- Small saving instruments (SSI): Meaning & Benefits
- Kisan Vikas Patra (KVP): Timeline
- Appendix
- Mock Questions for CSAT
Small saving instruments (SSI): Meaning & Benefits
- As the name suggests, Small saving instruments promote habit of savings among poor people, saved them from Ponzi scamsters.
- SSIs are launched either through Statutory-Law OR gazette notification. Their Interest rates are “administered” by the government, hence considered risk free investments.
- SSI investments (usually) enjoy tax exemption and tax deduction benefits under Income tax act of 1961. for example
- PPF deposit is deducted from taxable income, upto Rs.1.5 lakhs.
- Interest earned on Post office savings account: exempted from tax. (upto certain amount).
- No TDS (Tax deduction at source) on withdrawals for most schemes.
Type | Examples | Governing Act |
---|---|---|
1.Post office deposits | Post office savings account, time deposits, recurring deposits, monthly income accounts. | Government Savings Banks Act, 1873 |
2. Savings Certificates |
|
Government Savings Certificates Act 1959 |
3.Social security schemes | PPF: Public provident Fund (1968) | Public Provident Fund Act 1968 |
Senior citizen savings scheme (2004) | Government Savings Banks Act, 1873 |
^Exact years not important but Chronological order is.
National Small savings fund (NSSF)
- 1999: NSSF was created in the Public accounts of India, on recommendations of R.V. Gupta Committee (Ex.Dy-Governor of RBI)
- The money collected from above small savings schemes, goes to National small savings fund (NSSF) in the Finance ministry.
- From NSSF, money is lent to Union and state governments for financing their fiscal deficit. Usually, 80% of the money is loaned to States and remaining 20% to Union.
KVP-2014: Salient Features for MCQs
- Launched under Government Savings Certificates Act 1959.
- Awareness Agency: National Savings institute, Department of Economic Affairs in Finance ministry.
- At present, only sold via Post offices. Later, nationalized banks will be permitted to sell KVP as well.
- KVP are available in the Denomination of Rs. 1000, 5000, 10,000 and 50,000.
- There is no Upper Ceiling on Investment. You may invest as much as you want.
- KVP will double your invested money in 100 Months (8 years and 4 months.)
- If you want to pullout money before 100 months, you can do so after
- 30 months =2 years and 6 months OR
- Subsequent blocks of 6 months.
- For more, refer to appendix.
- KVP certificate can be purchase in single individual name or in joint names. Need to submit ID proof and residence proof.
- KVP can be bought using cash, cheque, demand draft BUT
- If Rs.50,000 or more invested, then PAN card copy is must.
- If Rs.10 lakh invested, client will have to give additional proof of income.
- Adult can buy it on behalf of minors. But such certificate can’t be transferred to others as long as minor is alive.
- Nomination facility available i.e. if I die, handover the money to xyz person.
- KVP certificate can transferred to others via post office, for multiple times.
- But to prevent money laundering, during every transfer, both certificate-giver and taker, will have to sign form in the post office along with photocopies of following, under KYC norms (Know your customer)
- ID proof
- Resident proof
- PAN card (if more than Rs.50,000 invested) as per KYC norms. .
- If Certificate is destroyed/lost, client and get a duplicate copy BUT has to submit identity proofs. Therefore, again money laundering difficult.
- Post-master can transfer the KVP certificate from an individual to President and governor, RBI, Banks, cooperative society, PSU, Government companies, Housing finance companies and even local Panchayat and municipalities.
- Above feature is designed, to help the client use KVP as “security deposit” e.g.
- While taking loan from banks, cooperative societies or even housing finance companies.
- As Deposit for contesting elections.
- As “bond money” for certain jobs, such as the fabled ACIO, some PSU-jobs etc.
- Tax liabilities
- Interest earned from Kisan Vikas Patra, is taxable.
- If you gift KVP-certificate to someone, then he’ll have to pay gift-tax to Government.
Old scheme (1988) | New scheme (2014) |
---|---|
Available in denominations of Rs. 100, 500, 1000, 5000 and 10,000 | Rs. 1000, 5000, 10,000 and 50,000. |
|
8 years and 4 months (100 months) |
Annual compound interest rate
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Stringent norms. 50k=need PAN card, 10 lakh=need to disclose source of income. |
Discontinued in 2011 | Launched in 2014 |
Was quite popular because of liquidity and easy transfers. KVP used to fetch government ~30% of all money collected in small savings schemes. | Customers’ response yet to be seen. But Government hopes to collect ~35,000 crore rupees. |
Kisan Vikas Patra & Black money / money laundering
- We learned that Kisan Vikas Patra were launched in late 80s but discontinued in early 2010s because of fears about money laundering.
- So, when Jaitley again launched KVP in 2014, Opposition parties again raised concerns:
Yes it’s possible | Not possible |
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Kisan Vikas Patra: Other Criticism

Seems General Dong is reading theHindu too much and too seriously!
Anti-arguments | Pro-arguments |
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Atleast KVP will prevent them from being duped by Saradha chit fund scam and other Ponzi scheme. |
Appendix
A1: Shyamala Gopinath Committee
- 13th Finance commission (Vijay Kelkar) had recommended need for comprehensive reforms in small savings instruments.
- Therefore, Finance ministry setup a Committee under RBI Deputy Governor Shyamala Gopinath.
- Gopinath gave report in 2011. So, It’s very unlikely UPSC will ask its “salient recommendations” in Mains 2014 or 2015. But few points should be memorized as fodder for “resource mobilization” and “Money laundering” (Mains GS3 Paper)
Recommendations of Shyamala Gopinath Committee
- Small savings certificates can generate black money. Because they’re out of the tax deduction at source (TDS) mechanism. So, Government should introduce TDS on SSIs under Direct tax code (DTC)
- Small savings certificates can be used for money laundering i.e. converting black money to white money. Therefore,
- Computerize the Post office branches to monitor individual’s investment and ceilings.
- Stop Kisan Vikas Patra (KVP).
- Increase the yearly investment limits in PPF.
- Money collected from SSI goes to NSSF. At present this money is loaned to state:union in the ratio of 80:20. Change it to 50:50
- If spare money left in NSSF i.e. when union/states not borrowing all the money, invest it to NHAI and infrastructure companies.
~120 words.
A2: premature encashment
- Not important for exam, but just for information.
- We learned that KVP doubles your money in 100 months. But if you wish to pullout money before that, you can do so after 2 years and 6 months.
- So how does this “premature enchashment” work in real life?
Time | Amount repaid |
---|---|
2 .5 years but <3 years | 1201 |
3 years but <3.5 years | 1246 |
3 .5 years but <4 years | 1293 |
4 years but <4.5 years | 1341 |
4 .5 years but <5 years | 1391 |
5 years but <5.5 years | 1443 |
5.5 years but <6 years | 1497 |
6 years but <6.5 years | 1553 |
6.5 years but <7 years | 1611 |
7 years but <7.5 years | 1671 |
7.5 years but <8 years | 1733 |
8 years but before the maturity | 1798 |
on 8 years & 4 months (=100 months)= Money doubled | 2000 |
Mock Questions for CSAT
[columnize]
Q1. Which of the following is/are small savings instrument?
- Recurring deposits made in Post Office.
- Kisan Vikas Patra
- Senior citizen savings scheme
Answer choices
- Only 1 and 2
- Only 2 and 3
- Only 2
- All of them
Q2. Arrange the following in correct chronological order
- Post office savings instruments
- Nationalization of SBI
- Kisan Vikas Patra
- Indira Vikas Patra
Correct choice
- 1234
- 1243
- 1324
- 1423
Q3. Find incorrect statements about Kisan Vikas Patra 2014
- Interest rate in KVP, is linked with CPI-rural inflation.
- KVP doubles the money every 8 years and 4 months.
- KVPs are available in the denominations ranging from 100 to 50,000.
Answer choices
- Only 1 and 2
- Only 2 and 3
- Only 1 and 3
- None of them
Q4. Find correct statements about Kisan Vikas Patra 2014
- KVPs can be purchased on behalf of minors.
- KVP can be purchased in individual or joint names.
- Interest earned in Kisan Vikas Patra, automatically gets deposited to person’s Jan Dhan bank account.
Answer choices
- Only 1 and 2
- Only 2 and 3
- Only 1 and 3
- All of them
Q5. Which of the following safeguards are incorporated in Kisan Vikas Patra to prevent money laundering?
- Upper investment limit is Rs.10 lakh for an individual.
- Person has to provide copy of PAN card for investment of Rs.50,000 or more
- Person has to disclose source of income, if investment more than Rs.10 lakh
- No account can be opened without UID-Aadhar card.
Answer choices
- Only 1 and 2
- Only 2 and 3
- Only 1 and 3
- all of them
Q6. What are the salient features of Kisan Vikas Patra?
- Investment upto Rs.1.5 lakh, get tax-deduction benefit under IT act.
- KVPs can be pledged as security-deposit in public sector banks only.
- KVP Funds can be withdrawn from ATMs using Kisan Credit card.
Answer choices
- Only 1 and 2
- Only 2 and 3
- Only 1 and 3
- None of them
Q7. Find incorrect statements about Small Savings instruments in India
- Their interest rates are administered by the Bench Prime Lending rate (BPLR) of RBI.
- Money collected from SSI, is transferred to National Investment Fund (NIF)
- Money collected from SSI, forms a part of the Consolidated Fund of India.
Answer choices
- Only 1 and 2
- Only 2 and 3
- Only 1 and 3
- all of them
Q8. Find correct statements about National Small savings fund (NSSF)
- Money from this fund, is utilized for covering the fiscal deficit of the Union and states.
- Parliamentary approval is not necessary for utilizing funds from NSSF.
- Both A and B
- Neither A nor B
Q9. Which of the following pairs are correct?
- Shyamala Gopinath: Discontinue Kisan Vikas Patra
- SS Tarapore: Discontinue Capital Account convertibility
- HR Khan: Utilize unclaimed deposits from PPF & Post offices, for Senior citizens welfare.
Answer choices
- Only 1 and 2
- Only 2 and 3
- Only 1 and 3
- all of them
Q10. (CSAT-Aptitude) at 8% annual compound interest rate, a Government savings certificate doubles the invested money in approximate 9 years. IF Finance minister wants to get the money doubled in only 4 years, by approximately what percentage he should increase this scheme’s interest rate from its present rate?
- 45%
- 125%
- 225%
- None of above
[/columnize]
UPSC Mains Examination
- Write a note on the importance of Small savings schemes for resource mobilization and financial inclusion in India.
- Discuss in brief, the concerns about the money-laundering in PMJDY and Kisan Vikas Patra, and recommend suggestions, if any.
- List the recent measures taken by RBI and government of India, for financial inclusion in India.
Thank you….
Thnx sirJi…
Thnx Sir,,
Excellent work Sir ji!! Thank you so much!
Dear mrunal
post some details about insurance administrative officer details
I read the left column in the voice of General Dong. Hehehe.
Same here, and I even chanted General Dong’s “Bhajan”: Shom Shom Shom….Shaamo Shaa Shaa..
i actually searched this song..bhai kya dikha dia.. :D
As usual, nice work..
awsome man. and here mrunal bhai is back again with humour and passion.
answer to last question 10?
125%
@shivam plz explain?
Aman,
you’ve to apply the rule of 72.
(72 / interest rate) =years it’ll take to double the money.
accordingly,
~8% = 9 years to double the money
~18% = 4 years to double the money.
Since FM will have to increase the interest rate from 8% to 18% so the percentage increase is
[(18-8)/8] x 100
=125%
Mrunal sir, if the principal is doubled in 8 years and 4 months, then isn’t the rate of intetest equal to 12%? If that is so, then how is it that we are considering the rate of interest as 8.7%?
sir, i am preparing for cds 2 2016..which is on 14th feb,2016…i wanted to ask..whether watching your videos is enough to crack economy , polity and geography questions ? i am running short of time…please let me know…how should i prepare to crack this exam…and i did not know how to contact you…so replied here…my email id is : anuraags219@gmail.com ….. i will wait for your reply sir…thankyou.
Rule of 72: Derivation
The rule of 72 used to straight away find the time taken to double an amount at rate of interest R compounded annually.
Principal: P
Time: T
Rate of interest: R
P after T years= P(1+R)^T
since we want P to get double
=> 2P=P(1+R)^T
=> (1+R)^T=2
T *ln(1+R)=ln2
ln=2=.693, for smal R, ln(1+R) ~ R
thus
T*R=o.693
T=69.3/R (as R is in %)
69.3 is replaced by 72 as it has many factors (2,3,4,6,12) thus makes mental calculation simple
hence the formula T=72/R
Thanks for this wonderful article sir…..Please discuss once the history of Ponzi scheme and timeline of shradha scam also the roles and mandate of various investigation agencies like ED,SFIU,FIU IND ,CBI in context of money laundering act ,which will be helpful for GSIII.
is it d? ans is 137%
Thank you sir.
@mrunal: I think in one of the reply to a starred question, FM said that the maturity amount will be transferred only to the bank account. Kindly tell me the veracity of this statement
Yes, you are right. Money can be encashed through cheque only
good one
as always ur note is uniq
sirrrrr ji. bade. dinnnn bad…….. .thannnnxxxx. alot
only one word>>>AWESOME _/\_
Great work Mrunal G as usual….God Bless!!!
I am new to this site. Can somebody please guide me from where can I get the answers to the practice questions?
Thanks
Sir… Ravi Shankar Prasad saying” Toh mat kharido bhai”…. Hilarious….hahaaha
What is the meaning of 14th point ?
good article
Splendid sir
I was expecting some motivational speech along with the daily posts. Anyway, good post. Thanks
Excellent
Mrunal
Requesting you to Please write an article on the Lima Climate summit-The fight going between the nations
also One more with SARS,Ebola,MERS,H1N1: together comparing similarity etc
Hi,
I have been looking for an article that was posted on this forum which gives a list of quotes that could be used in essay. Can someone please direct me to the same. I can’t for the life of me find it. Many thanks in anticipation.
https://mrunalmanage.wpcomstaging.com/2010/01/quote-book-2010-for-civil-service.html
That is the link, probably, let me know if I am right sister.
Dear AK,you have posted a much valuable link,I have been reading Mrunal blog so far, but didn’t see this quotes page,thank you very much,and I am very much enlightened with the quote by W.L. Bateman-
If you keep on doing what you’ve always done,
you’ll keep on getting what you’ve always got.
Now I will find much better way to to tune myself rather day dreaming about cracking IAS.
https://mrunalmanage.wpcomstaging.com/2012/09/polity-2nd-arc-ethics.html
Do the beneficiary get the interest + double the money after maturity
Or double amount and interest is same n he gets only one of it?
Only double the money
Means == principal
Only double the money
Means interest == principal
Are you serious? Are you serious ?
It is interest added to principal making amount appear double of original !
Yes I am serious. Yes I am serious.
I hope we are talking about KVP here which gets doubled in 8 years and few months. It’s not simple interest but compound interest. Principal plus total compound interest becomes twice of principal in 8 years and few months.
excellent work sir… your posts are very usefull….
Can anyone explain whats SPV(Special purpose vehicle) used in PPP? Not finding any comprehendible document in internet…:(
what are the answers of these objective type questions below this aritcle
1-d
2-
3- c
4-a
5-a
6-d
7 –
8-c
9-d