12 November 2011

Review of National Small Savings Fund (NSSF) by Ministry of Finance on 11-11-2011


Ministry of Finance, Department of Economic Affairs (Budget Division), New Delhi,  vide its Office Memorandum dated the 11th November, 2011 has taken various decision on various parameters of operation of Small Saving Schemes operated by Post Office and other departments.

Some of decision effecting small saving investors are as under

  1. Kisan Vikas Patras (KVPs) will be discontinued
  2. The maturity period for Monthly Income Scheme (MIS) and National Savings Certificate (NSC) will be reduced from 6 years to 5 years.
  3. A new NSC instrument, with maturity period of 10 years, would be introduced.
  4. The annual ceiling on investment under Public Provident Fund (PPF) Scheme will be increased from Rs. 70,000 to Rs. 1 lakh.
  5. Interest on loans obtained from PPF will be increased to 2% p.a. from existing 1% p.a.
  6. 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 have been increased as under:

  1. The rate of interest paid under Post Office Savings Account (POSA) will be increased from 3.5% to 4% p.a.
  2. 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.
  3. 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 1 st April of that year.
  4. Assuming the date of implementation of the recommendations of the Committee as 1 st 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





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

Agents Commission have also been reduced or discontinued:

  1. Payment of commission on PPF schemes (1%) and Senior Citizens Savings Scheme (0.5%) will be discontinued.
  2. Agency commission under all other schemes (except MPKBY agents) will be reduced from existing 1% to 0.5%.
  3. Commission at existing rate of 4% will continue for Mahila Pradhan Kshetriya Bachat Yojana (MPKBY) agents.
  4. Incentives, if any, paid by the State/UT Governments will be reduced from the commission paid by the Central Government.

Dates of effecting the changes are yet to be notified.