Regularization of accounts opened in deviation to Rules – Guidelines

Regularization of accounts opened in deviation to Rules stipulated under National Small Savings Schemes for select Schemes– Guidelines

On July 12, 2024, the Ministry of Finance, Department of Economic Affairs, Budget Division, issued crucial guidelines regarding the regularization of accounts under the National Small Savings Schemes (NSS). These guidelines are intended to address irregularities in account openings and ensure that they comply with the rules.

F. No. 14/1/2018-NS-Part(1)  Dated 12th July 2024
Issued by Ministry of Finance, Department of Economic Affairs, Budget Division

Key Highlights

1. Authority to Regularize:
   • The power to regularize irregular small savings accounts lies solely with the Ministry of Finance. Operating agencies, such as the Department of Posts and agency banks, are required to forward cases of irregular accounts to the Ministry for approval.
2. Categories of Irregular Accounts:
   1. Irregular NSS Accounts:
      • Two NSS-87 Accounts Opened Before April 2, 1990: The first account will receive the prevailing scheme rate, while the second account will receive the Post Office Savings Account (PoSA) rate plus 200 basis points on the outstanding balance. These conditions are valid until September 30, 2024. From October 1, 2024, both accounts will earn zero interest.
      • Two NSS-87 Accounts Opened After April 2, 1990:The first account will earn the prevailing scheme rate, and the second account will receive the PoSA rate on the outstanding balance. Similar to the above, these accounts will earn zero interest from October 1, 2024.
      • More Than Two NSS-87 Accounts:No interest will be paid on the third or any subsequent accounts. Only the principal amount will be refunded.
   2. PPF Account Opened Under Minor’s Name:Such accounts will earn PoSA interest until the minor turns 18. The maturity period will be calculated from the date the minor becomes an adult.
   3. More Than One PPF Account:
      • The primary account chosen by the investor will earn the scheme rate of interest, while the balance in the second account will be merged with the primary account, subject to the applicable ceiling.
   4. Extension of PPF Account by NRIs:
      • Active PPF accounts held by NRIs, opened under the PPF Scheme, 1968, will earn PoSA interest until September 30, 2024. After this date, the account will earn zero interest.
   5. Small Savings Accounts in a Minor’s Name (Except PPF and SSA):
      • These accounts may be regularized with simple interest at the prevailing PoSA rate.
   6. Sukanya Samriddhi Accounts (SSA) Opened by Grandparents:
      • If accounts were opened by grandparents who are not legal guardians, guardianship must be transferred to the natural or legal guardian. Irregular accounts exceeding the allowed limit of two per family will be closed.
3. Compliance Measures:
   • The Department of Posts and agency banks must obtain PAN and Aadhaar details of account holders or guardians before applying these new guidelines. They are also instructed to proactively identify and regularize such cases to minimize inconvenience to account holders.

Implementation

The guidelines, approved by the competent authority, are to be implemented immediately by the Department of Posts and agency banks. These entities must also inform account holders about the new rules through available communication channels.