The interest rate on popular savings tool, public provident fund (PPF) has been kept unchanged at 8.7 per cent.The decision to hike interest rates, which is in line with the recommendations of Shyamala Gopinath Committee, will make small savings schemes more attractive and returns would be in sync with market rates.

In line with the committee's suggestions, the government also decided to align rate of interest on small savings schemes with G-Sec rates of similar maturity, with a spread of 25 basis points (bps) with two exceptions.

According to the committee recommendations, the interest rate is revised every financial year and notified before April 1.

The revisions announced on Tuesday were -

>> Interest rate on fixed deposits for one and two years has been increased to 8.4 per cent from the present 8.2 per cent
>> Fixed deposits of three and five years will earn 0.1 per cent higher rate at 8.4 per cent and 8.5 per cent, respectively.
>> Interest rate on five-year recurring deposits will be 8.4 per cent, up from 8.3 per cent.
>> Annual investment ceiling in PPF savings is unchanged at Rs one lakh.
>> Rate on National Savings Scheme (NSC) with 5 and 10 year maturities also remain unchanged at 8.5 per cent and 8.8 per cent, respectively.
>> Rate on five-year Monthly Income Scheme (MIS) remains the same at 8.4 per cent.
>> Savings deposit rates are kept unchanged at 4 per cent.

The finance ministry's decision came on the eve of the announcement of general elections schedule by the Election Commission. The model code of conduct comes into play after Lok Sabha elections announcement.

PTI