National Savings Certificate (NSC) issue IX, which had a term of ten years has been discontinued. The move was approved and notified by the Ministry of Finance on 1 December 2015 and the postal department stopped issuing these certificates 20 December 2015 onward.
Observers believe that the instrument was discontinued because it locked-in the government into a long-term commitment in a falling rate regime.
The small-savings instrument that was launched in the December 2011 were available in denominations of Rs 100 to Rs 10,000 that offered a rate of interest of 8.80%. This was higher than the 100 months Kisan Vikas Patras which offers a 8.7% per annum. The Public Provident Fund ( PPF), another long-term savings instrument with 15-year lock-in, also provides a rate of 8.7%, but the rates get revised every year. On the other hand, the NSCs guaranteed the same rate for the whole investment term.
Although the interest rates of small savings schemes have been linked to the bond yields in the secondary market, the 10-year NSC meant that the buyer locked in at a rate that remained fixed for the rest of the tenure. So, while the rates for NSC were revised, they were effective only for the NSCs issued for that particular year. It, therefore, seems the government is trying to avoid issuing long-term contracts.
TThe five-year NSCs still remain in continuation. They offer an interest rate of 8.5% and accept deposits Rs 100 onward. These NSCs can be purchased by any adult for himself or on behalf of a minor. These single-holder certificates come in smaller denomination than the KVP, which requires a higher minimum investment deposit of Rs 1,000. Also, the deposits qualify for I-T rebate under Section 80C of Income Tax Act.
Source:-The Economic Times
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