Small Savings Schemes: PPF, NSC and Sukanya Samriddhi

The correct answer is B, 15 years. A PPF account runs for fifteen financial years counted from the end of the year in which it is opened, and after that it can be extended in blocks of five years, with or without fresh deposits. Option A, ten years, is wrong; no small savings scheme has a ten-year term, and the shorter certificates run for five years. Option C, twenty years, is wrong because an extended PPF account reaches twenty years only after one five-year block, which is a choice made by the holder and not the original maturity. Option D, twenty-one years, is the strongest distractor; that is the maturity of the Sukanya Samriddhi Account, counted from the date of opening. Fix fifteen with the PPF and twenty-one with Sukanya Samriddhi, because these two are the usual pair in a question.

The correct answer is C, 1,50,000 rupees. The Public Provident Fund Scheme allows a minimum of five hundred rupees and a maximum of one and a half lakh rupees in a financial year, the same ceiling that applies to the Sukanya Samriddhi Account and matching the limit of the deduction under section 80C. Option A, fifty thousand rupees, is wrong and far below the ceiling. Option B, one lakh rupees, is wrong but tempting because it was the limit in an earlier period before the ceiling was raised. Option D, two lakh rupees, is wrong; a two lakh ceiling belongs to the Mahila Samman Savings Certificate announced in the Union Budget for 2023-24, not to the PPF. If the deposit in a year exceeds the ceiling, the excess earns no interest and is simply returned.

The correct answer is B, 10 years. Under the Sukanya Samriddhi Account Scheme a guardian may open an account in the name of a girl child who has not completed ten years of age, and a family may hold two such accounts, or three where twins or triplets are born. Option A, eight years, is wrong and is simply a lower number offered to unsettle the candidate. Option C, twelve years, is wrong; no age relaxation to twelve exists in the scheme rules. Option D, fourteen years, is wrong, although fourteen may be confused with the fifteen years for which deposits have to be made into the account. Remember the three numbers of this scheme in order: open before ten, deposit for fifteen years, mature at twenty-one years from opening.

The correct answer is C, 21 years. The account matures twenty-one years after the date of opening, and it may close earlier if the girl marries after completing eighteen years. Option A, fifteen years, is the commonest wrong choice because deposits into the account have to be made only for fifteen years; the balance continues to earn interest for the remaining period without further deposits. Option B, eighteen years, is wrong, although at eighteen the girl becomes eligible to withdraw half the balance or to close the account on marriage, which is where the confusion comes from. Option D, twenty-five years, is wrong and has no place in the scheme. The deposit period and the maturity period being different is exactly the point a paper setter tests here.

The correct answer is B, the Government Savings Promotion Act, 1873. This is the parent law under which the Public Provident Fund, National Savings Certificate, Sukanya Samriddhi, Senior Citizens' Savings and Kisan Vikas Patra schemes are notified, and it was called the Government Savings Banks Act, 1873 until the Finance Act of 2018 renamed it. Option A is wrong; the Banking Regulation Act of 1949 governs banking companies and their licensing and supervision, not post office savings schemes. Option C is wrong because the Reserve Bank of India Act of 1934 constitutes the central bank and its functions. Option D is wrong since the Payment and Settlement Systems Act of 2007 gives the Reserve Bank authority over payment systems. The small savings schemes are run by the Ministry of Finance and the Department of Posts, not by the Reserve Bank.

The correct answer is C, 60 years. The scheme, which began in 2004, is open to an individual who has attained sixty years, and it has a term of five years that can be extended by three years, with interest paid every quarter. Option A, fifty-five years, is wrong as a general rule but is the strongest distractor, because a person who retires under a voluntary retirement or superannuation scheme may open an account after fifty-five and before sixty, within the period allowed after receiving retirement benefits. Option B, fifty-eight years, is wrong and corresponds to no provision of the scheme. Option D, sixty-five years, is wrong; there is no upper age bar, so sixty-five is permitted but is not the qualifying age. Retired defence personnel enjoy a wider relaxation than civilian retirees.

The correct answer is B, 5 years. The eighth issue of the National Savings Certificate is a five-year certificate on which interest is compounded annually and paid along with the principal when it matures, and deposits in it qualify for deduction under section 80C. Option A, three years, is wrong; three years is one of the terms available under the Post Office Time Deposit, not for the NSC. Option C, seven years, is wrong and recalls the discontinued ninth issue of the certificate, which ran for a longer term. Option D, ten years, is wrong because no current small savings certificate runs for ten years. The five-year block is worth remembering because the NSC, the Senior Citizens' Savings Scheme, the Monthly Income Scheme and the Recurring Deposit all share it.

The correct answer is B, Kisan Vikas Patra. The Kisan Vikas Patra is sold as a certificate that doubles the amount invested over a period notified by the government, and that period moves up or down as the interest rate is revised. Option A, the National Savings Certificate, is wrong; it is a five-year certificate on which interest accumulates but the amount does not double. Option C, the Public Provident Fund, is wrong because it is a fifteen-year account with annual deposits, not a single certificate with a doubling promise. Option D, the Post Office Monthly Income Scheme, is wrong since it pays interest out every month and returns the principal at the end of five years. Note also that the Kisan Vikas Patra gets no deduction under section 80C, unlike the NSC.

The correct answer is B, the National Small Savings Fund. The fund was created in 1999 in the Public Account of India, all small savings collections flow into it, and the Centre and the States draw loans from it, which is why small savings are treated as a source of government borrowing. Option A is wrong; the Consolidated Fund of India under Article 266 holds the government's revenues and loans raised, and money from it can be withdrawn only by law, whereas the small savings fund sits in the Public Account. Option C is wrong because the Contingency Fund of India under Article 267 is a small fund at the disposal of the President for unforeseen expenditure. Option D is wrong since the National Investment Fund was created to hold the proceeds of disinvestment of government holdings in public sector companies.

The correct answer is B. The Department of Economic Affairs in the Ministry of Finance notifies the rates at the start of every quarter, and since the Shyamala Gopinath Committee reported in 2010 the rates are linked to the yields on government securities of comparable maturity, with a spread for some schemes. Option A is wrong; the Reserve Bank sets the policy repo rate and regulates bank interest, but it does not fix small savings rates. Option C is wrong because the Budget may announce a new scheme, as it did for the Mahila Samman Savings Certificate, without fixing the quarterly rates. Option D is wrong since the Department of Posts only sells and services the schemes through post offices; it does not decide the rate at which they pay.