Small Savings Schemes – Post office – Interest rate revision


W.E.F. 1.12.2011, the interest rates in respect of small savings schemes – Indian post offices have been revised.

Existing   Proposed

3.50%      4.00% Savings deposit

6.25%       7.7% One year Fixed deposit(FDR)

6.50%       7.8% Two year FDR

7.25%      8.00% Three year FDR

7.50%      8.30% Five year FDR

7.50%     8.00% Five Year RD

9.00%       9.00% Senior citizens savings scheme

8.00%      8.20% Monthly income scheme of 5 year duration(Bonus5% scrapped and one year reduced from previous duration of 6 years)

8.00%       8.40% National Savings certificate of 5 year duration(NSE)( one year reduced from previous tenor of 6 years)

Nil             8.70% National Savings certificate of 10 year duration(new one)

8.00%      8.60% Public Provident Fund(PPF)

Kisan Vikas Patras will be discontinued.

Investment ceilings for PPF is increased from Rs.70,000 to 1,00,000.

Early withdrawal of post office fixed deposits allowed now.

Abolished the commission for agents on PPF and Senior Citizens Savings Schemes.

Disadvantage:

Though generally, the above is good for investing public in respect of safety, liquidity and returns, there are concerns for senior citizens in respect of Monthly income schemes where bonus of 5% is removed though there is marginal increase of interest rate from 8% to 8.2%. This entails a loss of 0.6% for senior citizens as they lose interest which is supposed to be 8.80% including bonus. Govt should consider increasing the rate to 9% in MIS thus removing this disadvantage especially when India is growing with % of old citizens.

C.R. Venkataramani

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12 thoughts on “Small Savings Schemes – Post office – Interest rate revision

  1. if a post office monthly investment is running since 2007 then do these revised rate of interest applicable to the amount deposited in that scheme after the with effect date of the rates or not applicable? do the investor will get the amount on same rate of interest on what he had started the scheme or at the revised rate?

  2. The savings rate in post office savings bank account will be raised by 0.5% from 1.4.12. PPF and MIS interest rates will be also increased by 0.25% from 8.36% and 8.2%. So small investors can get some gain in these and income tax earners who invest in PPF.

  3. The Reserve Bank said interest rates on small savings schemes, except the PPF, will remain fixed throughout the term of schemes.

    It clarified that interest rate for small savings, barring PPF, will be declared on April 1 every year and will remain valid till the maturity of the scheme. For the Financial year 2012-13, the rate of interest on NSC and PPF will increase from 8.6 to 8.8% and 8.9% a year. The term deposits in post office scheme are expected to fetch more than the longer tenure products such as PPF or the 10 year NSC. No change in interest rate on saving bank account in post office which is 4%.. PPF is one of the best option for investment as it offers tax benefit for investment and its interest earning also is not taxable. So actual yield will be around 12% for those salary earners in 30% tax slab.

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