The government on 31^st March, 2023, has announced a significant increase in the interest rates of several saving schemes for the June quarter. The Senior Citizen Savings Scheme, Sukanya Samriddhi Yojana, Kisan Vikas Patra and National Savings Certificate (NSC) will see an increase in interest rates by up to 70 basis points.
The interest rates are increased as follows:

As it can be seen from the above table, interest on various schemes have been increased, ranging from 10bps to 70bps. With highest increase being made in National Savings Certificate of 70bps, to revise its rate from 7% to 7.7%

Now you might be thinking that why are these increases in interest rates being made? The Reserve Bank of India (RBI) has been increasing key rates since May 2022. Due to this, banks have been increasing interest rates on fixed deposits (FD) and bond rates have also increased.

Thus, in order to keep these government schemes competitive, the Government too increases interest offered by various government schemes. There also runs a formula suggested by Shyamala Gopinath Committee which states that the interest rates of different schemes should be 25-100 bps higher than the yields of the government bonds of similar maturity.

The interest rates on these schemes are reviewed each quarter. In the last quarterly review on December 30, 2022, the interest rates on many of these schemes were hiked by as much as 20 – 110 bps (applicable for the January-March 2023 quarter).

This move is aimed at encouraging more people to save and invest in these schemes. This could also make these schemes look more lucrative, for eg, 5 years post office term deposit of 7.5% is higher than 5 years FD rates for renowned banks which ranges from 6% to 7.25%. Though if you are thinking about making investments in these government schemes do not forget to check out the returns offered by other prospective investments.