Investors beware: PPF, NSC, SCSS, KVP to be frozen if inactive beyond three years
Tens of millions of common people of India deposit their hard-earned money in guaranteed return instruments such as Public Provident Fund (PPF), National Savings Certificate (NSC) and Senior Citizen Savings Scheme (SCSS). A change in rule could impact many of them.
Kolkata: Public Provident Fund (PPF), National Savings Certificate (NSC) and Senior Citizen Savings Scheme (SCSS) are savings instruments in which crores of Indians repose their faith. The government has introduced a new rule that could impact a number of them and at any rate they should be aware of the rule even if it doesn't impact them directly. The broad objective of the new rule is to furthe ensure the safety and security of the funds in these popular instruments.
The new rule says small savings accounts will be frozen more frequently. This activity will be undertaken once every six months. Those account which will be identified as being inactive for three years even after they attain maturity will be frozen. So far putting thses instruments under the frozen category was done once a year. Analysts maintain that this new decision by the Department of Posts will help in the safekeep of funds. The morale of the story: don't keep your money idle in these accounts after maturity. "To further enhance security of hard-earned money of depositors, it has now been decided that this freezing activity will be conducted twice a year as a continuous cycle," read an official statement.
Which instruments are covered by the new rule
The new decision of the government has come into effect from July 15, 2025. The new rule applies to almost all small savings schemes. The freezing will be done on January 1 and July 1 of every year. The instruments under the purview of this decision are:
PPF (Public Provident Fund)
NSC (National Savings Certificate)
SCSS (Senior Citizen Savings Scheme)
KVP (Kisan Vikas Patra)
POMIS (Post Office Monthly Income Scheme)
TD (Time Deposit in post office) and
RD (Recurring Deposit)
However, SSY or Sukanya Samriddhi Yojana will not come under the ambit of this new rule. Incidentally, the amount of unclaimed deposits in Indian banks reached a staggering amount of Rs 78,213 crore at the end of FY24, according to media reports. In the same year, about Rs 881 crore lay with the Life Insurance Corporation. Union finance minister Nirmala Sitharaman has urged the financial institutions on several occasions to identify the beneficiaries and channelise the money to them. The responsibility of claiming the money after maturity lies with the depositor.
If the amount is not claimed and lie idle for years, the depositor of his/her legal heir/nominee misses interest income which they can earn by reinvesting the money in any instrument of their choice. Moreover, they have to visit the post office, submit KYC documents and do some paperwork to claim the money back.