7 hrs ago

NSC Has Widest Gap Against Government Bond Yields

Small savings schemes pay interest to people who deposit money with the government.

Their rates are compared with government bond yields using a formula.

The NSC pays 7.7%, while the formula suggests about 6.75%.

This makes the NSC the most generously priced scheme in the comparison.

SCSS, Post Office Time Deposits and POMIS also pay more than their estimated formula rates.

The Post Office Recurring Deposit is almost exactly aligned with its formula rate.

The government can choose the final rates instead of following the formula automatically.

Some schemes lock in the rate when money is deposited, while others apply new quarterly rates to balances.

Key facts

Widest gap: NSC: 7.7% current rate versus 6.75% formula-implied rate, a gap of about 95 basis points.
SCSS comparison: Senior Citizen Savings Scheme pays 8.2% versus an estimated formula rate of 7.5%.
Post Office TD: The five-year Post Office Time Deposit pays 7.5% versus an estimated formula rate of 6.75%.
POMIS comparison: Post Office Monthly Income Scheme pays 7.4% versus an estimated formula rate of 6.75%.
Closest to formula: Post Office Recurring Deposit pays 6.7%, only 5 basis points below its estimated rate of 6.75%.
POMIS deposit limits: The current limits are ₹9 lakh for a single account and ₹15 lakh for a joint account.
Rate treatment: NSC and KVP certificates, plus POMIS and Post Office Time Deposits, retain applicable purchase or opening terms; PPF and SSY receive new quarterly rates on outstanding balances.

businesstoday.in · 16 hrs ago