Govt's new PPF policy to hit NRIs and small investors

Over the last decade, the Narendra Modi government has repeatedly harped on a kind of diaspora diplomacy based on Hindu nationalism that has apparently enamoured his constituency of non-resident Indian (NRI) supporters.

- Ayaskant Das and Paranjoy Guha Thakurta

Curiously, his government has now barred NRIs from availing the benefits of the popular long-term small savings and investment public provident fund (PPF) scheme.

The PPF scheme - introduced in all head post offices of India with effect from January 1979 is popular not only because of its relatively higher rate of interest as compared to fixed deposits, but also because the interest earned from it is free from payment of income tax.

The Modi government has amended rules whereby PPF accounts held by NRIs will henceforth earn "zero" interest with effect from October 1, 2024. An order to this effect was issued on August 21, cations, currently headed by turncoat politician Jyotiraditya Scindia.

It can be argued that the move is basically designed to drive NRI investments away from the guarantees of fixed return (7.1 per cent annual rate of interest) promised by the PPF to stock markets and mutual funds that are, by their very nature, volatile and unpredictable. Returns on in2024, by the financial services vestments in equity shares division of the Department of and mutual funds can potenPosts which is overseen by the tially be considerably higher Union Ministrépaper.freepressjours in PPF accounts, but the former is dependent on corporate profits and buoyant share markets. The government order amending the PPF rules was issued as a set of guidelines to regularise accounts that have been operating in deviation of rules contained in various national small savings schemes.