Post office savings bank deposits without any fixed maturity will earn interest of 4 per cent up from 3.5 per cent now.
And interest rates on other small saving instruments, such as the National Savings Certificate, will be indirectly linked to the market. The new rates could be notified from July 1, 2011 for the current fiscal year.
High interest rates offered by the banks seem to be luring people to withdraw money from the small savings. The Government was expecting Rs 24,182 crore through small savings during this fiscal, but till date far from any fresh accretion, there has been a net outflow of approximately Rs 11,000 crore. This means people withdrew more money than making fresh deposits.
There is also a proposal to discontinue the Kisan Vikas Patra scheme.
A senior Government official told Business Line, “The Finance Minister, Mr Pranab Mukherjee, has approved the proposals based on the Shyamala Gopinath Committee. Now, the new mechanism for the small saving instruments will be effective after the new system is notified.”