Kisan Vikas Patra | Details, Documents Needed | Sarkari Niti

Posted by aliyas on August 7th, 2017

Kisan Vikas Patra | Sarkari niti

To increase domestic savings, which fell to 30% of gross domestic product, or GDP, in 2012-13 from the peak of 36.8% in 2008, the government has re-launched Kisan Vikas Patra, or KVP, a small savings scheme it had discontinued in 2011.

The re-launched KVP offers 8.67% interest and will double the principal during its maturity period of 100 months.

Though the investment matures in eight years and four months, one can redeem it after the lock-in period of two years and six months and thereafter in a block of six months by getting a pre-determined maturity value.

KVP certificates will be in denomination of Rs 1,000, Rs 5,000, Rs 10,000 and Rs 50,000. There is no cap on the amount that can be invested.

Initially, the certificates will be sold through post offices. Later, they will also be available at designated branches of public sector banks.

The certificates can be bought singly or jointly and can be transferred to any person/persons multiple times. The facility of transfer from one post office to another anywhere in India is also available. One can also avail of a loan against the certificates.

Invest in debt mutual fund: According to Suresh Sadagopan, founder of Ladder7 Financial Advisories - a specialist financial planning firm, the latest cut in small savings rate is a very minute adjustment. But the options for savers in such a scenario are limited. "We will have to learn to live in this scenario," he says.

His advise is to consider investing in debt mutual funds. "FDs and other small saving schemes are treated as income from taxation point of view and savers will have to pay complete tax on it. In debt mutual fund schemes, investing in it for three years or more is considered as long-term capital gains. Effective tax incidents will be three to four percent then." The debt funds become attractive from a taxation point of view.

Look for equities and real estate: Bhargavi Sridharan, founder, Finmitra (www.finmitra.com), an online investment services firm, feels that rates will fall further as the government wants to boost investments. Many infra projects are in limbo and 80 percent of them are dependent on debt. A small reduction in rates changes the economics, said Sridharan. She thinks that with the government being pro business, pro economy and pro growth, it is bound to encourage this climate by cutting interests.

Kisan Vikas Patra | Sarkari niti

Sridharan suggests that with equity markets on a strong footing over the past four to six months, investment in equity market-related instruments could be a better option in a falling interest rate scenario.

Who should invest in Kisan Vikas Patra?

These KVP’s are designed for low risk taking individuals who are looking for safety of their investment and aiming for high interest rates. However, individuals who are looking for tax savings or willing to park money for the long term have better alternatives like National Saving Certificates, Public Provident Fund and tax saving bank FD Schemes. If you are looking for saving money, you can simply opt for bank Fixed deposits which offers 9% interest rates. Many banks even offer higher interest rates.

Concluding remarks: Kisan Vikas Patra’s aims to double your money in 100 months along with providing higher liquidity. However, several negative factors make KVP un-attractive. These are most suitable for rural investors who might not have a bank account, PAN card, etc. who can simply invest in these schemes and get high returns.