New Delhi: If you are a small-time saver, then there is some good news for you, your savings will now earn you even more. The government has made small savings more attractive in an effort to woo small investors.
The government has raised interest rates on Public Provident Fund from 8 per cent to 8.6 per cent. Now one can invest more in PPF, the investment ceiling is up from 70,000 rupees to 1 lakh rupees a year.
The government has also raised interest rates on Post Office Savings Account deposits to 4 per cent from current 3.5 per cent.
The maturity period for monthly income scheme and National Saving Certificate has been cut to 5 years. The NSC will now fetch 8.6 per cent while monthly income scheme will return 8.2 per cent.
The government borrows money from this pool of small savings to finance its deficit, but for the current fiscal year, the finance ministry had to resort to higher-than-budgeted market borrowings by as much as 530 billion rupees ($10.57 bln) as there were insufficient funds in the National Small Savings Fund.
The higher government borrowings had piled pressure on the government to revisit the structure and pricing of small savings, under intense pressure from bank deposits to attract investments.
Rising interest rates had led to more people parking money in bank deposits rather than small savings like the National Savings Certificates or the Public Provident Fund.
With additional information from Reuters
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