Blast from the past: When Post Office Time Deposits, Recurring Deposits offered equity-like returns

People who invest in the equity market, despite its risks, are generally considered smart for knowing how to manage their finances wisely. On the other hand, individuals who choose low-risk investments like national savings certificates (NSC), post office time deposits (TDs), and recurring deposits (RDs) are seen as cautious and conservative with their money. But did you know that there was a time when some of the Post Office's small savings schemes offered returns that matched the equity markets?

In the early to late 1990s, India Post used to offer high interest rates on its Time Deposits (TDs) and RDs, often in double digits. While these schemes now offer only 6-8%, in the high-inflation environment back then, they competed with stock market returns.

At their peak, Post Office 5-year Time Deposit rates touched 13.5% in the early 1990s (1991-1993). Let’s take a closer look at the returns from these Post Office schemes and the stock markets over the last three decades:

With soaring inflation throughout the 80s and 90s, and high government borrowing costs, small savings schemes helped Indian households save and fund government deficits. This is why these schemes offered decent interest rates.

During 2000-2003, the stock market returns stood at approximately 2-3% only, while India Post still offered generous interest rates of 9-11%. Following this period, between 2003-2008, the stock market gave bumper returns of approximately 30% led by 76.6% and 56.8% returns in 2003 and 2007, as per NSE data.

Notably, during the market crash in 2008-09, when the stock market returns fell to a significant negative of -51.3%, Post Office schemes still offered nearly 8-8.5% returns.

Over the years, the government has gradually reduced the interest rates on India Post schemes in line with falling inflation and monetary policy. Until 2016, the rates were set annually, or sometimes even once in a couple of years. However, after a notification by the centre in 2016, interest rates on Post Office schemes are now revised every quarter. For the current July-September quarter of the financial year 2025, India Post TDs and RDs are offering modest returns of 6.9% to 7.5%.

Since 2018, interest rates on Post Office schemes have stayed between 5.8% to 7.8%, while trends have shown the stock market to deliver much higher returns in recent years. After COVID-19, during 2020-21, markets delivered nearly 70% to investors, breaking all records.

In the 1990s, Post Office TDs and RDs were like equity, without the risk of investing in markets. Today, they continue to be safe, but with lower yields. Government-backed small savings schemes are an ideal choice for safe and predictable returns, but for higher returns, most go with the stock market and take their chances for higher profits.