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No loans for small savings

No loans for small savings
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First Published: Mon, Mar 19 2007. 12 03 AM IST
Updated: Mon, Mar 19 2007. 12 03 AM IST
The Reserve Bank of India has asked banks not to lend or provide financing for buying small-savings instruments such as National Savings Certificates (NSC) and Kisan Vikas Patras (KVP). According to RBI, high net-worth investors have been taking loans for up to 90% of the face value of KVPs and contributing the remaining 10% from their own pockets.
RBI says “…the basic objective of small-savings schemes is to provide a secure avenue of savings for small savers and promote savings as well as inculcate the habit of thrift among people. The grant of loans for investing in KVPs does not promote fresh savings, rather, it channels existing savings in the form of bank deposits to small-savings instruments and thereby defeats the very purpose of such schemes.” KVPs mature in eight years and seven months from the date of purchase, with the amount invested doubling in this time period, but it doesn’t qualify for tax rebates.
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First Published: Mon, Mar 19 2007. 12 03 AM IST
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