The Finance Ministry’s Department of Economic Affairs (DEA) has issued directives regarding “irregular” small savings scheme accounts in post offices and banks. Henceforth, the power to regularise a small savings scheme account will be vested with the ministry and not with the post office or bank, it said in a notification last week.

Here are the new regularisation rules, which will take effect from October 1, 2024.

PPF Account Opened In The Name Of A Minor:

If the public provident fund (PPF) account is in the name of a minor, the account will earn interest applicable to the Post Office Savings Account (POSA). After the minor turns 18, existing rates will apply to the account. A PPF account has a maturity period of 15 years. However, for a minor account, maturity will be calculated from the date the minor becomes an adult or 18 years old when he will be eligible to open the PPF account.

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More Than One PPF Account:

In case of more than one PPF account in a person’s name, the primary account will earn the PPF interest rates subject to the annual capping. According to the guidelines, the primary account is one of the two accounts the investor selects to continue with the account upon regularisation.

The balance in the second PPF account will be transferred to the primary account subject to the applicable capping for a year. Once the balance is merged, the primary account will continue receiving the PPF interest rate. Any excess balance in the second account will be refunded to the holder with zero interest. So, if there is more than one account, it will earn no interest.

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PPF Account Extension By NRIs:

NRIs are not allowed to open PPF accounts. However, if they have an active PPF account opened under the Public Provident Fund Scheme (PPF), 1968, where residential status was not explicitly asked for, in that case, the POSA rates will apply. This rate will be given to such PPF accounts until September 30, 2024, with no interest after that.

Other Small Savings Account In The Name Of Minor:

Other small savings accounts, except PPF and Sukanya Samriddhi Account (SSA), when opened in a minor’s name, will earn POSA rates and be regularised with a simple interest rate, according to the guidelines.

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Sukanya Samriddhi Account (SSA) Opened By Grandparents Or Someone Other Than A Guardian:

As per the regularisation guidelines, if a grandparent opens an SSA account, the guardianship will be transferred to the natural guardian or parents if they are alive or a legal guardian. If a family has opened more than two Sukanya Samriddhi Accounts, the irregular account will be closed due to “contravention of the scheme guidelines”.

National Savings Scheme (NSS)-87 Account:

Besides PPF and SSA, two national savings scheme (NSS) accounts are being regularised. The NSS-87 accounts opened before April 2, 1990, will get the prevailing rate. The second NSS account will get the POSA rate and 2 per cent (200 basis points) on the outstanding balance, subject to conditions. From October 1, 2024, NSS-87 accounts will earn no interest, whether opened before or after April 2, 1990.

As per the guidelines, all the post offices must get the PAN and Aadhaar details of accountholders or guardians and record them in the system, before regularisation. So, the post offices must identify irregular accounts and inform the account holders.

The circle, regional, and division offices are asked to track the cases for regularization to keep the process smooth for account holders.