From 1st Dec 2011 you will be able to enjoy higher returns on your small saving schemes. The rate of interest paid under the Post Office Savings Account has been increased by 0.5% to 4%. MIS (Montly Income Scheme) will get you 8.2% and PPF will get you 8.6%, an increase of 0.6%.

Also, the annual ceiling on investment under the Public Provident Fund (PPF) has been increased from Rs. 70,000 to Rs. 100,000. NSC’s will be for 5 and 10 years now, and the interest will be 8.4% and 8.7% respectively. The Government has decided to discontinue Kisan Vikas Patra (KVP’s).

The Government borrows money from a 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 Rs. 530 billion as there were insufficient funds in the National Small Savings Fund. Rising interest rates has led to more people parking money in bank deposits rather than small savings like the NSC or the PPF.

This move will make more cash available to Government who is running low on the funds this year.