The quarterly revision of Small-Saving Scheme interest is due this month. And this includes a review of PPF interest rates as well.
The current PPF interest rate is 7.1%. And the Government has not changed the rates since April-2020, when it was cut from 7.9% to 7.1% per annum. There is a growing concern among PPF investors about this. And the pain was aggravated last quarter, when the government increased the rates of almost all small savings scheme for April-June 2023 quarter (details here) from 0.10-0.70%, but sadly left out and did not increase in Public Provident Fund interest rates. The rates for other instruments have seen a hike of 0.10-0.70% in the latest update.
Will PPF Interest Rates be Increased?
So now, there are high expectations that the Government will finally go for hike in PPF interest rate after nearly 3 years.
If the Finance Ministry does announce an increase in PPF interest rates for the July-September 2023 quarter, then this will come as a big relief and joy for PPF investors. The announcement is expected to be made on or before 30th June 2023.
How much Will PPF Rates be Increased?
It is just a possibility that this time, the PPF rates will be increased. No one knows for sure. But if the rates are increased, then chances are that the Finance Ministry may not increase it by too much and instead go for a few basis points increase. And the reason is that given the huge size of PPF funds, any big hike in interest rate will lead to higher interest burden for the government.
So its possible that if they do go for an increase, it might be a conservative one in a small range of 0.10% to 0.50% (i.e. 10 to 50 basis points hike). Be reminded that this is a guess and hence, needs to be taken with a pinch of salt.
Why were PPF Rates Not Increased in Apr-Jun 2023 Quarter?
It is just an expectation that this time the PPF rates will be increased. No one knows for sure.
As per the government officials, one of the reasons why the PPF rate were not hiked is that given the tax-exempted EEE status of PPF, the post-tax returns (or yield) from this small savings scheme are reasonably high. More so for those in higher income tax slabs.
I had also shared my views about Why PPF rates were not increased few months back. You may want to read the linked article to know about more than one different possibilities for this decision.
Suggested Reading – Here are the historical PPF interest rates.
So let’s wait and watch. It will be clear in a few days’ time whether the government decides to please the depositors and goes for Hike in PPF Interest Rates for July-September 2023 quarter in India.
Disclaimer – This is just a general discussion. The views expressed above should not be considered professional investment advice or advertisement or otherwise. The article is for general educational purposes only. The readers are requested to take into consideration all the risk factors including their financial condition, suitability to risk-return profile and the likes and take professional investment advice before taking any financial decisions or actions which may have financial implications now or in future.
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