Small saving instruments to fetch more money in 2012-13

Investments in instruments such as National Savings Certificates (NSCs), public provident fund (PPF) and post office deposits under the Union government's small-savings scheme will fetch higher returns in the current financial year.

The interest rates on various instruments under the scheme have been increased by 20 to 50 basis points (bps, or one-hundredth of a percentage point). Five-year NSCs will fetch 8.6 per cent in 2012-13, against 8.4 per cent earlier.

Interest on newly introduced 10-year NSCs have been increased from 8.7 per cent to 8.9 per cent. PPF will yield 8.8 per cent in the current financial year, from 8.6 per cent earlier. The interest rate offered on savings accounts held with the postal department remains unchanged at 4 per cent.

The changes are part of the annual revision in the interest rates based on market rates of respective benchmark government securities. Last year, the government had accepted a recommendation to this effect by a committee set up for reviewing the government's small savings scheme.

In stark contrast, the Employees' Provident Fund Organisation (EPFO) has slashed the interest rates on the employee provident fund from 9.5 per cent to 8.25 per cent for 2011-12. The EPFO had offered an interest rate of 9.5 per cent for 2010-11, thanks to its discovery of unaccounted funds.