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Showing posts with label PPF. Show all posts
Showing posts with label PPF. Show all posts

Thursday, 23 June 2016

09:08

Centre allows premature closure of PPF account

Centre allows premature closure of PPF account

SURABHI PRASAD NEW DELHI, JUNE 20 BUSINESSLINE

Deposit scheme can be closed early for higher education, medical expense In a significant move, the Finance Ministry has allowed subscribers of the
Public Provident Fund (PPF) to prematurely close their accounts after a minimum of five years for reasons such as higher education or expenditure
towards medical treatment.
The Finance Ministry has also retained the interest rates on all small saving products for the second quarter of the fiscal.
On PPF, the Ministry, in a notification, said, the subscribers can close the account if “the amount is required for serious ailments or life threatening 
diseases of the accountholder, spouse, dependent children or parents…or the amount is needed for higher education of the account holder or the minor account holder.” It further added that supporting documents and bills will have to be produced. But such subscribers will get one per cent interest less than other accounts. 
For instance, instead of an interest of the current 8.1 per cent, a subscriber who chooses to prematurely close his PPF account would earn interest of 7.1
per cent on the deposit. At present, withdrawals from the PPF account are allowed after seven years of opening the account. But it is only up to 50 percent of the total deposit till the end of the fourth year. The account matures after 15 years, when full withdrawal is permitted. 

Interest rate

“On the basis of the decision of the government, interest rates for small savings schemes are to be notified on quarterly basis,” said the Ministry on Monday.
The return on PPF is maintained at 8.1 per cent in the July-September quarter, the same as that in the quarter ending June 30, 2016.

Similarly, the interest rate on the Kisan Vikas Patra has been maintained at 7.8 per cent for a maturity of 110 months, while the return on the five-year National Savings Certificate is 8.1 per cent. The government has moved to a quarterly reset of interest rates on small savings beginning this fiscal. Under the new mechanism, returns on these products are aligned with the market rates of the relevant


Source:AIBEA 
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Monday, 20 June 2016

20:43

Quarterly Revision of Interest Rates for Small Savings Schemes

Quarterly Revision of Interest Rates for Small Savings Schemes 
On the basis of the decision of the Government, interest rates for small savings schemes are to be notified on quarterly basis. Accordingly, the rates of interest on various small savings schemes for the second quarter of financial year 2016-17, on the basis of the interest compounding/payment built-in in the schemes, shall be as under:

Instrument
Rate of interest w.e.f. 01.04.2016 to 30.6.2016
Rate of interest w.e.f. 01.07.2016 to 30.9.2016
Compounding frequency
Savings Deposit
4.0
4.0
Annual
1 Year Time Deposit
7.1
7.1
Quarterly
2 Year Time Deposit
7.2
7.2
Quarterly
3 Year Time Deposit
7.4
7.4
Quarterly
5 Year Time Deposit
7.9
7.9
Quarterly
5 Year Recurring Deposit
7.4
7.4
Quarterly
5 Year Senior Citizens Savings Scheme
8.6
8.6
Quarterly and paid
5 year Monthly Income Account Scheme
7.8
7.8
Monthly and paid
5 Year National Savings Certificate 
8.1
8.1
Annual
Public Provident Fund Scheme 
8.1
8.1
Annual
KisanVikasPatra
7.8 (will mature in 110 months)
7.8 (will mature in 110 months)
Annual
SukanyaSamriddhi Account Scheme
8.6
8.6
Annual


Source:PIBNEWS



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Monday, 21 March 2016

08:55

Higher flow of savings into the capital markets via mutual funds and Others-India Banking Experts

Higher flow of savings into the capital markets via mutual funds and Others-India Banking Experts

CHENNAI: With their huge bad loans and provisioning for the same affecting their profitability, India's banks may not reduce their lending rates in the near future following the slashing of interest rates on the small savings schemes, say experts.

They also predict that there will be a higher flow of savings into the capital markets via mutual funds and others.

The BJP-led central government, much to the chagrin of the common man, cut the interest rates on various small savings schemes and public provident fund (PPF), citing banks' grievance that they were not able to reduce their lending rates as interest on deposits were on the high side.

The interest rate was cut from 8.7 percent to 8.1 percent on PPF, from 8.5 percent to 8.1 percent on National Savings Certificate, from 8.7 percent to 7.8 percent for Kisan Vikas Patra and from 8.4 percent to 7.4 percent on five-year recurring deposit. Even the girl child scheme Sukanya Samridhhi Account (SSA) was not spared, with a cut from 9.2 percent to 8.6 percent.

Similarly, rate cut has been announced on various term deposits. The banks had been saying that they are forced to pay higher interest rate on their deposits as they have to compete with the small savings schemes enjoying tax benefits.

"This decision was expected as the government had indicated a move in this direction earlier. We hope that with this review of the small savings interest rates, banks would considerably hasten a re-look at their own lending rates and bring these down for both consumers and investors," business chamber FICCI's secretary general A. Didar Singh said in a statement.

"Banks have been pointing out the interest rates on small savings instruments as one of the factors that have deterred them from reducing their interest rates. With the government now having made this move, banks must take an immediate cue and support the incipient economic recovery," he added.

The slashing of interest rates on PPF and other small savings schemes may not result in banks cutting down their lending rates immediately given their own problems.

"In the near future the banks may not reduce their lending rates but will use this - interest cut on small savings schemes - to mobilise more deposits. If they have to kick start the economic growth, they have to mobilise deposits for lending," Saswata Guha, director, Financial Institutions at global credit rating agency Fitch Ratings, told IANS.

He also agreed that the banks have to contend with their huge bad loans and hence lending rate cuts may not happen soon.

"They don't have the wherewithal to reduce their lending rates now," Guha said.

"The rate cut on small savings schemes is not all that bad and savers will now put some part of their money in the capital markets, mutual funds and others that give higher returns," Bhuvana Shreeram of Mumbai-based Financial Freedom Golden Practices told IANS.

"PPF rates have been as high as 12 percent for the first 15 years and have come down to average around 8.5 percent in the last 15 years. But look at the timing of this fall. In 2001, double digit PPF rates became history. And what happened to India's GDP and more importantly per capita income of Indians is important to note," Shreeram said.


According to her, when GDP and per capita income goes up, people have more money to spend, and the government will increase its spending thereby creating more jobs and more capital investments will come into the country which again means more jobs.

"Historically, through the good and bad times of the last 35 years, capital markets have given 17 percent average annual returns which is 2.5 times risk free rate," Shreeram said.

Source:ET 
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Wednesday, 13 January 2016

05:23

To Increase Savings Rate in the Economy - Different Views and Suggestions

To Increase Savings Rate in the Economy - Different Views and Suggestions

NewDelhi:The Reserve Bank of India and financial sector bosses on Tuesday made a strong pitch for higher incentives for savings, including raising the tax benefit for investing money in fixed deposits and public provident fund (PPF) to Rs 2.5 lakh from Rs 1.5 lakh currently.

Sources said RBI deputy governor Urjit Patel kicked off the customary pre-budget consultation with finance minister Arun Jaitley with a suggestion to "significantly" increase savings, which was followed by demands to raise the cap by bankers as well as insurance companies.

"We need to increase the savings rate in the economy and take it back to 35% of GDP. For that, enhancing section 80C (of Income Tax Act) to Rs 2.5-3 lakh will be helpful," Yes Bank MD & CEO Rana Kapoor said.

Bankers said the ceiling should be enhanced, especially at a time when real interest rates (net of inflation) had turned positive after several years.

Taking a cue from RBI's Patel, Life Insurance Corporation chairman SK Roy suggested that the government could impose sub-limits within the section 80C exemptions, said a source present in the meeting.

Under the current rules, the government allows deduction of up to Rs 1.5 lakh for investment in various savings instruments such as fixed deposits with a tenure of five years or more, provident fund, PPF and life insurance schemes.

The suggestion came amid recommendations from some private sector bankers that the government should lower the quantum of tax-free bonds that are issued, if not completed do away with them. They argued that the bonds were being bought by high net-worth individuals such as film stars and were not benefiting the common man. The bonds issued by certain institutions compete with bank deposits.

Bankers also demanded tax should be deducted on interest of above Rs 50,000 as against the current Rs 10,000.

In addition, Kapoor said, there were suggestions on making the gold monetization scheme more attractive. A finance ministry statement said bankers also suggested that interest rate on small savings schemes such as PPF should be rationalized and linked to the yield on five-year government securities.

Banks as well as the RBI have been demanding the change to ensure that investors don't park funds in PPF and National Savings Scheme, which offer higher rates, and instead opt for fixed deposits with banks. Bankers say higher deposit rates don't allow them to lower lending rates, something that the government has been seeking.

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