The government on Friday hiked interest rates on deposits under the public provident fund (PPF) scheme to 8.6 percent from 8 percent and post office savings accounts to 4 percent from 3.5 percent – a move that will benefit millions of depositors.

The maximum deposit limit in a PPF account has been raised to Rs.1 lakh in a financial year from the earlier Rs.70,000. The minimum deposit limit under the popular scheme remains at Rs.500 per year.

The PPF scheme is a favourite investment option for salaried as well as self-employed individuals. The interest earned under the scheme is tax free. PPF deposits are also exempt from wealth tax.

The government has also decided to hike interest rates on post office savings deposits to 4 percent from 3.5 percent.

The hike in the interest rates on post office savings deposit is in line with the increase in interest rates on savings banks deposits. The Reserve Bank of India (RBI) recently directed commercial banks to hike rates on savings deposits.

The PPF scheme, a statutory scheme of the central government, is for a maturity period upto 15 years. The interest rates on one-year fixed deposits has been increased to 7.7 percent from 6.25 percent, the highest increase among different maturity period. Interest rates on other time maturities have also been hiked.

However, the government has decided to discontinue the Kisan Vikas Patras (KVPs) and lowered the maturity period for National Savings Scheme to five years from six years.

Here are the salient feature of the government decision:

Interest rates on public provident fund scheme hiked to 8.6 percent from 8 percent

Maximum deposit limit raised to Rs.1 lakh from Rs.70,000

Rates on post office savings deposits raised to 4 percent from 3 percent

Kisan Vikas Patras discontinued

Maturity period of National Savings Scheme cut to 5 years from 6 years


No. 6-1/2011-NS.II (Pt.)
Ministry of Finance
Department of Economic Affairs
(Budget Division)

New Delhi, the 11th November, 2011.


Sub:   Decisions on the recommendations of the Committee for Comprehensive Review of National Small Savings Fund (NSSF).

The Thirteenth Finance Commission in its Report had, inter alia, recommended that all aspects of the design and administration of the NSSF be examined with the aim of bringing transparency, market linked rates and other much needed reforms to the scheme. As a follow up of this recommendation, the Government had constituted a Committee on 8th July, 2010, headed by Smt. Shyamala Gopinath, the then Deputy Governor, Reserve Bank of India for comprehensive review of NSSF.

The terms of reference of the Committee included review of the existing parameters for the small saving schemes in operation and recommend mechanisms to make them more flexible and market linked; review of the existing terms of the loans extended from the NSSF to the Centre and States and recommend on the changes required in the arrangement of lending the net collection of small savings to Centre and States; review of other possible investment opportunities for the net collections from small savings and the repayment proceeds of NSSF loans extended to States and Centre; review of the administrative arrangement including the cost of operation; and review of the incentives offered on the small savings investments by the States.

2. The Committee submitted its report to the Government on 7th June, 2011. Comments/views of Department of Posts, Department of Revenue, Department of Financial Services, Department of Expenditure and all State/Union Territory Governments were sought on the recommendations made by the Committee.

3. The recommendations of the Committee have been considered in detail, taking into account the views/comments received from other Departments, States/UTs and representations received from various agents’ associations and others. After detailed examination the following decisions have been taken:-

Rationalisation of Schemes

(i) The maturity period for Monthly Income Scheme (MIS) and National Savings Certificate (NSC) will be reduced from 6 years to 5 years.

(ii) A new NSC instrument, with maturity period of 10 years, would be introduced.

(iii) Kisan Vikas Patras (KVPs) will be discontinued.

(iv) The annual ceiling on investment under Public Provident Fund (PPF) Scheme will be increased from Rs.  70,000 to Rs.  1 lakh.

(v) Interest on loans obtained from PPF will be increased to 2% p.a. from existing 1% p.a.

(vi) Liquidity of Post Office Time Deposit (POTD) – 1, 2, 3 & 5 years – will be improved by allowing pre-mature withdrawal at a rate of interest 1% less than the time deposits of comparable maturity. For pre-mature withdrawals between 6-12 months of investment, Post Office Savings Account (POSA) rate of interest will be paid.

Interest Rates on Small Savings Instruments

(i) The rate of interest paid under Post Office Savings Account (POSA) will be increased from 3.5% to 4% p.a.

(ii) The rate of interest on small savings schemes will be aligned with G-Sec rates of similar maturity, with a spread of 25 basis points (bps) with two exceptions. The spread on 10 year NSC (new instrument) will be 50 bps and on Senior Citizens Savings Scheme 100 bps. The interest rates for every financial year will be notified before 1st April of that year.

(iii) Assuming the date of implementation of the recommendations of the Committee as 1st December, 2011, the rate of interest on various small savings schemes for current financial year on the basis of the interest compounding/payment built in the schemes, will be as given below:-


Current Rate (%)

Proposed Rate (%)

Savings Deposit



1 year Time Deposit



2 year Time Deposit



3 year Time Deposit



5 year Time Deposit



5 year Recurring Deposit



5-year SCSS



5 year MIS

8.00 (6 year MIS)


5 year NSC

8.00 (6 year NSC)


10 year NSC

New Instrument





(iv) Payment of 5% bonus on maturity of MIS will be discontinued.

Commission to Agents

(i) Payment of commission on PPF schemes (1%) and Senior Citizens Savings Scheme (0.5%) will be discontinued.

(ii) Agency commission under all other schemes (except MPKBY agents) will be reduced from existing 1% to 0.5%.

(iii) Commission at existing rate of 4% will continue for Mahila Pradhan Kshetriya Bachat Yojana (MPKBY) agents.

(iv) Incentives, if any, paid by the State/UT Governments will be reduced from the commission paid by the Central Government.

Investments from NSSF

(i) The minimum share of States in net small savings collections in a year, for investment in State Governments Securities, will be reduced from 80% to 50%. The remaining amount will be invested in Central Government securities or lent to other willing States or in securities issued by infrastructure companies/agencies, wholly owned by Central Government.

(ii) Yearly repayment of NSSF loans made by Centre and States, will be reinvested in Central and State Government securities in the ratio of 50:50.

(iii) The period of repayment of NSSF loans by Centre and States will be reduced to 10 years, with no moratorium.

(iv) For the current financial year the prevailing interest rate of 9.5% will continue. From 1st April, 2012 revised interest rate will be notified.

(v) Half yearly payment of interest by the Centre and the States will be introduced.

(vi) Interest rate on existing investments from NSSF in Central Government securities till 2006-07 will be re-set at 9% and on those from 2007-08 till 2010-11 will be re-set at 9.5%.

Operational Issues of NSSF

(i) A Monitoring Group drawn from Ministry of Finance, Reserve Bank of India, Department of Posts, State Bank of India, other select banks and select State Governments will be set up to resolve various operational issues like reducing the time lag between collection and investment, etc.

4. Necessary notifications, including those requiring amendments to rules of various small saving schemes and National Small Savings Fund (Custody & Investment) Rules, 2001 will be notified separately. The above decisions will take effect from the dates to be specified in the notifications.
5. This has the approval of Finance Minister.

(Shaktikanta Das)
Addl. Secretary to the Govt. of India

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  1. Rajesh Kumar Mishra, Varanasi says:

    The committee has discontinued the PPF commission. My family members are fully depedent on PPF commission only. From the last 20 years I have serviced more than 1000 account holders. They want to be services my me. What I will do at the age of 42 years to earn for my family other than PPF Investments.
    The account opened up to November 2011 must be given commission because these accounts are opened by me on behalf of Govt. order. These accounts must be serviced for future by me.
    Can the committee clarify that why the commission has been discontinued? I am working from last 25 yr.

  2. Tahasildar Dubey, Varanasi says:

    The commission paid to agents by the Govt has been discontinued from DEC 1 2011? All agents are now unemployed. My family is fully depedent on PPF commission. What I will do at the age of 54 years to earn for my family. Can the committee think? I am working from last 25 yr.

  3. V.S.KAKKAR says:

    The commission paid to agents by the Govt has been discontinued? All agents become unemployed. we are fully depedable on PPF commissiom.what I do at the age of 52 year to earn for my family to servive. Can the commettie think?I am working from last 25 yr.

  4. Ashish Gupta says:

    Why The commission paid to agents by the Govt has been discontinued? Has any clarifications given by the Committie to discontinue the commission on PPF & Senior Citizen Savings Scheme. Whereas the agents collects the amount from door to door and deposit in the accounts of PPF holders. Also they aware the public to open PPF accounts. Is the Govt not think about all these things before discontinue the commission. They provide the services to the customers/depositors of PPF account 24 hours a day. Can the commettie think that the banks can do so?

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