Almost 30 months after the Centre discontinued the Kisan Vikas Patra (KVP), Finance Minister Arun Jaitley announced its revival on Thursday.
“Kisan Vikas Patra was a very popular instrument among small savers. I plan to re-introduce the instrument to encourage people who may have banked and unbanked savings to invest in this instrument,” said Jaitley.
The KVP, offered by India Post till November 2011, had no ceiling on investment while the lower limit was fixed at Rs 100. While it offered an interest of 8.4 per cent and permitted withdrawal after two-and-a-half years, it was not eligible for tax benefits under Section 80C.
Experts said despite no tax benefits, it attracted many investors. “One reason for its popularity was that it allowed investors to invest in cash. However, the cash component may now be capped at Rs 50,000, in line with the limit set for other financial instruments,” said a Delhi-based financial advisor who did not wish to be named.
The Shyamala Gopinath Committee, in its report submitted on June 7, 2011, had recommended that the KVP be discontinued as it was “prone to misuse, being a bearer-line instrument”. It said the KVP was more popular than the National Savings Certificate (NSC) because of the ease of transfer and liquidity.
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“In view of the recent developments on AML/CFT (anti-money laundering/ combating the financing of terrorism) front, the committee recommends that KVP should be discontinued,” the report said.
Another committee headed by a former RBI Deputy Governor had also recommended that both KVP and NSC should be discontinued as their effective cost to the government was high.