RBI calls for higher rates of interest on PPF and SCSS

NEW DELHI, APRIL 3

THE Reserve Bank of India today directed the banks to provide the higher interest rates on Public Provident Fund (PPF) and senior citizens savings scheme (SCSS) from April 1 as announced by the Government. According to a central bank circular, the rates of interest on PPF 1968 and SCSS 2004 will be 8.8 per cent 9.3 per cent respectively from April 1. The new rates would be applicable during this fiscal. Last month, the government had decided to increase the interest rate on PPF by 0.2 per cent to 8.8 per cent. The rate for SCSS has been hiked to  9.3 per cent from 9 per cent.

RBI has also asked the bank to display the new rates for the two small saving schemes on their  notice boards for the information of subscribers. The government had earlier raised annual investment ceiling in PPF savings to Rs 1 lakh from Rs 70,000. The hike in interest rates on small savings schemes is based on the recommendations of the Shyamala Gopinath Committee which had suggested linking of interest  rates on small savings with that of the market. The panel had also suggested that the interest rates on small savings schemes should be revised annually.

The revision in the interest rates will help in maintaining the attractiveness of the small savings schemes vis-à-vis fixed deposit schemes operated by banks. The government as part of economic liberalization process had freed the interest rates on banks  deposits giving freedom to lenders to fix rates depending upon the asset-liability position, but continued to fix rates for small savings schemes.

Source : The Political and Business Daily, April 4, 2012