Interest rates on small savings have been hiked in the range of 4 per cent up to 8.6 per cent. The investment limit for Public Provident Fund (PPF) has also been increased by Rs 30,000 to Rs 1 lakh, as also the interest rate at 8.6 per cent from 8 per cent at present.
Announcing the new norms on Friday, the Finance Ministry said the new rates will be applicable from the date of notification which will be announced soon. From next year, the rates would be notified before April 1, it added.
The small saving schemes have been restructured on the basis of the recommendations of the Shyamala Gopinath Committee, which submitted its report in June.
The rate of interest on small savings schemes will be aligned with Government Securities rates of similar maturity, with a spread of 25 basis points with two exceptions. The spread on 10-year National Savings Certificates (new instrument) will be 50 basis points and on Senior Citizens Savings Scheme 100 basis points.
The maturity period for the post office Monthly Income Scheme (MIS) and National Savings Certificate (NSC) has been reduced to five years from six years at present.
Although this is good news for small savers, collection agents are disappointed. According to an office memorandum issued by the Finance Ministry, payment of commission on PPF at the rate of 1 per cent and Senior Citizens Savings Scheme at the rate of 0.5 per cent will be discontinued.
Agency commission under all other schemes (except Mahila Pradhan Kshetriya Bachat Yojana) will be reduced by half, from the existing 1 per cent