who have long-term holding capacity and temperament to tolerate volatility and uncertainty. Tax advantages are the same as those of the balanced funds.
5. Buying Stocks Directly: This is very suitable for investors having time, temperament and research capability for investing in the share market. Returns can potentially be the highest in this option, but it is extremely important that the portfolio is well monitored and managed.
Besides these, there are other options like gold, alternate investment funds and investing in global markets. However, according to experts, all these need very skilful management as well as deep knowledge of asset classes, their prices and cycles.
