Notably, the interest rates on this small savings are calculated based on the yields of government bonds also called government securities or G-sec. The government reviews these interest rates quarterly against the average g-sec yields over the past three months.
The benchmark 10-year yield has been above 7% since April 2022 and averaged 7.31% from June to August 2021, which argues for a rate review at the next review.
Similarly, the Sukanya Samriddhi Savings Scheme interest rate is expected to be 75 basis points above the G-sec yield, but the SSA is currently giving 7.6%. The Senior Citizen Scheme interest rate is 100 basis points above the average three-month G-sec yield.
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However, in practice, the government revises interest rates, based on the above formulas, after a significant lag. Interest rates for small savings plans have remained unchanged since September 2020; they were revised downwards in the last quarter of April-September 2020. Now that bond yields have been high for some time, interest rates for small regimes could be revised upwards.