The new interest rates will come into effect from April 1, 2012. Interest rate on the Public Provident Fund (PPF), a very popular scheme has been increased to 8.8% from 8.6%, while the Monthly Income Scheme (MIS) will attract interest rate of 8.5% as against 8.2%.

The post office savings rate remains unchanged at 4%. However, interest rates on three-year term deposits has been raised to 8.4% from 8%. Similarly, interest rate on five-year term deposit has been raised from 8.3% to 8.5%.

The five-year recurring deposits will fetch an interest of 8.4% , against 8%. The rate for senior citizens savings scheme (SCSS) has been hiked to 9.3% from 9%.

The government's decision to hike interest rates on the various Post Office Schemes are a welcome move, since inflation in the economy continues to remain at elevated levels. In fact, bank deposit rates continue to fetch better returns despite the hike in small savings and post office deposits.

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