The Congress-led UPA Government on Tuesday announced its decision to increase interest rates on Post Office fixed deposit (FD) schemes by up to 0.2 per cent.

The interest rate on FDs for one to two years has been hiked by 0.2 per cent from 8.2 per cent to 8.4 per cent; while interest rate on FDs of three to five years has been hiked by 0.1 per cent, from 8.4 per cent to 8.4 per cent.

Five-year recurring deposits will now earn interest at a rate of 8.4 per cent, 0.1 per cent up from previous rate of 8.3 per cent.

The hikes were made just a day ahead of announcement of Lok Sabha polls.

However, the interest rate on PPF has been left untouched at 8.7 per cent.  The investment ceiling in PPF savings has also been left unchanged at Rs 1 lakh per annum.

The interest rates on National Savings Scheme (NSC) with maturity period of 5 and 10 year were left unchanged at 8.5 per cent and 8.8 per cent, respectively.  The five-year Monthly Income Scheme (MIS) will also continue to earn interest at the same rate of 8.4 per cent.  Interest rate on savings deposit has also been kept unchanged at 4 per cent.

The government decision to increase interest rates on various Post office deposit schemes, which is in proportion to the recommendations of Shyamala Gopinath Committee, are expected to make small savings schemes more attractive.