Post office savings rates are frozen for a tenth quarter while the 10-year bond they track climbed to 7.17 per cent

By Strota Newsroom · 2026-10-01 · How Strota reports

The Finance Ministry left every small savings rate unchanged for the October to December quarter. The notification said the rates for the third quarter of FY 2026-27, starting October 1, 2026 and ending December 31, 2026, would stay the same as the July to September quarter. The public provident fund stays at 7.1 per cent. The National Savings Certificate stays at 7.7 per cent. Kisan Vikas Patra stays at 7.5 per cent, with maturity at 115 months. The monthly income scheme stays at 7.4 per cent. Sukanya Samriddhi and the Senior Citizen Savings Scheme both stay at 8.2 per cent.

It is the tenth straight quarter without a change, according to the wire report carried by Business Standard. The last time the government moved any of these rates was in the fourth quarter of 2023-24. For the public provident fund on its own, the freeze is older still. Business Today noted that the PPF rate has stood at 7.1 per cent for 25 consecutive quarters, with the last revision in April 2020, when it was cut from 7.9 per cent to 7.1 per cent.

That matters because these are not arbitrary numbers. Under the framework recommended by the Shyamala Gopinath Committee in 2011, each scheme is benchmarked to the average yield on government securities of comparable maturity over the previous three months, plus a fixed spread. The public provident fund carries a spread of 25 basis points over the 10-year government security. Sukanya Samriddhi carries 75 basis points over long-term government securities. The Senior Citizen Savings Scheme carries 100 basis points over the five-year government security.

The benchmark moved. The 10-year government bond yield rose from 6.74 per cent on June 30 to about 7.17 per cent on September 30, a climb of around 43 basis points, according to News18. Business Today put the yield at around 7.16 to 7.17 per cent on September 28, after it had sat at about 6.7 to 6.9 per cent through much of the first half of 2026.

So the government reviewed the rates in the week the bond that anchors the provident fund formula moved up by 43 basis points, and the rates stayed exactly where they were. The ministry is not obliged to follow the formula. The framework is a recommendation, and the government retains the discretion to hold administered rates wherever it judges they belong.

The bond market had its own reasons to reprice. The yield on the benchmark 10-year had hardened as crude oil prices and United States Treasury yields rose, and as the market increasingly factored in the possibility of a repo rate increase at the October policy meeting, market participants told Business Standard.

The clearest evidence came from a borrower rather than a saver. Sidbi called off a Rs 6,000 crore three-year bond issue after investors sought more than it was willing to pay. The issue drew 93 bids worth Rs 7,333.5 crore, with investors quoting around 7.85 per cent for the Rs 1,000 crore base issue and 7.97 per cent for the full Rs 6,000 crore. The 10-year benchmark settled at 7.12 per cent that day, one basis point higher, having hardened almost 12 basis points in 15 days.

What sits over the next two policy meetings is an expectation, not a decision. Nomura said in a report that the RBI is likely to raise rates by 25 basis points in both October and December, reaching a terminal rate of 5.75 per cent, while flagging some risk of a one-and-done hike. That is a named house view, not a settled fact.

The repo rate is the one that reaches a household through its bank. When policy rates rise, banks tend to pay more on deposits and charge more on new loans, which is why a rate cycle surfaces in fixed deposit rates and in equated monthly instalments. A floating-rate home loan is the straightest line between a policy meeting and a monthly outgo.

Small savings sit outside that line. They are administered rates, notified by the Finance Ministry each quarter, and a repo change does not automatically move them. A household holding a post office scheme therefore receives the policy cycle only if the government chooses to pass it through.

Where the formula actually points is not uniform today, and that is the honest part. Business Today worked through two schemes. For the Senior Citizen Savings Scheme, the five-year government security averaged about 6.5 per cent over July to September; adding the prescribed 100 basis points gives about 7.5 per cent against the 8.2 per cent actually paid, a gap of about 70 basis points in the saver's favour. For Sukanya Samriddhi, 15-year and 30-year securities yielded around 7.2 per cent and 7.55 per cent, putting the formula range at roughly 8 to 8.3 per cent, and the current 8.2 per cent sits inside it.

One detail decides who a future change would touch. These rates apply to the outstanding balance for the quarter, not only to money deposited fresh, as Business Today noted. A change in the October to December notification would have moved existing balances from that quarter onward, which is why a freeze is worth more than a footnote to a household already holding the scheme.

What the record does not establish is what happens next quarter. The formula points one way for one scheme and another way for another, the government has held rates through moves in both directions, and no notification commits it to the benchmark. The October to December papers settle something narrower and firmer: the 10-year bond that the provident fund rate is benchmarked to rose 43 basis points since June, and that rate is still 7.1 per cent.

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