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New Delhi, Feb. 11

THE Union Government on Friday reduced the rate of penalty for premature closure of the 6-year Post Office Monthly Income Scheme.

"With a view to rationalising the rates of penalty for premature closure of the 6-year Post Office Monthly Income Account (POMIA) Scheme, 1987 and aligning the effective yield on the deposits with other comparable savings instruments, Government has decided to modify the POMIA Rules. The penalty on premature closure of a POMIA account which at present is 3.5 per cent of the deposit on closure between one to three years from the date of opening of the account stands reduced to two per cent on premature closure (between one to three years), and one per cent on premature closure after three years, with immediate effect," an official release said here.

The Government has also withdrawn the provision of bonus on maturity of the scheme on any new account opened with effect from February 13 , currently payable at the rate of 10 per cent of the deposit. The reduction comes into effect immediately.

"While the revised penalty rates will provide relief to the depositors who need to close their accounts before three years, the nominal penalty of one per cent after three years is expected to encourage the depositors to hold their deposits till maturity. The effective return under the POMIA scheme at eight per cent per annum payable monthly will still remain higher than bank fixed deposits and Government securities of comparable maturity," the release pointed out.

The necessary amendment to the POMIA Rules, 1987 is being notified in the Gazette of India, the statement added.

(This article was published in the Business Line print edition dated February 12, 2006)
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