India’s Public Provident Fund (PPF) interest rate has held firm at 7.1% per annum for the current quarter, according to the Finance Ministry’s latest announcement. Despite speculation that falling government bond yields and RBI’s repo rate cut might push PPF rates down, the government has opted for stability.
PPF interest rates are revised every quarter, guided in part by the average yield on 10-year government securities and a small premium above that benchmark. Recently, the average yield on 10-year G-Sec dropped to around 6.325%, which by formula would suggest a PPF rate near 6.575%. Many industry watchers expected a cut.
However, the government chose to maintain the rate at 7.1%, citing the need to provide certainty to retail investors and small savers.
Key Highlights of the Current PPF Interest Rate
- Current Rate: 7.1% per annum (for Q2 of FY 2025–26)
- Compounding & Credit: Interest is computed monthly (on the lowest balance from the 5th to last day), but credited annually.
- Investment Limits: Minimum ₹500, maximum ₹1.5 lakh per financial year
- Tax Treatment: PPF is fully tax-exempt under EEE (your contribution, interest earned, and maturity amount are all tax-free)
- Lock-in & Withdrawals: The scheme has a 15-year lock-in, with options for partial withdrawal or loan in certain years.
What This Means for You
For many individual investors, PPF interest rates staying at 7.1% offers reassurance in uncertain times. With fixed deposit rates from banks softening, the steady PPF rate can look more attractive by comparison.
However, the gap between the prescribed “fair” rate (6.575%) and the maintained 7.1% may not be sustainable over the long term if bond yields remain low, pressure may build for a rate cut in subsequent quarters.
For now, no change in the PPF interest rate means that savers can continue to count on a guaranteed, tax-free return of 7.1% per year. This stability helps with planning and gives confidence to long-term investors. But given the evolving bond yield environment, it's wise to keep an eye on the quarterly announcements going forward.
Risk Disclaimer: This article is for general informational purposes only. It does not constitute financial advice. Interest rates, tax laws, and financial policies may change. Always consult a certified financial advisor before making investment decisions.
