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Public Provident Fund -- a few points



Earlier Shyamala Gopinath Committee has proposed the set of changes on small savings interest rates to the govt. The reason for the proposal is to compete with other investment areas like bank deposits and fixed income categories. In the last week, govt. has announced  changes on the small savings schemes for the customers,  theinterest rates and other changes to the small savings schemes like PPFPost Office Savings, Monthly Income Scheme (MIS), etc. This would benefit the customers who prefer the small savings scheme like Post Office.Subscribe to our future articles here.

Public Provident Fund (PPF)

  • The existing limit for the yearly investment of Rs. 70000 has been increased to Rs. 100000. Now onwards, an individual can invest up to Rs. 100000 for afinancial year.
  • The interest rates for PPF account is 8.0% p.a. and it has been revised to 8.6% p.a. which is very good for the customers. It will attract more investors to open the PPF account.
  • Interest on loans from the PPF will be increased to 2% p.a. from the existing 1% p.a.

Post Office Savings Accounts (POSA)

  • Existing post office savings accounts fetch only 3.5% p.a. as the interest rates. In the revised rate is 4.0% p.a.
  • This has been revised with effect of banks accounts has revised the interest rates to 4.0% earlier. (update: bank’s savings account interest rates deregulated).

Post office Time Deposit (POTD)

  • Liquidity of post office time deposit – 1,2,3 & 5 years to be improved by allowing premature withdrawal at 1% less than the time deposits of comparable maturity.
  • For premature withdrawals between 6 and 12 months of investment, the POSA rate of interest will be paid.

Monthly Income Scheme (MIS)

  • Existing rate of 8.0% p.a. will be revised to the 8.2% p.a.
  • The duration of the scheme is reduced to 5 years from 6 year.
  • Payment of 5% bonus on maturity is discontinued.

National Savings Certificate (NCS)

  • The maturity period of National Savings Certificate (NSC) reduced from 6 years to 5 years.
  • A new NSC instrument, with a maturity period of 10 years, to be introduced.

 Kisan Vikas Patras (KVPs)

  • Kisan Vikas Patra certificates is that the deposited amount doubles itself after the completion of stipulated period and the rate of interest offered by the post offices for these certificates remain same throughout the loan period.
  • The tenure of Kisan Vikas Patra certificates is 8 years and 7 months.
  • This scheme will be discontinued and no longer will be available with the post office savings.
The following is the table contains summary of changes proposed:

Bad News for Commission Agents

  • The payment of commission on the PPF schemes (1%) and senior citizens savings scheme (0.5%) will be discontinued.
  • Agency commissions under all other schemes will be reduced from the existing 1% to 0.5%.
  • The commission at the existing rate of 4% will continue for the Mahila Pradhan Kshetriya Bachat Yojana agents.
  • Incentives, if any, paid by the state/UT governments will be reduced from the commission paid by the central government.


I hope this changes would bring more investors to the post office savings schemes. But, still there could be more changes because the investors who prefer the post office savings are from rural areas with less income. The revised rates are not effective now, it is expected that government would announce it from the Dec 1,2011. If you have any doubts, please post it in the comments section.

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