Finance minister Arun Jaitley today relaunched the popular Kisan Vikas Patra (KVP) scheme that offers to double investment in 100 months, in a bid to boost small savings and hike overall savings rate.
At the same time, the scheme will help channelise savings to genuine schemes rather than in gold or some ponzi schemes like the infamous Saradha chit fund.
Finance minister Arun Jaitley and communication minister Ravi Shankar Prasad jointly relaunched the KVP scheme which aims to boost saving and use them for long term capital requirement.
Speaking after the launch, finance minister Arun Jaitley said investment in the Kisan Vikas Patra (KVP) scheme would double in 100 months. Those who want to increase their savings and get good returns on them, would make best use of the KVP, he said.
"This will be a bearer instrument just like currency and easy to encash," Jaitley said.
The finance ministry is also reported to have done away with the requirement of Permanent Account Number (or PAN) as also investment limits in relaunched Kisan Vikas Patra (KVP) in a bid to attract maximum number of investors, including small investors.
Jaitley asked people to increase their domestic savings and invest in small savings schemes like Kisan Vikas Patras (KVPs), which, he said, could be used for undertaking various development activities in the country for the benefit of the people at large.
The finance minister said that domestic savings rate had come down below 30 per cent over the last few years over the peak rate of 36.8 per cent a few years ago, due to slower rate of economic growth.
Stressing the urgent need for raising the domestic rate of savings, the finance minister said that the people need to be careful of privately-run ponzi schemes that are both unsafe and risky even though they offer a little higher rate of interest. Often, these have resulted in huge losses of hard-earned income, he pointed out.
On the other hand, he said government schemes are not only simple and safe but also offer best possible returns to the people on their investment. Besides, he said, it would give a direction to bank and non-bank savings of the people as the scheme is open to everyone, including the farmers.
The finance minister had, during his budget presentation, announced plans to revitalise the popular small savings instrument.
Speaking on the occasion, minister for communications and IT Ravi Shankar Prasad said there is a need for a financial instrument which is safe to attract the savings of the people. The communications minister expressed happiness that the postal department and small savings are linked together for years.
He said there are more than 308 million postal account holders in the country and more than 60 small saving schemes are being operated through the postal department. There are over 1,540 postal centres in the country which are best suited for implementing the programmes relating to financial inclusion, especially in rural areas, he said, adding that there is a need to restructure the postal department into a new format to meet the changing needs of the people.
He said that initially this scheme would be operated through post offices but would be operated through banks as well later.
About the relaunched KVP scheme:
- The amount invested in Kisan Vikas Patra would get doubled in 100 months or eight years and four months. This means KVPs would be giving a return of 8.7 per cent annually. This is in line with 8.70 per cent per annum interest rate offered by public provident fund (PPF);
- Investors would not get any tax benefit for their investment in Kisan Vikas Patra unlike in the PPF;
- The Kisan Vikas Patra certificates would be available in the denominations of Rs1,000, Rs5,000, Rs10,000 and Rs50,000 and there is no upper limit on investment in KVPs;
- Kisan Vikas Patra certificates can be encashed after a lock-in period of 30 months or 2 years and 6 months. Thereafter, investors can withdraw in any block of six months;
- Kisan Vikas Patra certificates can be issued in single or joint names and can be transferred from one person to any other person/persons, multiple times;
- The certificates can be transferred from one post office to another anywhere in India and will have nomination facility;
- Kisan Vikas Patra certificates can also be pledged as security to avail loans from the banks;
- Initially, the Kisan Vikas Patra certificates will be sold through post offices, but later on they will be made available to the through designated branches of nationalised banks;
- Kisan Vikas Patra savings scheme was originally launched in 1988 with a maturity period of five and half years and the money invested doubled on maturity.
Kisan Vikas Patra was very popular among the investors and the percentage share of gross collections secured in KVP was in the range of 9 per cent to 29 per cent against the total collections received under all National Savings Schemes in the country.
Gross collections under Kisan Vikas Patra in 2010-11 were Rs21,631.16 crore, which was 9 per cent of the total gross collections during the year. Kisan Vikas Patra scheme was withdrawn in 2011.