As the quarterly review of interest rates for the Senior Citizen Savings Scheme (SCSS) and other small savings schemes approaches, senior citizens across India are anticipating a potential hike in the rate for the October-December quarter of FY 2023-24. However, experts are painting a different picture. suggesting that an increase in SCSS rates is unlikely.
The alignment of
SCSS rates with long-term fixed deposits (FDs) and the Reserve Bank of India's (RBI) pause on rate hikes, combined with a global decrease in inflation, has left little room for further upward adjustments, experts say.
In August 2023, India's retail inflation eased to 6.83 percent from 7.44 percent in July. While it's acknowledged that rates of small savings schemes like SCSS are not influenced by monthly figures alone, it's important to recognise that inflation is anticipated to remain high throughout the year. In the last policy announcement, Reserve Bank of India (RBI) governor Shaktikanta Das increased the CPI inflation forecast for FY24 from 5.1 percent to 5.4 percent.
The scenario of SCSS
To provide context, the government opted to maintain the SCSS interest rate at 8.2 percent for the July-September quarter, following two consecutive quarters of upward revisions. In the April-June period, the interest rate was raised from 8 percent to 8.2 percent, and in the preceding quarter of FY 2022-23, it was further increased to 8 percent.
A look at the historical interest rates for SCSS
| Time Period | Annual Interest Rate |
| April to June (Q1 FY 2023-24) | 8% |
| January to March (Q4 FY 2022-23) | 8% |
| October to December (Q3 FY 2022-23) | 7.6% |
| July to September (Q2 FY 2022-23) | 7.4% |
| April to June (Q1 FY 2022-23) | 7.4% |
| January to March (Q4 FY 2021-22) | 7.4% |
| October to December (Q3 FY 2021-22) | 7.4% |
| July to September (Q2 FY 2021-22) | 7.4% |
| April to June (Q1 FY 2021-22) | 7.4% |
| January to March 2021 (Q4 FY 2020-21) | 7.4% |
| October to December 2020 (Q3 FY 2020-21) | 7.4% |
| July to September 2020 (Q2 FY 2020-21) | 7.4% |
| April to June 2020 (Q1 FY 2020-21) | 7.4% |
| January to March (Q4 FY 2019-20) | 8.6% |
| October to December 2019 (Q3 FY 2019-20) | 8.6% |
| July to September 2019 (Q2 FY 2019-20) | 8.6% |
| April to June 2019 (Q1 FY 2019-20) | 8.7% |
| January to March 2019 (Q4 FY 2018-19) | 8.7% |
| October to December 2018 (Q3 FY 2018-19) | 8.7% |
| July to September 2018 (Q2 FY 2018-19) | 8.3% |
| April to June 2018 (Q1 FY 2018-19) | 8.3% |
| January to March 2018 (Q4 FY 2017-18) | 8.3% |
| October to December 2017 (Q3 FY 2017-18) | 8.3% |
| July to September 2017 (Q2 FY 2017-18) | 8.3% |
| April to June 2017 (Q1 FY 2017-18) | 8.4% |
(Source: Paisabazaar)
What lies ahead?
Analysts and financial experts predict that the trend of rising rates may stall for the upcoming quarter.
Adhil Shetty, the CEO at BankBazaar, shared his insights: "Many of the small savings schemes, including SCSS, were not marked to the market during the COVID years, and the rates were much higher than the markets. However, with the rate hikes in the last year, the interest rates on small savings schemes are currently at par with long-term Fixed Deposits (FDs). The Reserve Bank of India (RBI) has also paused rate hikes since April, and with inflation slowly easing up globally, the expectation is that the repo rate would hold. So, there's little to no headroom for an upward revision, and the chances of a significant rate hike in SCSS are unlikely at this point."
About SCSS
SCSS, designed to cater to senior citizens, allows individuals to invest in the scheme after reaching the age of 60. Those who have opted for the Voluntary Retirement Scheme (VRS) are eligible to invest in SCSS from the age of 55. Notably, SCSS offers tax benefits under section 80C of the Income-Tax (I-T) Act, making it an attractive option for retirees seeking to maximise their savings.
It allows senior citizens to earn a quarterly interest income by making a maximum initial investment of Rs 30 lakh per person. The SCSS account matures in 5 years but it can be extended by another 3 years.
