Small scheme investment cap raised

Written by Economy Bureau | New Delhi, Aug 30 | Updated: Aug 31 2007, 06:00am hrs
The government has raised the investment limit for its flagship small savings schemethe Post Office Monthly Income Account (POMIA)to draw more investors. Individuals can now invest Rs 4.5 lakh annually, instead of Rs 3 lakh, in the post office monthly income account. Investors have shown waning interest in such schemes, considered the largest savings avenue for the salaried class.

The scheme was popular until about two years ago before the government withdrew the 10% bonus paid on maturity. The 50% rise in annual subscription limit is also applicable to joint accounts, where the cap has been raised to Rs 9 lakh from the previous Rs 6 lakh. Investments can also now be made in multiples of Rs 1,500, a significant departure from the earlier system of investing in multiples of Rs 1,000.

The interest rate from POMIA works out to just under 8%. The term of the scheme is for six years. The changes have been brought about through a notification issued by the finance ministry this month. A ministry official said on Thursday, "We hope that this will encourage people to invest in such schemes once again.

Government figures, to be released on Friday, show that investments in the NSS funds have been dropping sharply. Year-on-year rise in small savings schemes has come down by 8%, according to figures until the end of June. Even investments in PPF, though exempted from tax, have also come down by 4%. Budget estimates for savings deposits and certificates for 2007-08 have been reduced by over Rs 30,000 crore to just Rs 41,100 crore.