Returns on PPF and Post Office Accounts may rise: How does this affect your money?



Is this really good news for millions of investors who have invested in PPF and post office account? Let us find out.

A committee set by the finance ministry had recently announced the PPF limit be increased to 1 lakh for the earlier capped Rs 70,000 without a change in the interest rate. RBI's deputy governor has also stated that the returns must be with par to the government securities.

However, the actual question is that how many investors really look on to invest their money in PPF. So if the common man is not too excited to invest their money in PPF or Post Office Account is that increase in return really good news? It's definitely good news for people who invest their many in there. One major restricting factor as far as PPF is concerned is that the money is not liquid, because of five years time lock. With such a high inflation rate does this saving add to the advantage?

The Government of India is aiming to increase the interest rate from 8% to 8.5%. There definitely is a positive side to PPF. A person can invest any amount ranging from Rs 500 - Rs 70,000 in a year and according to the new policy Up to one lakh. This money is regarded as tax free and a loan up to 20-25% can be obtained on the credited amount. PPF is a good saving tool which may come in handy during retirement. This increase in interest rate will encourage people to invest in PPF deposits which would act as savings when they retire.

Inflation is continuously rising and the worst part is that it is rising at a high rate. The rate of inflation rose from 8.66% in March 2011 from 8.98% in April 2011 and further to 9.01% in May 2011. The only way to fight inflation and encourage people to save is to provide them with a higher interest rate. According to economists it is witnessed that in the coming years the inflation does not look like it would come anything below 8%. Therefore it's still a question whether the rise in returns for such instrument will tempt investors to invest in them. This is sure that these moves certainly have brought smiles to many people.



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