The government will increase the interest rates on post office schemes like Public Provident Fund (PPF) and Monthly Income Scheme (MIS) from April 1, a move that will boost savings of small savers.

The interest rate on such schemes will be increased by 0.5 percent with effect from April 1. The interest rate on PPF will be increased from 8.2 per cent to 8.5 percent, according to a new release from the finance ministry.

The Post office term deposits of one and two years will now have an interest rate of 8.2 percent and 8.3 percent interest, respectively. The new rates will be for the entire 2012-13 fiscal year.

The National Savings Certificates (NSC) having maturity of five and 10 years will now attract 8.6 per cent and 8.9 percent interest, respectively. The post office savings deposit rate have been fixed at 4 per cent.

The interest rates on these schemes have been lower than what a saver can earn from keeping the funds in a savings account in any of the country's banks. The government is planning to change that with an overhaul of these schemes.

The small scale saving schemes offered by the post offices were not taken up by savers looking at higher interest rates offered by banks in the country. Most banks are already offering a 4 per cent interest rates on savings accounts and after the deregulation of interest rates on savings account; some banks are planning to increase the rate to as much as 6 per cent.