No plan to raise interest on small savings: FinMin

The government is not planning to increase rates on small savings scheme, the finance ministry said today.

"There is no proposal at present to increase the rate of interest of various small savings schemes," Minister of State for Finance Pawan Kumar Bansal told Rajya Sabha in a written reply.

Prevailing interest rates on small savings vary between 3.5% for the post office saving account to 8% under the post office monthly income account. Rates for Public Provident Fund (PPF) and Senior Citizen savings scheme are 8% and 9% respectively.

The rate of interest on investment in special state government securities is 9.5%.

The government does not have plans to raise the interest rate on pension fund from the present 8% for government employees as well, Finance Minister P Chidambaram was quoted as saying yesterday.

The decision comes at a time when most of the banks have increased interest rates on deposits following tightening of monetary policy by the Reserve Bank (RBI).

Banks are paying as much as 9-10% for term deposits of 1-4 years, compared to 6.5 to 7.25% a year earlier.

The government has not revised interest rates on state-run pension schemes like General Provident Fund (GPF) and Employees Provident Fund (EPF) arguing that tax adjusted returns on these schemes are still attractive.

It said that no gain has accrued to the national small saving fund for the last three years. On the other hand, the fund incurred a loss of Rs 18,490 crore in 2006-07.