Is Public Provident Fund (PPF) rate cut coming? Here's why 6.5% interest is possible

The Finance Ministry will announce the Public Provident Fund (PPF) interest rate for the July-September quarter of FY 2025-26 tomorrow (June 30, 2025).

Ahead of the PPF interest rate announcement for the next quarter, PPF account holders are curious about whether the rate will be reduced or kept the same.

The PPF interest rate has remained unchanged at 7.1% since April 1, 2020.

However, it is expected that the PPF interest rate may be reduced for the first time in five years. And there is a strong reason for this, if you consider the set methodology to determine the PPF interest rate. However, there is also a possibility that no change will happen.

Let's understand both situations in detail:

PPF interest rate is linked to the secondary market yields of Central Government securities (G-Secs) of comparable maturities, as per the recommendation of the Shyamala Gopinath committee.

The G-Sec yield generally reduces whenever the Reserve Bank of India (RBI) cuts the repo rate. In the last four months, the RBI has reduced the repo rate by 1%, the impact of which is being seen in falling G-sec yields.

So the PPF interest rate = Average yield of G-sec+0.25%

Between April 1, 2025, and June 29, 2025, the average yield of 10-year G-sec is 6.299%, according to investing.com. If we add 0.25% to 6.299%, the expected PPF rate becomes 6.549%.

Will it happen?

Now, coming to the big question at the moment: Will the Government cut the PPF interest rate?

Falling bond yields and repo rate provides reasons for the Government to reduce the PPF interest rate. However, we can't predict whether the PPF rate will be cut.

The Government's decision on interest rates is typically influenced by the prevailing economic conditions, and at times by public sentiment.