SCSS interest rate: Can it change from October? What rules, G-sec yields indicate

Open to individuals aged 60 and above, and to retired civilian employees aged 55 and defence personnel aged 50 and above, SCSS allows a single deposit between ₹1,000 and ₹30 lakh, running for five years, and pays interest quarterly. The account can be extended for three years after the end of five-year maturity period.

For those in the old tax regime, SCSS investment qualifies for Section 80C deduction. However, the interest itself is taxable and attracts TDS once it crosses ₹50,000 a year for senior citizens. On the maximum deposit of ₹30 lakh, the current rate produces a quarterly payout of ₹61,500, which is about ₹20,500 a month, or ₹12.3 lakh of interest over the full five years.

How is SCSS rate decided?

As per the framework recommended by the Shyamala Gopinath Committee in 2011 and adopted with quarterly resets since 2016, the SCSS is benchmarked to the 5-year G-sec with a spread of 100 basis points. The formula-implied rate has, however, sat well below 8.2% for most of the time since last revision.

With the 5-year G-sec now averaging roughly 6.5% over the July-September reference quarter (it was 6.3-6.5% through the first half of 2026 and closed September around 6.5-6.7%), the SCSS rate as per the Committee's formula works out to be 7.5%, some 70 basis points below what the scheme is actually paying at present.

However, the benchmark 10-year G-sec ended last week around 7.1%. Rising G-sec yields theoretically lift the formula-implied SCSS rate, which reduces the SCSS rate cut chances as per the formula.

Why the government has not cut SCSS rate anyway

The government has so far chosen not to apply the formula mechanically, as the formula is just a recommendation. There is also a fiscal logic. Small savings schemes like SCSS form a significant part of the government's borrowing programme. SCSS collections feed the National Small Savings Fund, which lends to the Centre and states at 9.5%, and successive pause decisions have kept that pipeline humming.

The above indicate the government may again keep the SCSS interest rate unchanged. The formula never forced the government's hand in previous quarters, and the September bond selloff has only weakened the case for a cut. However, one can never correctly predict government decisions.