Kisan Vikas Patra (KVP), a small savings scheme, now offers a higher rate of interest than what it used to offer before.
The government has announced hikes in interest rates across small savings schemes such as Kisan Vikas Patra (KVP) by up to 0.4 per cent.
From October 1, savings scheme KVP will offer an annual return of 7.7 per cent, according to a statement by the Ministry of Finance.
The maturity period of KVPs has also been shortened.
Currently, interest rates on small savings schemes are revised on a quarterly basis.
The new interest rate of 7.7 per cent, as against the existing rate of 7.3 per cent, will be applicable for the third quarter of this fiscal, which ends on December 31, 2018.1.
Rate of interest: Investment in the Kisan Vikas Patra scheme will fetch an annual return of 7.7 per cent.
The interest rate will be compounded annually.2.
Maturity period: The government has also shortened the maturity period of the KVP scheme.
Instead of the existing maturity period of 118 months (nine years and 10 months), a revised term of 112 months (nine years and four months), according to the government.3.
What does the change in maturity period mean Deposit in a Kisan Vikas Patra account doubles on completion of the maturity period.
The changed term will mean that the amount invested in the scheme will take six months lesser than the existing maturity period.4.
Minimum investment required: There were no changes announced in other features of the KVP scheme, such as compounding frequency.5.
Compounding frequency: The interest earned on deposit in a KVP account is compounded annually.
In other words, the interest on the principal amount in the first year, and the principal amount along with the accumulated interest in subsequent years.KVP certificates can be purchased at a post office.
India Post has a network of more than 1.5 lakh post offices across the country.
The certificates can be transferred from one individual to another, and from one post office branch to another, according to India Post's website - indiapost.gov.in.
The Kisan Vikas Patra scheme has a minimum lock-in period of two-and-a-half years, which means the invested amount can be liquidated after this period.