Impact of higher PPF, SCSS, SSY and other small savings interest rates: Inflows jump 26%

According to ICRA, the small savings inflows jumped nearly 26% YoY in FY26, which is likely to boost government's cash balances in FY2026-27.

"As per the provisional data provided by the CGA, the cumulative inflows under savings deposit and certificates and PPF surged by 25.5% YoY to Rs. 2.0 trillion in 8M FY2026 (65% of FY2026 BE of ₹3.1 trillion) from ₹1.6 trillion in 8M FY2025 (47% of FY2025 PA of ₹3.4 trillion)," ICRA said in its Union Budget 2026-27 Expectations.

"This increase was partly been driven by unchanged interest rates for small savings schemes, even as interest rates on bank deposits declined during the fiscal following rate cuts by the RBI," it added.

As the small savings interest rates remain unchanged even in the January-March quarter of FY26, ICRA believes that small savings inflows are unlikely to contract.

"Given these trends, inflows under savings deposits and certificates and PPF need to contract by a sharp 40.6% YoY during December-March FY2026 to remain within the target. This is highly unlikely, given that the GoI has kept the interest rates on small savings schemes unchanged for Q4 FY2026, and these remain elevated relative to G-secs with comparable maturity or spreads higher than the acceptable levels," ICRA said.

"Even if such inflows remain flat during December-March FY2026 compared to the year-ago levels, this will imply an overshooting to the tune of ~Rs. 0.7 trillion on this account. Amid expectations of unchanged market borrowings vis-à-vis the FY2026 BE, this would likely boost the GoI’s cash balances, that would be carried into the next fiscal," it added.

Finance Minister Nirmala Sitharaman will present Union Budget 2026 on February 1, 2026.