New Delhi, March 4: The government today hiked interest rates on post office savings schemes by up to 0.2 per cent, beating the poll code by a whisker to provide benefits to lakhs of small investors.
However, the rate on the popular public provident fund (PPF) scheme remains unchanged at 8.7 per cent.
The new rates will be applicable for the next fiscal year from April 1 and are now competitive with the rates on fixed deposits offered by banks.
The Election Commission is expected to announce the schedule for the Lok Sabha polls tomorrow, meaning the model code of conduct will come into immediate effect.
Speculation is rife that the Congress-led UPA government is trying to woo small investors with the changes. Finance ministry officials, however, said the code of conduct would not have barred them from hiking the rates.
All they needed to do was to take permission from the poll panel. For the past two years, the changes have been announced in the last week of March.
Not all post office rates have been raised — the time deposit rates have gone up, but those on savings deposits, monthly income scheme (MIS), national savings certificate (NSC) and senior citizen savings scheme (SCSS) remain the same.
In the schemes where the rates have gone up, they are now competitive with the schemes of banks. The country’s largest bank State Bank of India offers 9 per cent for deposits of one year and less than two years. Other state-owned banks also offer returns of around 9 per cent for the period.
While post office rates are valid for the entire year; bank deposit rates can change within a year according to the policy rates announced by the Reserve Bank of India during periodic reviews.
The decision to align the small savings rates to the comparable gilt rates was taken on the basis of a report submitted by the Shyamala Gopinath committee in June 2011 after a comprehensive review of the national small savings fund.
The annual changes have won the confidence of investors at a time the stock markets remain volatile and inflation is high.
Analysts said people were flocking back to small saving schemes, seeking the safety of government instruments after a host of ponzi schemes sank, destroying thousands of crores of investors’ money.
Data indicate that deposits into the public provident funds and other small saving schemes have begun to register a rise.
Between April and December 2013, deposits into the public provident fund grew to Rs 1,391.43 crore against Rs 1,169.12 crore a year ago, according to data of the Controller General of Accounts (CGA).
The contributions to saving deposits and national saving certificates, too, have witnessed a revival after steady erosion over the past few years.
The CGA data indicate that these contributions to the schemes jumped up to Rs 1,732.88 crore in the first three quarters of this fiscal compared with net withdrawals of Rs 460 crore a year ago.