The Kissan Vikas Patra (KVP) was relaunched last year by Finance Minister Arun Jaitley. The Small Savings Scheme was earlier discontinued in 2011 due to various worries including that it could be used as a vehicle for black money.
The product was launched in the late 80s when the interest rate was such that the money would double in five years and six months.
The objective of launching the product again in 2014 was to once again channelise idle money into products like the Kissan Vikas Patra.
Which Banks Can You Open a Kissan Vikas Patra Account?
Apart from the post office you can open a Kissan Vikas Patra or take a certificate from the post office and a number of banks. Here are the list of banks where you can take a Kissan Vikas Patra or KVP.
1) State Bank of India
2) State Bank of Patiala
3) Punjab National Bank
4) Bank of Baroda
5) State Bank of Bikaner and Jaipur
6) State Bank of Patiala
7) Allahabad Bank
8) Andhra Bank
9) Bank of Maharashtra
10) Central Bank of India
11) Corporation Bank
12) Dena Bank
13) Indian Bank
14) Union Bank of India
15) UCO Bank
16) Oriental Bank of Commerce
17) IDBI Bank
18) ICICI Bank
What Is The Interest Rate On The KVP?
The Kissan Vikas Patra gives you an interest rate of 8.67 each year, as the money under the product doubles in 8 years and 4 months.
The interest rate is not the best that you could get around and is more competitive. Interestingly, unlike the PPF the product does not give you tax benefits on interest income earned.
Thus the post tax yield makes the product returns very poor if you are in the 20 and 30 per cent tax bracket. Therefore, the product may not be the best around.
In fact, banks can still offer you slightly superior returns around the same tenure.
Should You Invest in the KVP?
The KVP is not a solid product and offers no tax benefits. Prudent investing in FMPs can still generate higher post tax returns.
The rate of interest is also not the very best. You can look at alternative investment products, rather then the KVP.
The Reserve Bank of India has recently written to banks to report on all KVP transactions i.e. receipt, payment, penalty, etc., so as to have uniformity in reporting, reconciliation and accounting.
There many good long term investment plans that you could consider other than the KVP and one them is the PPF. Take a look at the various long term investments read here