Kisan Vikas Patra

Introduction

In 1988, India Post, under the Ministry of Finance, launched the Kisan Vikas Patra (KVP), a small savings certificate scheme, to encourage long-term investments and savings among the citizens. Initially, this scheme was introduced for farmers; however, it is now available for all. It proved to be a success in the early years of its launch, but after a committee, which was appointed by the Government of India under the leadership of Ms. Shyamala Gopinath, recommended that Kisan Vikas Patra (KVP) could be misused for money laundering purposes, the scheme was closed in 2011.

Following that, in 2014, the government reintroduced the erstwhile popular small savings scheme with amendments such as compulsory PAN Card proof for investments >Rs. 50,000 (~US$ 600) and income proof (salary slips, bank statements, ITR documents, etc.) for deposits >Rs. 10 lakh (~US$ 12,000) to curb any mismanagement. The scheme’s maturity period is 115 months (i.e. 9 years and 7 months), with a minimum investment of Rs. 1,000 (~US$ 12) and no upper limit.

Need for KVP

To augment the country’s domestic savings—that shrunk to 30% of the gross domestic product (GDP) in 2012-13 from the peak of 36.8% in 2008—the government introduced the Kisan Vikas Patra scheme. Through this low-risk savings platform, the government aimed to boost financial independence of low-income investors from semi-urban and rural areas.

Policy Details

Certificate Types

According to the National Savings Institute, KVP certificates can be categorised as follows:

A ‘Single Holder’ type account can be opened by an adult for themselves, or on behalf of a minor or a person of unsound mind of whom he/she is the guardian, or by a minor who has attained the age of ten years. A KVP certificate is issued to an individual under his/her name. Also, an individual can furnish a KVP certificate for a minor, wherein the certificate will be issued under the individual’s name.
A ‘Joint A' type account may be opened jointly in the names of up to three adults. A KVP certificate is issued to the adults investing jointly, wherein, upon maturity, the amount will be paid to all the holders jointly or to the survivors.
A ‘Joint B' type account can be opened jointly in the names of up to three adults. A KVP certificate is issued to the adults investing jointly; however, in this case, when the investment matures, the amount will be payable to any of the account holders or to the survivor or survivors.

Eligibility

In this scheme, any Indian citizen who is above 18 years can invest and buy a certificate; however, it also allows minors, through aid of an adult, to invest and avail a KVP certificate. Moreover, the scheme does not have an age limit for investors and thereby, proving to be beneficial for senior citizens.

Documents Required

To avail benefits of the KVP scheme, citizens are required to submit the following documents:

Identity proof for the KYC process (Aadhaar card/PAN/Voter ID card/Driving License/Passport/Job card issued by NREGA signed by the State Government officer/Letter issued by the National Population Register containing details of name and address)
Address proof
KVP application form
Birth certificate

Kisan Vikas Patra Interest Rate

The Ministry of Finance regulates/decides the interest rates, which are not subject to market risks, on KVP investments. Also, the government reviews the interest every quarter and tweaks it frequently. As of June 2024, the deposits made in KVP accounts earn an interest rate of 7.5% compounded annually.

Kisan Vikas Patra Withdrawal Rules

Unlike numerous other long-term saving schemes, KVP allows investors to make premature withdrawals; however, it comprises certain limitations such as the scheme has a minimum lock-in period of 30 months or two and a half years. Any encashment before two and a half years could either invite penalty or lead to reduced interests and it can be done only if ordered by a court of law, on forfeiture by a pledge or by a Gazetted Officer, or upon the death of the KVP holder or any or all the holders in the case of joint KVPs.

KVP Progress

Consolidated KVP Savings Collections (2017-18)
Institute	Gross	Net
Department of Post	Rs. 24,638.39 crore (US$ 3,822.87 million)	Rs. 24,588.76 crore (US$ 3,815.17 million)
Banks	Rs. 28.66 crore (US$ 4.45 million)	Rs. 28.46 crore (US$ 4.42 million)
Total	Rs. 24,667.05 crore (US$ 3,827.32 million)	Rs. 24,617.22 crore (US$ 3,819.58 million)

Source: National Savings Institute Website

According to government data, between 2018 and 2019, 30.18 lakh KVPs were sold, with deposits worth Rs. 26,478.36 crore (US$ 3,788.57 million), while between 2019 and 2020, 21.43 lakh KVPs were sold, with investments of Rs. 19,730.16 crore (US$ 2,799.00 million). Under the KVP scheme, the outstanding balance stood at Rs. 1,23,736.61 crore (US$ 17,553.78 million), as of March 31, 2020; 8.02 crore certificates were registered until November 2020.

To promote digitalisation, the government discontinued physical KVP certificates and introduced e-mode certificates (w.e.f. 01.07.2016). In compliance to its policies, the Indian government ensured the availability of small savings schemes to investors through authorised commercial banks, wherein Bank of Baroda launched e-Kisan Vikas Patra on August 16, 2018. This facility is also available at the Union Bank of India and Axis Bank, with other key commercial banks joining the bandwagon in the future.

Road Ahead

In September 2020, under the ‘Five Star Village’ scheme, India Post launched a campaign to promote all postal products and services available at village-level, with an aim to ensure that a minimum of 100 households are covered under postal products. Through this scheme, the government seeks to bridge the gap between public awareness and reach of postal products & services, especially in interior villages. The ‘Five Star Village’ scheme covers the following initiatives:

Savings Bank Accounts, Recurrent Deposit Accounts and NSC (National Savings Certificates)/KVP (Kisan Vikas Patra scheme) certificates
Sukanya Samridhi Accounts/PPF Accounts
Funded Post Office Savings Account linked to India Post Payments Bank Accounts
Postal Life Insurance Policy/Rural Postal Life Insurance Policy
Pradhan Mantri Suraksha Bima Yojana Accounts/Pradhan Mantri Jeevan Jyoti Bima Yojana Accounts

The ‘Five Star Village’ scheme was launched on a pilot basis in Maharashtra; based on the experience in the state, the scheme will be implemented nationwide.

The KVP scheme has emerged as one of the most trusted and investment-worthy scheme, post the regulatory amendments in 2014. The scheme not only provides a safe and secure investment avenue to small investors but also helps augment the savings rate in the country. Though most conservative investors prefer FD (Fixed Deposit) schemes, many are selecting and opting for alternative schemes. For such investors, KVP offers high returns as opposed to bank FDs and is considered a safe investment option, as the scheme is backed by the Government of India.