Should You Switch From FD To Post Office Savings Schemes In Falling Interest Cycles?

With the repo rate down to about 5.25 per cent, banks will inevitably start trimming fresh FD rates over the next few quarters. Today, large banks are broadly offering around 6.5 to 7.2 per cent on 1-3 year FDs, while many government small savings schemes are still locked at higher levels - NSC at 7.7 per cent, Senior Citizen Savings Scheme (SCSS) at 8.2 per cent and PPF at 7.1 per cent for the October-December 2025 quarter.

"So the spread between FDs and small savings has opened up. If policy stays soft, that gap can widen before the government revises these administered rates,: said Ashutosh Mishra, Co-Founder & CEO - kPaisa.

With repo rates coming down, banks may reduce FD interest rates soon. So many people are thinking of shifting to Small Savings Schemes. Isha Jaiswal- CA, Finance Creator and Entrepreneur advised not to switch everything suddenly.

Small Savings Schemes like PPF, NSC, SCSS and Sukanya usually give better and more stable returns during falling-rate periods. But they also have long lock-ins, which means you cannot take out your money easily.

So use a simple rule:

- For short-term or emergency needs, keep money in FDs.
- For long-term goals, small savings schemes are a better choice.

Interest rates will keep changing, but your savings plan should stay stable.

With the recent repo cuts creating a softer interest-rate environment, many investors are reassessing whether Fixed Deposits (FDs) remain the most efficient option compared to Small Savings Schemes (SSS).

"Historically, FD rates react quickly to policy adjustments. During the 2019 to 2020 easing cycle, average 1 to 3 year FD rates dropped from 7.1% to nearly 5.2% (RBI), compressing real returns for traditional savers, a pattern that tends to repeat whenever policy rates decline," said Mr. Rohit R Chauhan-Founder Ingood.

Small Savings Schemes, by contrast, follow an administered-rate structure and typically adjust more gradually. Even during sharp rate reductions in 2020, schemes such as PPF and SCSS showed far greater stability. Today, SCSS offers 8.2% and PPF 7.1%, both above the prevailing FD band of 6.5% to 7%. A CRISIL study indicates that SSS have historically delivered steadier inflation-adjusted returns than bank deposits during periods of rate softening.

"Globally, similar behaviour is observed; government-backed savings products in markets like the UK and Japan tend to remain stable even when commercial deposit rates fall," Rohit R Chauhan added.

While FDs offer liquidity and simplicity, investors aiming to preserve yields in the current post-cut environment may find SSS a more resilient choice for medium- to long-term savings.

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