PPF NSC and Small Saving Scheme Cap Increase for Small Investor-Panel Report

A committee set up for looking small scale investor fund presents it's report to the finance minister. The report recommends to increase the cap of Public Provident Fund, increase the rate of interest of post office scheme as well as decrease the maturity period,increase the rate of interest on small saving scheme and discoutinue of KVP(Kisan vikas patra). Full report is as under.

IN what could reform the interest rate structure of small saving schemes, a committee set up to review the National Small Savings Fund (NSSF) today recommended discontinuation of Kisan Vikas Patras (KVPs) and introduction of a 10-year National Saving Certificate (NSC) scheme.

The committee also suggested linking of rates on small saving schemes with government securities. It also proposed an increase in the cap on annual public provident fund (PPF) investments from

`70,000 to `1lakh. The panel, headed by Reserve Bank of India Deputy Governor Shyamala Gopinath, also suggested an increase in the rate of interest on post office saving schemes from 3.5 per cent to 4 per cent and reduction in the maturity period of monthly income schemes and NSCs from six years to five years.

“The committee has examined all small saving schemes, interest rates payable on them, their maturity period and other aspects. It has recommended discontinuation of KVP and continuation of all other schemes with suitable modifications,” said the finance ministry.

In its report, submitted to Finance Minister Pranab Mukherjee, the committee suggested linking of interest rates on small saving schemes to rates on government securities of similar maturity with a positive spread of 25 basis points (bps), but with two exceptions –a 100 bps spread for senior citizen schemes and a 50 bps spread for 10-year schemes.

It said these rates might be notified at the beginning of the financial year based on the average yield on government securities in the previous calendar year.

The committee also suggested abolition of payment of commission to agents on PPF and Senior Citizens’ Savings Scheme and reduction in the commission on the standardised agency system from 1 per cent to 0.5 per cent.

It recommended that the mandatory investment of net small savings collections in state government securities be reduced from 80 per cent to 50 per cent.
Source- Business Standerd
Tags- nsc calculator,nsc interest calculator,kvp interest calculator,small saving scheme rate of interest
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