New Delhi, Jun 8 (IANS): A committee headed by Reserve Bank of India (RBI) Deputy Governor Shyamala Gopinath has recommended that the interest rates on post office savings accounts be increased to four percent from the existing 3.5 percent in a bid to promote small savings.

The committee submitted its report to Finance Minister Pranab Mukherjee Tuesday, and has recommended hiking the post office savings account interest rate from 3.5 percent to four percent, benchmarking interest rates on other small savings schemes, the finance ministry said in a statement.

The committee, set up for comprehensive review of the National Small Savings Fund, also recommended that the mandatory component of investment of net small savings collections in state government securities should be reduced from 80 percent to 50 percent.

"The balance amount could either be invested in central government securities or could be on-lent to other states on basis of requirement, or could be lent for financing infrastructure projects requiring long-term finance," it said.