4.8 Post Office Deposits:

 

You must have noticed Post offices also accepting deposits from Public. However unlike Banks, Post Offices do not lend money to any one. But then what do they do with deposits?. The Government of India uses the deposits for developmental works (Building Roads, Social welfare, Adult Education …) either directly or through State Governments. Post offices also follow more or less same rules and procedures when an individual opens an account with them (address proof etc …).   Since post offices do not cater to the needs of businessman and companies, only Individuals can open accounts in Post Offices. Like Banks, Post offices also pay interest on deposits made with them.

 

In order to get interest periodically (monthly, quarterly) people need to go to post offices, fill the form, stand in the Queue, collect cash etc. Some people may not have time for this activity. Also people may get into the habit of spending interest money immediately. To help those who do not want to collect interest money regularly, Post offices offer schemes like National Savings Certificates (NSC) and Kisan Vikas Patras(KVP).  In these cases, instead of offering interest periodically the Post offices return the deposit amount along with accumulated interests (for all years) at the end of maturity period. The advantage with this is that depositor gets money in lump sum.

Post office deposits come under the purview of National Savings Scheme announced in 1882.

The main objectives are:

 

1.      To encourage people to save money.

2.      To get money from public for large projects (National or State)

3.      To help people mainly from rural area who do not have access to Banks

4.      Cultivate the habit among people to reduce expenditure and save more.

 

The advantages of Post office schemes are:

 

1.      Reach ability (There are more post offices than Banks in India, hence they are accessible to more people)

2.      Security (Deposits are with the Government of India and hence they are 100% safe)

3.      Easy transferability (Accounts can be transferred to any post office in India)

4.      Reliability (Since the Schemes are operated by Government of India, services are guaranteed by the government)

5.      Income Tax benefits (Income tax payers get benefit on the investments made in certain types of deposits)

 

Some of the popular small scales saving schemes are:

 

1.      Savings Bank account (SB - Similar to that in Banks)

2.      Five Year Recurring deposit account (RD - Subscribe fixed amount every month to get lump sum amount after 5 years with interest)

3.      Time deposit (TD -Fixed Deposit for fixed number of years)

4.      National Savings Certificate (NSC- Get fixed amount on maturity on the initial deposit after few years)

5.      Monthly Income Scheme (MIS - Get monthly interest on the deposit made)

6.      Kisan Vikas Patra(KVP-Get  fixed amount on maturity on the initial deposit after few years with interest)

7.      Indira Vikas Patra(IVP-Get  fixed amount on maturity on the initial deposit after few years with interest)

8.      Senior Citizen Scheme (SCS - Get quarterly interest on the deposit made only senior citizens can invest in these)

 

The procedure of openings, and their operations (SB, RD.MIS, and SCS) are almost similar to those followed in Banks

Many of the schemes (KVP, IVP, and NSC) are almost similar but they are called by different names because money collected under the respective schemes is used for specific purposes. The certificates are available in denominations like 100Rs, 500Rs, 1000Rs, and 5000Rs. Unlike Banks they are not issued for amounts like Rs 5050, Rs 10,450...

 

An example of NSC of Rs 100 is given below. The left side figure is the front portion and the right side figure is back side of the same certificate

Let us understand some important details the above NSC  has

 

Circled Number/Marking	Details	Entry in the above certificate
1	Denomination of the certificate	100 Rupees
2	Name of the depositor	K V R SOM
3	Date of deposit	30 –oct-2002
Red oval on the figure on left	Term	6 years
Blue oval on the figure on left	Name of the issuing post office	Karnataka circle
Brown rectangle on left	Maturity value	Rs 169.59
Blue rectangle on right	Signature	To sign on repayment

 

An example of KVP of Rs 5000 is given below. The left side figure is the front portion and the right side figure is back side of the same certificate

 

  
Let us understand some important details the above KVP  has

 

Circled Number/Marking	Details	Entry in the above certificate
1	Denomination of the certificate	5000 Rupees
2	Name of the depositors	Padmavathi and another person
3	Name of the issuing post office	K R Circle, Mysore
4	Date of issue of certificate	20-11-02
violet rectangle on figure on left	Term	7 years 8 months
Red rectangle on figure on right	Maturity value	Rs 10,000
Blue rectangle on figure on right	Signature	To sign on repayment

 

Note: In case of deposits with Post Offices, Government of India guarantees return of money at the end of maturity period. In the case of deposits with banks, banks and not the Government, guarantee the return of money. Hence money is safer with Post offices than with Banks

 

4.8 Summary of learning