There’s a running gag, and it comes up every year during tax season around us. most of us don’t bother with elaborate investment plans. We just park our money in the Public Provident Fund (PPF) or the post office’s National Savings Certificates (NSC). One or two of us may go the extra mile to plan an equity-linked saving scheme or two, but that’s about it. Instruments like PPF and NSC, along with others such as the Senior Citizens Savings Scheme or Sukanya Samriddhi Account, are small savings schemes (SSS). They are meant to promote the savings habit among small investors through the country’s wide post office network, especially in rural areas. They are also intended to provide safe investment options and good returns to small investors and those in specific categories such as senior citizens and parents of girl children. Thanks to the socio-economic remit, SSS enjoy a full-safety guarantee by the government and relatively high returns. And thanks to the tax breaks, effective returns are a notch higher. And now, for the first time in four years, India’s central bank has hiked up repo rates by 40 basis points, going from 4% to 4.4%. So, logically, an investment corpus of Rs 1,00,000 (~$1,300) in your PPF account should earn Rs 400 ($5) higher in the coming year. Right? Wrong. Thanks to a complicated set of interest-rate rules, SSS rates remained high when the rest of the banking industry saw low interest rates. And now that the repo rates have been hiked, thanks to the same set of complicated rules—and maybe a little juggling from the government’s side—your SSS returns may end up staying the same even as other bank deposits may earn higher interest rates.
