Post Office provides some of the best interest rates for small depositors looking for guaranteed returns in the long term. While schemes like Post Office Public Provident Fund (PPF), Sukanya Samriddhi Yojana and Senior Citizens Savings Scheme (SCSS) provide over 7 per cent interest, another popular scheme – Kisan Vikas Patra (KVP) is currently providing 6.9% interest compounded annually.
KVP is an interesting scheme. At the current rate of interest, it can double your deposits in 10 years and 4 months (124 months). If you start a KVP deposit of Rs 1 lakh today then it will grow to Rs 2 lakhs in the next 124 months. The current interest rate of 6.9% on KVP deposits is higher than many bank fixed deposit schemes.
Let’s take a look at some of the key features of this small savings scheme:
- Minimum and Maximum Deposit: You can deposit a minimum of Rs 1000 and thereafter in multiples of Rs 100 in KVP. There is no maximum investment limit under the scheme. You can open any number of KVP accounts.
- Maturity: The deposit under KVP matures as per the period prescribed by the Ministry of Finance from time to time. Currently, if you make a deposit today, it will mature after 124 months. Premature withdrawal is, however, allowed under specific circumstances.
- Pledging: According to the Post Office website, KVP can be pledged or transferred as security by submitting the prescribed application form at the concerned Post Office supported by an acceptance letter from the pledgee.
- Transfer: KVP account can be transferred from one person to another in case of death of account holder to nominee/legal heirs; On the death of account holder to the joint holder(s); on order by the court and on pledging of account to the specified authority.
Should you invest in small savings schemes?
Small savings schemes like KVP offered by Post Office provide guaranteed returns and peace of mind to investors who can’t afford to lose their hard-earned money. Additionally, many of the post office schemes like PPF, SSY and SCSS provide tax benefits and higher interest rates, compared to term deposit interest rates offered by leading public and private sector banks.
However, investors having a good risk appetite can invest in market-oriented schemes like mutual funds and stocks, which may offer better returns and may double the money faster than post office schemes. But before making an investment in mutual funds or stocks, you should do thorough research and also take advice from a professional financial advisor.