Fintotal News Analysis | Post Office Savings Schemes Might Pay More
Post Office Savings Schemes Might Pay More
Ruby Jacob, 21 Mar 2012

Here's news to cheer on. Your deposits in Post Office Savings Scheme of NSC, PPF, Post Office Time Deposit is set to earn more by anywhere between 20 and 50 basis points with the Finance Ministry considering to increase rates on these.

This year the government estimates to mobilize around Rs 1000 crores through small savings instruments as against budgeted estimate of Rs 24,000 crores for last year. Even this number appeared difficult to achieve with retail investors preferring bank Fixed Deposits over postal savings schemes.

With the hike the government hopes to succeed in attracting new retail investors this year. Bank FD rates are soon expected to come down as RBI begins to cut policy rates. In contrast, rates on small savings instruments will stay for at least for a year. Investing in instrument like PPF also gives tax-free interest income, apart from the Rs 1 lac exemption on investment.

The increase is also in line with the government's decision to link rates on popular government savings schemes to the rate on government bonds. Interest rate on Post Office Savings Account is not expected to change from the current 4%.

(Based on report in Times of India)

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