Kisan Vikas Patra relaunched to boost household savings rate

NEW DELHI: The government has relaunched Kisan Vikas Patra, a popular post office savings certificate, to mobilise household surplus towards financial savings away from gold.

“In the last 2-3 years, savings rate in country has declined from a record high of 36.8% to below 30% due to slowdown in the economy. It is, therefore, necessary to encourage people to save more,” Union Finance Minister Arun Jaitley said on Tuesday at the launch of the revamped Kisan Vikas Patra (KVP).It will be a freely tradable, fully secured instrument with no upper limit on the amount one can invest in it.Available in denomination of Rs 1,000, 5,000, 10,000 and 50,000, the amount invested in KVP will double in 100 months, which translates into effective annual interest rate of 8.7%. The instrument can be encashed after a lock-in period of 30 months.

Also, one does not need to provide permanent account number (PAN) to purchase this instrument, though one should provide address and identity proof.

“These would be like bearer instruments... these would be like cash.... People who kept cash should take advantage of these scheme as they would earn interest on their savings and would be able to sell them when they wish to,” Jaitley said.

An investor can pass on a KVP certificate to another through a simple endorsement. This makes it almost like cash — small savers can easily liquidate it in case of emergency. This could help wean people away from gold, the most popular saving option, particularly in the rural hinterland.

The redemption amount will be transferred to an account or paid through a cheque once the government will know the eventual beneficiary. Initially, the certificates will be sold through post offices, but soon they will be made available to the public through designated branches of nationalised banks, Jaitley said.

He said it would help poor gullible investors to channelize their savings towards trusted government scheme instead of some Ponzi schemes, where their hardearned savings disappears.The earlier avatar of the saving instrument was withdrawn in 2011.“Such saving instrument not only earns interest but help in development of the country,” the minister said.Revenues mobilised from KVP will go into funding government welfare schemes for farmers.However, savers would not get any tax benefit on their investments in KVP.Dhirendra Kumar, CEO at Value Research, said, “It is a simple savings instrument offering reasonable returns.”