7 Key Features of Kisan Vikas Patra

  Author: Jai Prakash

Kisan Vikas Patra or KVP has been very popular in India for long. It was introduced in 1988 but was discontinued in 2011. However, it made a comeback in 2014. This Small Savings Scheme available at post offices was meant for rural areas but became popular in large cities as well as small towns. Here are seven basic features every first time investor should be aware of. 

Doubling of investment’s value The major feature of Kisan Vikas Patra is that the money gets doubled during a certain period of time. Currently, the money is getting doubled in 118 months, or 9 years and 10 months. Of course, KVP interest rates, like all Small Savings Schemes or Post Office Savings Schemes, are subject to change every quarter. However, once you have bought a KVP, you are locked into the interest rate at the time of its issue. This is unlike other Small Savings Schemes like Public Provident Fund (PPF) where the interest rate is reviewed every quarter and can be revised.

Investment amount and compounding of interest The minimum amount of investment required in a KVP is Rs 1,000 with no maximum limit for investment. So, Rs 1 lakh invested today will become Rs 2 lakh in 9 years and 10 months. The interest also gets compounded annually.

Transferrable KVP can be transferred to another person with endorsement.  It is also transferrable from one post office to another.  

When one finds bank fixed deposit rates lower than KVP interest rates and one needs to invest in a lower risk investment for a long period, one can consider KVP. Of course, since it doesn’t provide any tax deduction, as in under Section 80C, and with inflation at work, it may not make sense to earmark a large portion of your investments in KVP for major long term goals that require high growth of savings.

Income laddering KVP bought at regular intervals can create regular income flow when they mature. This is also called income laddering by investment experts. So, if you anticipate periodic income in the future, buying KVPs can help.

Premature exit They are allowed in KVP after two-and-a-half years or 30 months.

Loan against KVP You can also take a loan against Kisan Vikas Patra from any bank or other financial institution with the maximum tenure of the loan being less than the period to maturity of KVP.