Small savings get panel’s booster

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A committee headed by RBI deputy governor, Ms Shyamala Gopinath, on Tuesday recommended a hike in interest on the post office savings account from 3.5 per cent to four per cent.

The committee has also recommended an upward revision of the ceiling on annual subscriptions in public provident fund (PPF) from the current Rs 70,000 to Rs 1 lakh.

The committee’s recommendations come as a shot in the arm for the small investors. It has asked for discontinuation of Kisan Vikas Patra (KVP).

The report was presented to the finance minister, Mr Pranab Mukherjee, on Tuesday. The RBI in its last credit policy review had increased the interest rates on bank’s saving deposits from 3.5 per cent to 4 per cent due to the high inflation in the economy.

The Gopinath committee has recommended the benchmarking of interest rates on other small savings schemes to rates of government securities of similar maturity. As per the formula suggested by the committee returns for the PPF would improve to 8.2 per cent from 8 per cent.

The committee has also recommended abolition of payment of commission to agents on PPF and senior citizens’ savings scheme. It asked for reduction of commission paid on standardised agency system to 0.5 per cent from the current level of 1 per cent.

The committee called for reduction in the maturity period of monthly income schemes and National Saving Certificate (NSC) from six to five years.

Recognising the need for a long term investment opportunity after discontinuation of the KVP, the committee has also recommended introduction of a 10 years NSC scheme.