Interest rates on small savings schemes such as NSC (National Savings Certificate) and PPF (Public Provident Fund) has been raised by up to 0.4% for the October-December quarter.
The finance ministry announces interest rates for small savings schemes on a quarterly basis.
The government announced has been made in line with rising deposit rates set forth by banks.
With this hike, the returns from schemes such as PPF, KVP, NSC, Sukanya Samriddhi, Senior Citizens' Schemes are expected to make a decent gain.
Public Provident Fund (PPF) and National Savings Certificate (NSC) will fetch an annual interest rate of 8% as compared to existing 7.6%.
Kisan Vikas Patra (KVP) is expected to yield 7.7% and mature in 112 months as against 118 months in the previous quarter.
The interest rate for five-year term deposits, recurring deposits, Senior Citizens Savings Scheme will also get a hike.
The new interest rates on term deposits, recurring deposits, and senior citizens savings scheme has been fixed at 7.8, 7.3 and 8.7% respectively.
The interest on the senior citizens' scheme is paid quarterly.
Girl child savings scheme Sukanya Samriddhi accounts will earn higher interest rate of 8.5%, 0.4% more then the current rate.
Term deposits of one-three years will fetch a 0.3% higher interest rate.
Although interest rates on major savings schemes has been raised, the interest on savings deposits is retained at 4% annually.
While announcing the quarterly setting of interest rates in 2016, the finance ministry had said that rates of small savings schemes would be linked to government bond yields.
The move is expected to see banks lowering their deposit rates in line with the small savings rate offered by the government.