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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 per cent 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 Government securities, in order to improve the monetary transmission of interest rates by banks.
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