Small Savings Schemes Revamped: PPF CEILING RAISED TO RS. 1 LAKH, INTEREST RAISED TO 8.60%

11-11-11 has turned out to be a great day for investors in small savings schemes.

In an effort to update and boost small savings schemes, the Union Government on Friday announced that both the ceiling and the interest rate for Public Provident Fund investments have been increased as well as make some changes in other small savings schemes. Let's see what these changes are:



PPF
The ceiling is now Rs. 1 lakh p.a. as against earlier limit of Rs. 70,000 p.a.

The interest rate is revised to 8.60% p.a. from 8% p.a.

This will remain tax free on maturity, continuing with the Exempt-Exempt-Exempt model for PPF. So this is the equivalent of a very attractive pre-tax interest rate of 12.28% (considering a 30% tax bracket).



KVP
The small savings scheme Kisan Vikas Patra has been discontinued.



Post Office Savings Accounts
Post Office Savings accounts will now earn 4% instead of 3.50%.



Monthly Income Scheme & NSC

In addition, the NSC has been revamped. The maturity for both MIS and NSC has been reduced from 6 years to 5 years, and the interest on these schemes has been increased from the earlier 8% to 8.20% and 8.40% respectively.

There will also be a 10 Year NSC available offering 8.70% interest.
The 5% bonus given on maturity of the MIS has however been scrapped.
The rationale behind the move...
The Finance Ministry has said "The rate of interest on small savings schemes will be aligned with the G-Sec rates of similar maturity, with a spread of 25bps, with 2 exceptions. The spread on 10-yr NSC will be 50bps and the spread on Senior Citizens Savings Scheme will be 100bps. The interest rates for every financial year will be notified before April 01."
The decision to increase interest rates on small savings schemes has stemmed from the volatility of cash flows into and out of small savings schemes, when compared with corresponding safe rates of return available in the market.
Currently, we are in a period of very high interest rates, which means the market has plenty of attractive investment opportunities available, including by way of Bank and Corporate FDs. As these rates (post tax) are in many cases higher than the rates offered by small savings schemes of comparable tenure, these schemes have seen significant outflows, reducing the amount of money in the Government's coffers.
To staunch the outflows and also to bring rates in line with the market, the Government has made this move.
This will make small savings schemes more attractive to investors. Returns will be in sync with market returns.

When will it take effect?

The date is pegged at Dec 01, 2011.

A wonderful Article on Pakistani Foreign Minister Hina Rabbani Khar by Masood Hasan

Here is an article on the gorgeous Pak FM, written by a Pak journalist.

Pak perceptions are different from Indian perceptions, where most of the press and the TV had gone ga-ga.

Masood Hasan. Sun, 31 Jul 11

HRK – Hina Rabbani Khar is drop dead gorgeous. Her three day fashion onslaught has left the Indians gasping for breath and ambulances howling all over the countryside. Here we are crooning with delight – the men exchanging high fives, the women – the sensible ones that is, shaking their heads slowly from side to side. Is HRK the nuclear device that we promised we’d explode over the Indian capital? Have we scored a major diplomatic victory over arch enemy India? Is HRK going to lead the country armed with nothing but a Hermes bag and change global policies with a snap of her diamond encrusted fingers? As the euphoria subsides and her Birkin bag is safely stowed away along with her undoubtedly large Hermes collection, we, the ordinary riff-raff of this despondently poor country need to take a good long look at the events of last week. If we don’t, rest assured the lollypops in Islamabad certainly won’t. Introspection is not as fashionable as Roberto Cavalli shades.

Let’s get one thing straight. One dresses for the occasion. Anyone recall Angelina Jolie’s ‘designer’ outfits on her many visits to the Afghan camps? There is a time and place for all things. I think HRK didn’t quite get that right. She has many things going for her but maturity and a sense of balance seem to be virtues that Pakistan’s new foreign minister does not care about much.

It is amazing that the old hands at Hotel Scherezade that masquerades as Pakistan’s foreign office thought little of actually ‘briefing’ Lady Bond before she flew in her special aircraft to New Delhi. (No PIA please. That’s for the plebs). Did anyone tell her what precisely was her mission, if any on her maiden voyage to India? I doubt it. While she must have spent an enormous amount of time choosing her wardrobe and accessories – she has a talent for accessories as a gushing designer confided last week, one wishes there were men or women who could have briefed her on how she must conduct herself – but this is unlikely in a country where ‘yes sir, yes sir, three bags full’, is the most successful strategy.

As it is the ‘success’ of her trip is best summed up in the joint communiqué glued eternally together with Fevikol, the wonder Indian adhesive, that both sides will stick to their points of view. As before one might add. Sure we can talk till the cows come home but that much has more or less been there almost always, so those crooning about a ‘great diplomatic victory’, need a knock on the head administered by Mr Ijaz Butt. Having demolished cricket, he now has the world’s largest bat collection.

India may be many things to many people but even the most vitriolic Indian-haters grudgingly accept that our two countries are now worlds apart – poles apart will no longer do justice to the real on-ground situation. The Indians are suave diplomats and they manage – with all its warts, the world’s largest democracy. Whether this is for public consumption or genuinely felt, there is a strong current of simplicity that runs across India and does not require 3-D glasses to see. All of us who have travelled to India have been surprised by their casual attitude to attire given most days. We who are so class and caste conscious on the other hand must display all the banal outer vestments since we value these far more than any principles.

The Indians thus dress so simply that you can mistake them for minions whereas they may be billionaires. They go to work in loose sandals and creased trousers or faded jeans but sit and make strategic decisions that run into billions of dollars and have the power to change the direction of their huge country. Simplicity is not a put on like our constant bowing and scraping to the Maker without any meaning or sincerity. Our rulers and high stake rollers live in mansions of glory. Indians richer than their counterparts here live in modest homes. Retired generals there live in small houses or high rise flats whereas our medal laden over-fed blobs lord it over topping all records of ostentation. Time and again you are flattened by this simplicity on display in India – if it’s a put on, my God they should give a Lifetime Achievement Award to all the affluent and influential people who live there.

It is in this context that one finds HRK’s jaunt into India nauseating and in gross bad taste. Did she go to a tense foreign ministers’ meeting or launch a fashion show? Did she read up on India? She represents an impoverished country, now permanently and shamelessly begging day and night for sustenance, for alms, for mercy to keep Ms Khar and her ilk in clover. She is part of one of the most disastrous governments it has been our misfortune to have – incompetent, brazen, cruel and corrupt. When it is knocked out sooner or later, no one will shed tears for the fallen leaders who have given loot and plunder a new dimension adding to that great robbery repertoire fine tuned to an art by their predecessors.

HRK’s government boasts of a two percent growth rate against India’s nine percent, has no power or gas and soon will have no water. It groans under loans, yet gives walloping funding to keep the ‘khakis’ happy, depriving millions of men, women and children such basics as health, education and sanctity of life yet live like kings. Its representatives like HRK and 24 other ministers in 2010 paid no income tax because they were poor. HRK coughed up Rs 7,500 agricultural tax and declared that she couldn’t even afford a car! I suppose BMWs and Mercs must fall under the ‘donkey’ category.

She should have perhaps studied tapes on Sonia Gandhi who is always in cotton saris, her hair pulled back and with hardly any make up. You would not catch Sonia dead with a garish and ridiculously priced, diamond-laden wrist watch (Arab style) or pricey south sea pearls and $ 900 Jimmy Choo shoes, but then that’s Sonia and this is Hina – chalk and cheese with Devonshire in between. When the PM who spends more time on his clothes than on the pressing needs of his wretched country went to Paris and called upon the French president, he ensured that he was all trussed up in a reportedly $ 10,000 suit. Lady Bond, although it was evening had her designer shades perched on top of her pretty head. Babes out partying might do so for a lark but FMs with feudal blood coursing through their veins should avoid such nonsense. What a fantastic thing it would have been had she chosen to dress most simply, travelled by her national airline and told the Indians that she was here, in all humility and sincerity to move on and build bridges for the generations ahead. She should have said my country is struggling – with terrorism, suicide bombers, law and order, the Afghan problem, a poor economy and so on but that we would prevail if there is peace.

But then this is the stuff dreams are made of. In real life nothing like that happens – not here and we lost yet another opportunity to tell the world we are not shallow buffoons and idiots. Pakistanis are blaming the Indian media and Ms Khar left Islamabad in a huff, but when you set yourself up as she did, what is the media going to make of that? The ‘fash frat’ as one Indian newspaper said, had a field day and we had the customary egg on our face.

Gamesa Press Conf in Mumbai - Mar9, 2011