Panel suggests 4 per cent interest on Post Office savings deposits

The Hindu RBI Deputy Governor Shyamala Gopinath (left) presenting the report of the Committee on Comprehensive Review of National Small Saving Fund to Union Finance Minister Pranab Mukherjee in New Delhi on Tuesday. Photo: Sandeep Saxena
A government committee has suggested raising interest rates on Post Office savings bank deposits to 4 per cent, a suggestion that could benefit lakhs of small depositors.
The Committee on Small Savings also recommended linking returns on other small savings schemes with interest rates on government securities. It has also suggested that Kisan Vikas Patra (KVP) be withdrawn and the annual investment limit for the popular Public Provident Fund (PPF) be raised to Rs.1 lakh from Rs.70,000 at present.
The committee recommended that interest rates for Post Office savings deposits be raised to 4 per cent from 3.5 per cent at present, in line with the Reserve Bank's decision to hike rates on savings bank deposits.
Under the new formula, suggested by the committee headed by RBI Deputy Governor Shyamala Gopinath, small savings schemes would provide better returns to investors. Interest rate for one-year deposit scheme would go up to 6.8 per cent from 6.25 per cent, while returns for the PPF would improve to 8.2 per cent from 8 per cent.
With regard to taxing returns on the small savings schemes, the committee said the issue should be considered by the government while firming up the Direct Taxes Code, which seeks to replace the Income-tax Act, 1961. Noting that the small savings schemes are agent-driven, the committee suggested that the commission on them should be gradually reduced from 4 per cent to 1 per cent. While recommending to raise the interest rate on savings deposits by 50 basis points to 4 per cent, the panel said the Centre should introduce the system of calculation of interest rate on a daily basis on post office schemes as is being done by banks.
Comments:
Its a welcome suggestion and would benefit greatly to the depositers. Hope that Govt. accepts this at the earliest. However, the proposal to reduce the commission to the agents from 4 to 1 per cent may not go through well with the agent community. Lack of manpower in the post offices and their poor service to the customers would not attract depositers, but for the postal agents. So payment of commision to agents is beneficial than deploying more staff in postoffices.
from: makarand
Posted on: Jun 8, 2011 at 10:49 IST
The raise of interest rate is a welcome move. Withdrawal of kisan vikas pathra will affcet the rural investors.The proposal of rasing of PPF may attract tax payers only.
from: MUTHUBHARATHY
Posted on: Jun 8, 2011 at 16:24 IST
Please implement the panel report at the earliest.
from: T.KRISHNARAO
Posted on: Jun 8, 2011 at 16:31 IST
Good but dont with draw the Kisan Vikas Patra Scheme
from: B V SATHISH KUMAR
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