PPF Investors Alert! PPF Interest Rate May Go Below 7% For First Time In 50 Years: Reports

The formula recommended by the Gopinath Committee might be behind the low interest rate of Public Provident Fund, media reports have suggested.

New Delhi: The Public Provident Fund (PPF) rate may go below 7 percent, a Times of India report has said. The 10-year government bond yield has averaged 6.30 percent since the start of the April-June 2025 quarter. The Gopinath Committee formula for small savings schemes pegs the PPF rate 25 basis points above the average 10-year g-sec yield in the previous quarter. If the formula is followed, the PPF rate for the July-Sept quarter would be 6.55 percent, the Times of India report said.

PPF Interest Rate: Chances of deviation

The formula recommended by the Gopinath Committee, however, is merely suggestive and the government is not required to follow it, the Times of India report said. The actual PPF rate has historically differed from the one calculated using the formula. In 2016 and 2017, for example, 10-year g-sec yields dropped to 6.5 percent levels but the PPF rate remained steady at 7.8 percent. In 2018, g-sec yields shot up to nearly 8 percent but the PPF rate was lowered to 7.6 percent.

Although the g-sec yields have fluctuated since April 2020, the PPF rate has stayed constant at 7.1 percent. Furthermore, the charges of numerous other Post Office programs have been raised within the same time frame.

Some experts also believe that the government may not lower the PPF rate below the psychological threshold of 7 percent, the Times of India reported.

PPF Interest Rate: Will rate cuts affect investors?

Provident fund is one of the most trusted retirement savings instruments for salaried employees in India. The EPF offers tax benefits and a competitive interest rate on the savings. So, even if the PPF rate is cut, the scheme will continue to draw investors. The interest earned on PF is tax-free, making it a better option than bank deposits where the interest is fully taxable at the investor's slab rate. EPF returns have also historically outperformed inflation, maintaining purchasing power and delivering real gains.