InvestorQ : What are the chances that the PPF rate is likely to reach below 7%?
Sneha Balasubramanian made post

What are the chances that the PPF rate is likely to reach below 7%?

ramya Bhaskaran answered.
2 years ago
The Public Provident Fund’s rate of return is linked to the 10-year government bond yield. The rates under the said scheme do not change on a daily basis, they change at the beginning of every quarter based on average bond yield. For the quarter April-June, the bond yield was fixed at 7.1%, where the 10-year average bond yield stood at 6.42% in the quarter Jan-march.

However, since April, rates have been lowered sharply. Many funds have witnessed a sharp fall such as, PPF rate was cut by 80 basis points from 7.9% to 7.1%, senior citizens savings scheme rate was slashed by 120 basis points from 8.6% to 7.4%, while under the Sukanya Samriddhi Account Scheme rate was cut to 7.6% from 8.4% earlier. This all is a clear indication that rates on PPF are bound to go down and therefore, we can expect that it will reach below 7%. However, in lieu of this, investors cannot do much and hence have to cope with the falling rates this time.

If you listen to the experts this anticipated decline in the rates will not be as tragic as it seems, in the past six months consumer price index has remained below 7%, this simply means that the small savings scheme is yielding a positive and real return.