Kisan Vikas Patra (KVP) is a savings scheme offered by the Government of India. Historically, KVP was a popular investment option due to its fixed interest rates and guaranteed returns. However, with the availability of various other investment options, such as mutual funds, fixed deposits, and stocks, it's worth considering the advantages and disadvantages of KVP before making an investment decision.
Advantages of Kisan Vikas Patra
Guaranteed Returns: KVP offers fixed interest rates, which are declared by the government periodically. This ensures that your investment will grow at a predetermined rate.
Safety: KVP is backed by the government, which makes it a safe investment option. The principal amount invested, along with the accumulated interest, is guaranteed.
No Tax Deductions at Source (TDS): KVP does not attract Tax Deductions at Source, which means the entire interest earned is credited to your account without any deduction.
Disadvantages of Kisan Vikas Patra
Fixed Lock-in Period: KVP has a lock-in period, typically ranging from 2.5 to 4 years. During this period, premature withdrawals or encashments are not allowed, which can limit liquidity.
Inflation Risk: KVP's interest rates may not always keep up with inflation rates, which could result in the erosion of purchasing power over time.
Lower Returns: Compared to other investment options such as equities or mutual funds, KVP's returns may be relatively lower. If your goal is long-term wealth creation, you might consider exploring other investment avenues that have the potential for higher returns.
It's essential to evaluate your financial goals, investment horizon, risk appetite, and return expectations before investing in KVP or any other financial instrument. Consulting with a financial advisor can provide personalized guidance based on your specific circumstances and help you make informed investment decisions.
For those people who do not have an immediate requirement for their personal funds, Kishan Vikas Patra (KVP) is a good investment option. This is a Govt scheme and hence it is a safe investment. The returns are good if a person is able to keep it up for 10 years period. If one withdraws it prematurely then the returns are much decreased.
Many retired people go for this scheme mainly due to its safety and long-term returns. People especially in small towns and villages prefer it as they can invest in it in the nearest Post Office.
I remember there was a time when people rushed for this I remember because at that time interest rates were very high and their money doubled only in 5 years. Now the interest rates in Banks and Post Office are hovering in the range of 7 to 8% and KVP also gives the same return. In my view, for elders and retired people, it is still a good option, especially for those who have surplus funds to park for a long time.