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Chidambaram: Why KVP? There are better options

The KVP, which was launched by finance minister Arun Jaitley on Tuesday offers a fixed interest rate of about 8.5 per cent.

By: ENS Economic Bureau | Ahmedabad/new Delhi, New Delhi |
November 20, 2014 12:44:35 am

A day after the government re-launched the Kisan Vikas Patra (KVP) with a promise to double investments in 100 months, former finance minister P Chidambaram said there are other fixed-income instruments which offer better returns.

“Government has re-launched the KVP. The ostensible purpose is to promote savings. The argument is suspect because there are other fixed-income instruments which offer better returns,” he said in a statement on Wednesday.

The KVP, which was launched by finance minister Arun Jaitley on Tuesday offers a fixed interest rate of about 8.5 per cent. A very popular small saving product that was originally launched in 1988, the KVP was, however, withdrawn during the UPA’s tenure over concerns that it is used for money laundering since it is a bearer bond.

The former finance minister raised concerns over other features of the product, adding that he will reserve judgement until the government responds to his four queries. “Is it correct that payment is not required to be made by cheque or bank draft but can also be made in cash,” he asked, adding , “Will those who have a PAN be required to quote the PAN or is PAN being dispensed with?”

He also expressed doubt over the provision of transfers. “Will a KVP be freely transferable without any limit on the number of transfers? If so, what is the use of applying KYC to the first purchaser,” he asked.

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