Here's everything you need to know about the popular and safe small-savings instrument that doubles the invested money after a fixed term
28-Dec-2016 •Research Desk
The Kisan Vikas Patra (KVP) is a popular and safe small-savings instrument that doubles the invested money in 9 years and 3 months. This scheme is backed by the government. After withdrawing it, the government relaunched it on November 18, 2014. The money raised through the KVP is used in the welfare schemes for farmers.
The capital in the KVP is completely protected as the scheme is backed by the Government of India.
The KVP is not inflation protected. This means that whenever inflation is above the current guaranteed interest rate, the deposit earns no real returns. However, when the inflation rate is under 8.7 per cent, the KVP can manage to give a positive real rate of return.
The interest rate in the KVP is guaranteed. Currently, it is 7.8 per cent compounded yearly. The KVP rates will now be notified every quarter as per the prevailing government-bond rates. However, once you have made an investment, the rate will remain unchanged for you throughout the tenure.
The KVP is liquid. Liquidity is offered in the form of loans and withdrawals subject to conditions. The minimum lock-in period is 30 months, after which one can encash it. Also, it can be transferred from one person to another any number of times.
As the KVP is backed by the Government of India, it does not require any commercial rating.
Premature withdrawal is permitted at a cost for investors.
For the existing investors, there is no tax benefit on the deposit or the interest that the KVP earns. There is no tax deducted at source.
Where to Buy
One can buy the KVP at any head post office, general post office, any designated nationalised bank or State Bank of India and its associate banks.
How to Buy
Points to Remember