Foundation — Savings, insurance, pension and borrowing schemes of the Government

Chapter 9 — Government Schemes for Various Savings and Investment Options

In plain words: the Government takes your deposits. Some of these deposits also save you tax. Each scheme runs for its own time and pays its own rate.

This is a list chapter. It has five parts:

• A — government savings schemes.
• B — basic insurance schemes.
• C — other savings schemes.
• D — a pension scheme.
• E — borrowing schemes.

Do not learn them as one long list. Learn each one by the thing that sets it apart. That may be the age band, the rule on who can join, or the one thing only that scheme does.

A. Government schemes

Sukanya Samriddhi Yojana

This scheme is for a girl child. A parent or guardian opens it for her.

Two figures matter most. The child must be 10 or less when the account is opened. Money can be taken out for education or marriage only after 18.

Pradhan Mantri Jan Dhan Yojana (PMJDY)

Put simply: Jan Dhan is for people who have no bank account. It gives them a bank account and, through it, cheap access to savings, sending money, loans, insurance and pension.

What the account gives you:

• A zero balance account.
• A RuPay debit card.
• Accidental insurance cover and a life cover of a certain amount. It is paid on the death of the account holder, subject to conditions.
• An overdraft facility up to a certain amount. It is available against ONE ACCOUNT PER HOUSEHOLD.
• Mobile banking, to check your balance and send money anywhere in India.
• Interest earned on the deposits.
• No rule to keep a minimum balance.
• Direct Benefit Transfer, so government scheme money comes straight into the account.
• Easy access to pension and insurance products.
• One condition: "To get a cheque book, the individual will have to fulfil MINIMUM BALANCE CRITERIA".

That last point is the exception. The account needs no minimum balance. A cheque book does.

In other words, an overdraft is a small, short loan from your bank for an urgent need. You repay it by the agreed date.

Recall Chapter 4. The Business Correspondent is "a representative of a bank who goes to customers, usually in remote locations/villages". That is how Jan Dhan reached villages that have no bank branch.

B. Basic insurance schemes run by the Government

There are four schemes here. Three of them differ mainly by age band, and that is what examiners test.

1. Pradhan Mantri Suraksha Bima Yojana

• It gives ACCIDENT insurance cover to bank account holders aged 18 to 70.
• You pay a fixed yearly premium. The bank takes it by auto-debit from your account.
• You can join through ONE savings bank account only.
• "Insurance covers PERMANENT AND PARTIAL DISABILITY due to accident".

2. Pradhan Mantri Jeevan Jyoti Bima Yojana

• It gives LIFE insurance cover to bank account holders aged 18 to 50.
• The fixed yearly premium is taken by auto-debit.
• You can join through one savings bank account only.

Suraksha = accident, 18–70. Jeevan Jyoti = life, 18–50. Learn the two as a pair.

3. Pradhan Mantri Jan Aarogya Yojana — Ayushman Bharat

This is a health scheme for poor families.

• It gives healthcare facilities to poor, deprived rural families and identified occupational category of urban workers' families.
• "There is NO RESTRICTION ON FAMILY SIZE, AGE OR GENDER".
• Every member of an eligible family as present in the SECC (Socio-Economic Caste Census 2011) database is covered automatically.
• "NO MONEY NEEDS TO BE PAID by the family for treatment in case of hospitalization".
• "ALL PRE-EXISTING CONDITIONS ARE COVERED FROM DAY ONE of the policy".
• The benefit includes costs before and after a hospital stay (pre and post hospitalization expenses).
• Treatment is free at public or empanelled private hospitals across the country.

Two of these points are unusual for insurance, so they are examined. There is no limit on family size, age or gender. And all illnesses you already had are covered from day one. A normal commercial health policy does neither.

4. Pradhan Mantri Fasal Bima Yojana

This is crop insurance. It protects farmers when a crop fails.

How the payout works, in the workbook's words:

Put simply: the scheme works out a normal crop from the last seven years. If your actual crop is smaller, you are paid for the gap.

• "The scheme is COMPULSORY for farmers who have availed of INSTITUTIONAL LOANS". So a farmer who has taken a loan from a bank or similar lender must join.
• "Scheme covers POST-HARVEST LOSSES UP TO A PERIOD OF 14 DAYS".

It insures against these risks:

Three things to remember: seven years for the threshold yield, 14 days of cover after harvest, and compulsory for farmers with institutional loans.

C. Other savings schemes

Kisan Vikas Patra

• It is a small saving certificate scheme from INDIA POST. It is designed to DOUBLE THE INVESTMENT after a predetermined time.
• Its aim is "to inculcate LONG TERM FINANCIAL DISCIPLINE in people". In plain words, to build the habit of saving for the long run.
• The minimum is ₹1,000. You invest in multiples of ₹100. There is NO MAXIMUM LIMIT.
• "Certificate can be purchased by ADULT and also MINORS ABOVE 10 YEARS of age".
• You buy it from a post office.

Note what is not said. KVP is not described as a tax-saving product. It is a doubling certificate.

Public Provident Fund (PPF)

• It is a TAX FREE savings scheme offered by the Government of India.
• You can open it at a post office or any nationalized or private bank.
• "JOINT ACCOUNT CANNOT BE OPENED and ONLY ONE ACCOUNT can be opened by a citizen in India, along with NOMINATION FACILITY".
• What you put in qualifies for a deduction under Section 80C, up to a certain limit.
• "Investors can also avail LOANS AGAINST a particular amount of their investments made in PPF account".

National Savings Certificate (NSC)

• It is a Government of India scheme "primarily to invest while SAVING ON INCOME TAX".
• "Can be opened from ANY POST OFFICE and NSCs will be issued in shape of PASSBOOK".
• "JOINT ACCOUNT ALLOWED, can be opened by an ADULT ON BEHALF OF A MINOR".
• Deposits qualify for a Section 80C rebate.

The PPF and NSC contrast is a favourite question:

D. Pension scheme — Atal Pension Yojana

• It is a pension savings scheme for CITIZENS IN THE UNORGANIZED SECTOR. It "may be opened for ALL BANK ACCOUNT HOLDERS".
• Its aim is "to provide a FIXED AMOUNT OF PENSION to unorganized sector workers, who find NO COVERAGE UNDER OTHER SOCIAL SECURITY SCHEMES". These are workers with no other pension or social security.
• "Minimum age of joining the APY is 18 YEARS and the maximum age is 40 YEARS".

The exit rule, in the workbook's words:

So you normally stay in until 60. The two exceptions are death and terminal disease. If the member dies, the husband or wife can carry on.

APY: join at 18–40, exit at 60. Compare NPS from Chapter 7: 18–60. The two pension schemes have different joining ages, and questions are built on that difference.

E. Borrowing related schemes

Educational Loans through the Vidyalakshmi Portal

• Its aim is "to provide easy and effective system of getting educational loans so that NO STUDENT LEAVES HIS OR HER EDUCATION MID-WAY DUE TO LACK OF FUNDS".
• Web address: www.vidyalakshmi.co.in.
• Students get information about the education loan schemes of banks.
• A COMMON education loan application form is available.
• "There is a provision to apply to VARIOUS BANKS for educational loans THROUGH A SINGLE FORM". One form reaches many banks.
• It is linked to the NATIONAL SCHOLARSHIP PORTAL. Students can find and apply for government scholarships there.
• Students can check the status of their loan application at any time on a dashboard.

Pradhan Mantri Awas Yojana

• It is a CREDIT LINKED SUBSIDY SCHEME (CLSS). It helps Lower Income Groups / Economically Weaker Sections (EWS/LIG) and Middle Income Groups.
• "Individuals are eligible to avail subsidy through this scheme ONLY WHEN THEY ARE PURCHASING THEIR FIRST HOUSE or it is a NEW CONSTRUCTION".
• The property must follow the guidelines set by the scheme from time to time.

You are not eligible in any of these cases:

• Your family has already received central help under any housing scheme.
• You already own a house in India, in your own name or a family member's name.
• Your spouse is also claiming interest subsidy for a house.

Pradhan Mantri Mudra Yojana (PMMY)

• It gives business loans to owners of small and medium enterprises (proprietors or entrepreneurs).
• There are three loan schemes: SHISHU, KISHOR and TARUN. They differ "depending upon the AMOUNT OF LOAN availed".
• Key documents: proof of identity, a quotation of items purchased, and category certificates.

Who can borrow — the non-corporate small business segment:

SHISHU, KISHOR and TARUN differ by the size of the loan. The names run from smallest to largest, like stages of growing up.

Stand Up India

• "Scheme for financing SC/ST AND/OR WOMEN ENTREPRENEURS ABOVE 18 YEARS OF AGE".
• Its aim is "to facilitate bank loans to the above mentioned target groups".
• The loan is for "setting up a NEW ENTERPRISE in MANUFACTURING, TRADING OR SERVICES sector".

Note the words new enterprise. Stand Up India pays for starting a business, not for one that already exists.