The Reserve Bank of India has maintained an "accommodative" policy stance in the face of a slowing economy. The central bank has already cut the rates by 135 basis points so far in 2019, bringing cheer to the borrowers. But the resultant downward revision in deposit and small savings rate spells bad news for the small investors, as banks are usually quick to reduce their fixed deposit (FD) rates. Post office small savings schemes are handy investment tools in such a scenario as they provide a decent rate of interest, say wealth planners. Moreover, these saving schemes are low on risk and are designed for every segment of society, from the rich to the poor and so on.
Here is a primer on the nine small savings schemes offered at designated post office branches:
|Post Office Saving Scheme||Interest Rate||Minimum Amount Required For Opening Account|
|Savings Account||4%||Rs 20|
|Recurring Deposit Account||7.20%||Rs 10/month|
|Time Deposit Account||6.9-7.7%||Rs 100|
|Monthly Income Account||7.60%||Rs 100|
|Senior Citizens Savings Scheme||8.60%||Rs 1,000|
|Public Provident Fund||7.90%||Rs 500|
|National Savings Certificates||7.90%||Rs 100|
|Kisan Vikas Patra||7.60%||Rs 1,000|
|Sukanya Samriddhi Account||8.40%||Rs 250|
National Savings Certificate (NSC)
The National Savings Certificate (NSC) has a tenure of five years. The interest in this scheme is compounded annually, but is payable only at maturity. The minimum investment is Rs 100 and subsequent investments are in multiples of Rs 100, without any upper limit. For the NSC certificates purchased between July and September 2019, the interest rate is 7.9 per cent. This means that Rs 100 invested in the NSC today will have a maturity value of Rs 146.25 at the end of five years.
National Savings Recurring Deposit Account
The National Savings Recurring Deposit Account is akin to a savings account with a bank. A minimum amount of Rs 10 has to be paid per month, with multiples of Rs 5. There is no maximum limit either on the invested amount or on the number of accounts that can be held under this scheme. This scheme has a tenure of five years and this is extendable for another five years. The interest rate of this scheme is 7.2 per cent per annum (quarterly compounded).
Public Provident Fund Account (PPF)
The Public Provident Fund Account (PPF) has tenure of 15 years and can be extended within one year of maturity for an additional five years. On the flip side, premature closure is not allowed before 15 years. The minimum investment is Rs 500 and the maximum is Rs 1,50,000 in a given financial year, with a provision of making the investments either in lump sum or in 12 instalments. The PPF interest rates are 7.9 per cent per annum compounded annually.
Kisan Vikas Patra (KVP)
The Kisan Vikas Patra (KVP) is meant to encourage a long-term financial discipline. A one-time investment doubles in 9 years and 10 months (118 months), with the interest getting accumulated and being paid along with principal on maturity. The minimum investment under this scheme is Rs. 1,000 and in multiples of Rs 1,000 thereafter, without any upper limit. And the rate of interest currently stands at 7.6 per cent, compounded annually.
National Savings Time Deposit Account (TD)
The National Savings Time Deposit Account (TD) is available for tenures of one, two, three and five years. The minimum investment in a TD account is Rs 100 and in multiples of Rs 100, without any upper limit. The interest is payable annually, but calculated on a quarterly basis. The interest rate is 6.9 per cent in one, two and three years, and 7.7 per cent in the five-year tenure.
National Savings Monthly Income Account (MIS)
The National Savings Monthly Income Account (MIS) is ideal for retired people and those seeking monthly income as it provides a regular stream of income. The scheme has a lock-in period of five years. The investments can be made in multiples of Rs 100, with the maximum limit going up to Rs 4.5 lakh individually or Rs 9 lakh jointly. The scheme is flexible; it allows depositors to operate more than one account, subject to maximum permissible ceiling, and permits a single account to be converted into a joint account and vice versa. The scheme currently carries an interest rate of 7.6 per cent per annum payable monthly.
Senior Citizens Savings Scheme (SCSS)
The Senior Citizens Savings Scheme (SCSS) caters to individuals aged over 60 years. Individuals aged 55 years or more but less than 60 years who have opted for the Voluntary Retirement Scheme (VRS) or attained superannuation can also open an account, provided it is opened within one month of receiving the retirement benefits and investment amount does not exceed that of the retirement benefits. The deposit matures after five years from the date of account opening, but can be extended by an additional three years. A single deposit can be made in multiples of Rs 1,000, subject to a maximum limit of Rs 15 lakh. The best part of this scheme is that it offers the highest interest rate, currently at 8.6 per cent, among existing small savings schemes.
Sukanya Samriddhi Account
The Sukanya Samriddhi Account scheme caters focused on the girl child, with the purpose of building a fund for her education and marriage expenses. The girl child should be less than 10 years at the time of account opening and the account is operational till the girl attains 21 years of age. Partial withdrawal, maximum up to 50 per cent of balance standing at the end of the preceding financial year can be taken after account holder's attaining age of 18 years. The minimum investment is Rs 250 and this can go up to a maximum limit of Rs 1,50,000 in a financial year. The rate of interest currently stands at 8.4 per cent per annum and is calculated on a yearly basis.
Post Office Savings Account
The Post Office Savings Account is a fixed interest rate scheme meant for the benefit of individual investors who wish to earn a fixed rate of interest. It offers an interest rate of 4.0 per cent per annum. A Post Office Savings Account can be opened for as little as Rs 20. The minimum balance to be maintained in a non-cheque facility account is Rs 50 and a cheque facility can be availed with a minimum balance of Rs 500.