Interest rates on small savings schemes may face reductions in 2025, starting from the April-June quarter, as the government considers aligning rates with falling G-sec yields. The rates for January-March 2025 may remain unchanged due to high inflation and political considerations.

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• Small savings rates have remained above G-sec yields, widening spreads beyond acceptable levels.
• Rates on Public Provident Fund (PPF) and post office recurring deposits remain below formula-based returns.
• Inflows into savings deposits and PPF were tepid from April to October 2024, reaching only 37% of budgeted targets.
• The last rate cut for small savings schemes was in April 2020, with returns on PPF reduced from 7.9% to 7.1%.
• Since October 2022, rates on various small savings schemes were increased by 70-250 basis points cumulatively.
• Economists suggest April 2025 as the earliest likely start for rate cuts, coinciding with expected repo rate reductions.
• High inflation and upcoming Assembly elections may deter rate cuts in Q4 of 2024-2025.
• Government securities (G-sec) yields are projected to decline further, potentially justifying rate adjustments.
• Experts predict 10-year G-sec yields to stabilize between 6.5%-6.6% by March 2025 and 6.1%-6.3% by March 2026.
• Rate cuts in 2025 may help in monetary policy transmission, aligning with the Reserve Bank of India’s stance.