Archive · 30 Sep 2026
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.
The National Savings Certificate offers 7.7%, about 95 basis points above its formula-implied rate of 6.75%.
The five-year Post Office Time Deposit has an estimated 75-basis-point premium, while SCSS is about 70 basis points above its implied rate.
POMIS pays 7.4%, compared with an estimated formula-based rate of 6.75%.
The Post Office Recurring Deposit pays 6.7%, just 5 basis points below its estimated formula-implied rate of 6.75%.
Rate changes generally affect new or outstanding balances differently: NSC, KVP, MIS and Time Deposits retain applicable opening terms, while PPF and SSY use new quarterly rates.
- Who
- Investors in small savings schemes, including NSC, SCSS, POMIS and Post Office deposit holders, are affected.
- What
- The article compares current small savings interest rates with rates implied by five-year government security yields.
- When
- The comparison uses the July–September reference quarter and discusses the current quarterly rate review.
- Where
- The schemes are Indian government-backed and Post Office savings products.
- Why
- To identify which schemes are priced above or below their benchmark-linked formula rates and explain how a rate notification affects existing investments.
- 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.