Just a week after the interest rate on deposits to the employees’
provident fund was slashed by 1.25 per cent for 2011-12, the government is set
to hike the rate of interest on small saving instruments like the
Public Provident Fund (PPF) starting April 1.
Consequently, deposits to the PPF are expected to earn an
interest of near 9 per cent as against the prevailing rate of 8.6 per cent. The interest rate on other small saving instruments like
the National Savings Certificate and postal deposits are also expected to be
hiked from April 1.
The move comes after the Shyamala Gopinath committee on the
National Small Savings Fund suggested that interest rates on small savings
should be aligned to interest rates on government securities. The finance
ministry is expected to notify the new interest rates for every financial year
will be notified before April 1.
The finance ministry had
hiked the interest rate on deposits to the PPF to 8.6 per cent
from December last year, as against the earlier rate of interest of 8 per cent. With the higher interest rate, small saving
instruments like postal deposits and PPF are expected to become popular once
again. Many investors had moved away to more attractive and equally risk averse
avenues of investment like fixed deposits and EPF that provided higher returns.
While the EPF was providing an interest
rate of 8.5 to 9.5 per cent over
the last few years, bank deposits were giving returns of over 9 per cent. But
now the rate of interest on deposits to the EPF has been
reduced to 8.25 per cent. Fixed deposits are likely to give lower returns in
2012-13 with the RBI expected to cut key rates.
source : http://www.gconnect.in
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