Small savings interest rates - the rates on PPF, NSC, Sukanya Samriddhi, Senior Citizen Savings Scheme and all post office deposits - are set by the Ministry of Finance, not by RBI, and they are reviewed every quarter using a formula linked to government bond yields. On 30 June 2026, the government announced that all rates stay unchanged for the July-September 2026 quarter: PPF remains at 7.1%, NSC at 7.7%, and SCSS and Sukanya Samriddhi Yojana at 8.2%. These rates have now been held steady since the revision that took effect in January 2024, even though RBI has cut the repo rate to 5.25% in the meantime. This guide explains who sets these rates, the formula behind them, and why the formula and the actual rates have drifted apart.
Chapter 1What are the small savings rates for July-September 2026?
As of July 2026, every small savings scheme carries the same rate it did last quarter. The Finance Ministry's notification dated 30 June 2026 kept all rates unchanged for the second quarter of FY 2026-27 (1 July to 30 September 2026).
| Scheme | Rate (per annum) | Compounding / payout |
|---|---|---|
| Post Office Savings Account | 4.0% | Annually |
| 1-year Time Deposit | 6.9% | Quarterly compounding, paid annually |
| 2-year Time Deposit | 7.0% | Quarterly compounding, paid annually |
| 3-year Time Deposit | 7.1% | Quarterly compounding, paid annually |
| 5-year Time Deposit | 7.5% | Quarterly compounding, paid annually |
| 5-year Recurring Deposit | 6.7% | Quarterly compounding |
| Monthly Income Scheme (MIS) | 7.4% | Paid monthly |
| National Savings Certificate (NSC) | 7.7% | Compounded annually, paid at maturity |
| Kisan Vikas Patra (KVP) | 7.5% | Money doubles in 115 months |
| Public Provident Fund (PPF) | 7.1% | Compounded annually |
| Senior Citizen Savings Scheme (SCSS) | 8.2% | Paid quarterly |
| Sukanya Samriddhi Yojana (SSY) | 8.2% | Compounded annually |
These rates apply until 30 September 2026. The next announcement, for the October-December 2026 quarter, is due around the end of September.
Chapter 2Who decides small savings interest rates?
The Ministry of Finance sets small savings rates through a quarterly notification issued by the Department of Economic Affairs; RBI has no direct role in the decision. This is a common point of confusion. RBI sets the repo rate, which influences bank FD and loan rates. Small savings schemes sit outside that system - the money flows into the National Small Savings Fund, which lends to the central and state governments, so the rate on your PPF is effectively the rate at which you lend to the government.
How is each rate calculated?
Since 2016, the government has followed a formula recommended by the Shyamala Gopinath Committee (2011): each scheme's rate is linked to the average yield on government securities (G-secs) of comparable maturity over the preceding three months, plus a small fixed spread. The spread compensates savers for the lock-in and gives some schemes a deliberate social tilt.
Some of the prescribed spreads over the comparable G-sec yield:
- PPF: 25 basis points (0.25%)
- NSC: 25 basis points over the 5-year G-sec yield
- SCSS: 100 basis points over the 5-year G-sec yield, the largest spread, as a support for retirees
So when bond yields fall, the formula points to lower small savings rates the next quarter; when yields rise, it points higher. That is the theory.
Chapter 4Why have rates not changed since January 2024?
Because the formula is a guideline, not a law - the government can, and regularly does, hold rates steady even when the formula points lower. The last actual revision took effect in January 2024. Every quarterly review since then, through the 30 June 2026 announcement, has left rates untouched.
The gap matters more now than it did two years ago. RBI has cut the repo rate during 2025 and 2026, and it stood at 5.25% as of the June 2026 policy, with a neutral stance. Lower policy rates pulled G-sec yields down, so the formula-implied rates for several schemes now sit below the rates actually being paid. SCSS at 8.2% is the clearest example: the formula would imply a lower rate, but cutting a scheme aimed at senior citizens is politically and socially costly, so the rate stays.
For savers, the practical effect is that small savings schemes have quietly become more attractive relative to bank FDs. Banks reprice deposits downward within weeks of repo cuts; small savings rates are reviewed only quarterly and have not been cut at all this cycle. A 5-year post office time deposit at 7.5% or SCSS at 8.2% now generally exceeds what large banks pay on comparable deposits, though exact bank rates vary by bank and tenure.
Chapter 5Which schemes lock your rate, and which ones float?
This is the single most useful distinction in the whole system. Some schemes freeze your rate on the day you invest; others reprice your entire balance every time the government changes the rate.
- Rate locked at purchase: NSC, KVP, all post office time deposits, MIS and SCSS. If you buy a 5-year time deposit at 7.5% today, you keep 7.5% for the full term even if rates are cut next quarter.
- Rate floats quarterly: PPF and Sukanya Samriddhi. Your entire balance earns whatever rate is notified for each quarter, so a future cut applies to old money too.
How are these schemes taxed?
Tax treatment varies widely across the schemes, and the popular ones are popular partly because of it. PPF and Sukanya Samriddhi are EEE: the deposit qualifies for Section 80C (old regime only), and both the interest and maturity amount are tax-free. NSC and the 5-year time deposit qualify for 80C under the old regime, but their interest is taxable. SCSS and MIS interest is fully taxable at slab rates, and TDS applies on SCSS interest above the threshold. Under the new tax regime, which is the default, the 80C deduction is not available, though the tax-free interest on PPF and SSY remains tax-free under both regimes.
For the mechanics of individual schemes, see the guides on PPF, Sukanya Samriddhi Yojana, NSC vs KVP and the full post office schemes guide. For how repo rate cuts ripple through the system, see what happens when RBI cuts rates.
Chapter 7When could rates finally change?
Watch two dates. The next RBI monetary policy meeting is scheduled for 3-5 August 2026, and the next small savings announcement is due around 30 September 2026 for the October-December quarter. If RBI cuts again and G-sec yields fall further, the pressure from the formula grows; if the government keeps holding, the premium that small savings schemes pay over market rates keeps widening. Historically, the government has been quicker to raise these rates than to cut them, and cuts tend to come well after bond yields have fallen.
How Nora helps
Nora tracks the quarterly small savings notifications, the repo rate and FD rates in one place, so you can see how the rate on a scheme you hold compares with current alternatives - and whether your scheme locks its rate or floats with each announcement.
App · coming soonWhat this means for you
Understanding who sets these rates and how tells you what to watch: the quarterly Finance Ministry notification, not RBI's announcements, is what moves your PPF rate. Knowing which schemes lock rates and which float explains why two savers earning "the same" headline rate can have very different outcomes over time. As of July 2026, the rates are frozen where they have been since January 2024 - but the formula underneath them is pointing lower, and that gap is worth understanding whichever way it eventually closes.