It is important to note that the Ministry of Finance holds the power to regulate small savings accounts.According to the rule, all irregular accounts must be referred to the Ministry of Finance’s division for regularization.
According to an ET report, six main categories have been identified, and guidelines have been issued accordingly for irregular NSS accounts, PPF accounts opened in the name of a minor, more than one PPF account, extension of PPF account by NRI, and regularization of Sukanya Samriddhi Account (SSA) opened by grandparents other than guardians.
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1. Irregular NSS accounts:
These have been assessed to be of the following types
- Two NSS-87 accounts opened prior to DG order
- Two NSS-87 accounts opened after DG order
- ln case of more than two NSS-87 accounts
The following rules apply to two NSS-87 accounts that were opened before the DG Posts’ Order No. 35-19/9GSB-lll dated 02.04.1990:
- The first account that was opened will receive the current scheme rate. The second account, which was opened after the first one, will earn the prevailing POSA rate with an additional 200 basis points on the outstanding balance. However, these rules are subject to certain conditions.
- Cumulative deposits in both the accounts put together should not exceed the applicable deposit limits for each year.
- Excess deposits (if any) shall be refunded to the investor without any interest.
- These special provisions are a one-time concession granted to NSS-87 investors until September 30, 2024, as per the Office Memorandum issued by the Ministry of Finance on July 12, 2024. Starting from October 1, 2024, both accounts will no longer earn any interest.
The following rules apply to two NSS-87 accounts opened after the DG Posts’ Order No. 35-19/90-SB-lll dated 02.04.1990:
- The first account that was opened will receive the interest rate as per the prevailing scheme. The second account, which was opened after the first account, will earn the prevailing POSA rate on the outstanding balance. However, these rules are subject to certain conditions.
- The total deposits in both accounts combined should not surpass the applicable deposit limit for each year. If there are any excess deposits, they will be returned to the investor without any interest.
- These rules are a one-time special dispensation for NSS-87 investors, valid until 30 September 2024, as per the Office Memorandum dated 12th July 2024 issued by the Ministry of Finance.
- Starting from 1 October 2024, both accounts will no longer earn any interest, and the rate will be zero percent.
If there are more than two NSS-87 accounts, the principles that apply to two accounts opened before or after DG Posts’ Order. No. 35-19/90-SB-lll dated 02.04.1990 will be followed. However, for the third account and any subsequent irregular accounts, no interest will be paid, and the principal amount will be returned to the investor.
2. When a PPF account is opened under the name of a minor:
- For such irregular accounts, POSA interest will be paid until the minor reaches the age of 18, at which point they become eligible to open an account. From that point onward, the applicable interest rate will be paid.
- The maturity period for these accounts will be calculated starting from the date the minor becomes an adult, which is the date from which the individual is eligible to open the account.
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3. Multiple PPF Accounts:
- The primary account, chosen by the investor from their two accounts at any Post Office or agency bank, will earn the scheme’s interest rate as long as the deposit remains within the yearly ceiling. (Primary Account is the one the investor prefers to maintain upon regularisation).
- The remaining balance in the second account will be combined with the primary account, provided the primary account stays within the applicable annual investment limit. After the merger, the primary account will continue to earn the current scheme interest rate. Any excess balance in the second account will be refunded without interest.
- Any additional accounts beyond the primary and second account, shall earn zero percent rate of interest from the date of opening of that account.
4. NRI’s PPF Account Extension
For active NRI’s PPF accounts opened under the Public Provident Fund Scheme (PPF), 1968, where Form H did not explicitly inquire about the account holder’s residency status, the account holder (Indian citizen who became NRI during the currency of Account) will receive the POSA rate of interest until September 30, 2024. Thereafter, the said account shall earn zero percent rate of interest.
5. Minor’s Small Savings Scheme Account (Excluding PPF and SSY)
Irregular accounts opened under a minor’s name can be regularized with simple interest, calculated using the current POSA rate as the interest rate for the account.
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6. Regularization of Sukanya Samriddhi Account (SSA) opened by Grandparents, other than Guardian.
- For accounts opened under the guardianship of grandparents who are not the legal guardian, the guardianship must be transferred to the person legally entitled to it. This means that the guardianship should be given to the child’s living parents, who are the natural guardians, or to a court-appointed Legal Guardian.
- According to the Sukanya Samriddhi Account Scheme, 2019, “ln case of accounts opened under the guardianship of grandparents (who are other than legal guardian), the guardianship shall be transferred to a person entitled under the law in force, that is, to the natural guardian (alive parents) or Legal Guardian.” If a family has opened more than two accounts, violating Para 3 of the scheme, the irregular accounts will be closed, as they are considered to have been opened in contravention of the scheme guidelines.