It is important to note that the Ministry of Finance has the authority to regulate small savings accounts. According to the regulation, all irregular accounts must be referred to the Department of Finance for regulation.
According to an ET report, six main categories have been identified and guidelines issued 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 non-guardian grandparents.
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1. Irregular NSS accounts:
The following types were evaluated
- Two NSS-87 accounts opened before DG order
- Two NSS-87 accounts opened following DG order
- If you have more than two NSS-87 accounts
The following rules apply to two NSS-87 accounts opened before Order No. 35-19/9GSB-lll of the General Directorate of Post dated 02.04.1990:
- The current tariff applies to the first account opened. The second account opened after the first will be subject to the current POSA tariff plus 200 basis points on the outstanding balance. However, these rules are subject to certain conditions.
- The cumulative deposits in both accounts combined should not exceed the applicable deposit limits for each year.
- Any excess deposits will be refunded to the investor without interest.
- These special provisions are a one-time concession for NSS-87 investors as per the Ministry of Finance’s Office Memorandum dated July 12, 2024, which will be valid until September 30, 2024. From October 1, 2024, no interest will be paid on either account.
The following rules apply to two NSS-87 accounts opened under Order No. 35-19/90-SB-lll of the General Directorate of Post dated 02.04.1990:
- For the first account opened, the interest rate according to the current regulation applies. For the second account opened after the first account, the current POSA interest rate applies to the outstanding amount. However, these rules are subject to certain conditions.
- The total deposits in both accounts together may not exceed the respective deposit limit for the respective year. Excess deposits will be refunded to the investor without interest.
- These rules are a one-time special arrangement for NSS-87 investors, valid until September 30, 2024, as per the Ministry of Finance’s Office Memorandum dated July 12, 2024.
- From October 1, 2024, both accounts will no longer earn interest and the interest rate will be zero percent.
If there are more than two NSS-87 accounts, the principles applicable to two accounts opened before or after the General Directorate of Post Office Order No. 35-19/90-SB-lll of 02.04.1990 apply. However, no interest will be paid on the third account and all other irregular accounts and the capital amount will be refunded to the investor.
2. If a PPF account is opened in the name of a minor:
- POSA interest will be paid on such irregular accounts until the minor reaches the age of 18, at which point he or she will be eligible to open an account, at which point the applicable interest rate will be paid.
- The term of these accounts is calculated from the day the minor reaches the age of majority. From that day, the person is entitled to open the account.
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3. Multiple PPF accounts:
- The main account, which the investor chooses from his two accounts at a post office or an agency bank, will earn interest at the scheme rate as long as the deposit remains within the annual limit. (The main account is the account which the investor intends to keep after regularization.)
- The remaining balance in the second account will be merged with the main account, provided the main account stays within the applicable annual investment limit. After the merger, the main account will continue to receive the current interest rate. Any excess amount in the second account will be returned without interest.
- For all other accounts except the main and secondary accounts, an interest rate of zero percent applies from the opening date of the respective account.
4. NRIs PPF Account Extension
For active NRIs PPF accounts opened under the Public pension fund Scheme (PPF), 1968, where Form H did not explicitly ask for the account holder’s residency status, the account holder (Indian citizen who became NRI during the tenure of the account) will receive the POSA interest rate until September 30, 2024. Thereafter, the said account will earn zero percent interest rate.
5. Small Savings Account for Minors (excluding PPF and SSY)
Irregular accounts opened in the name of a minor can be regulated with simple interest, using the current POSA rate as the interest rate on the account.
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6. Regularization of Sukanya Samriddhi Account (SSA) opened by grandparents (excluding guardian).
- For accounts opened under the guardianship of grandparents who are not the legal guardian, guardianship must be transferred to the person who is legally entitled to do so. This means that guardianship should be given to the child’s living parents, who are the natural guardians, or to a court-appointed legal guardian.
- As per Sukanya Samriddhi Account Scheme 2019, “In case of accounts opened under the guardianship of grandparents (who are not the legal guardian), the guardianship shall be transferred to an eligible person under applicable law i.e. natural guardian (living parents) or legal guardian.” If a family has opened more than two accounts in violation of Clause 3 of the Scheme, the irregular accounts shall be closed as they are deemed to have been opened in violation of the Scheme guidelines.
