Oh, and we will also tell you the heart-breaking story of the little boy Amal from Rabindranath Tagore's, The Post Office.
IN TODAY'S NEWSLETTER
The post office - Scene 1
Post office savings schemes
The Post Office - Scene 2
PO Insurance schemes
The post office - Scene 3
PO Pension schemes and other schemes for senior citizens
BEFORE YOU DIG IN...
Is your money safe with the post office?
The answer to that question can be found in this passage from "The Post Office of India and its Story", 1918, Geoffrey Clarke.
"An Indian coolie in Burma, who has saved a few hundred rupees and wants to return to his village, seldom carries the money on his person, and he has a strange mistrust for banks; He usually goes to a post office and sends to himself a money order addressed to the post office nearest his own home and then he is satisfied. It may be months before he turns up to claim the money, as he frequently gets a job on the way back or spends some time at a place of pilgrimage, but he knows that his money is safe enough."
It was true in 1918, it is true more than 100 years later today in 2020.
THE POST OFFICE - SCENE 1 (By Rabindranath Tagore)
Madhav and his wife have adopted Amal, a little boy who lost both of his parents. The poor boy has a medical condition which has made him very sick. The doctor who comes in to see him says to Madhav that the boy needs to be kept indoors to protect him from the wind and sun. Heartbroken, Madhav tells Gaffer, his friend, that the boy may not live very long. Amal yearns to go out, climb the hills and go up the streams wading through water. But Madhav tells the boy that the learned doctor has said that he should not be going out.
So, Amal sits by his little window peeping out into the world. A dairyman passes by shouting, “Curds, curds, good nice curds”. Amal calls him asking the dairyman to tell him about his village up the hills by the river. The boy gawks dreamily as the dairyman describes it to him. Amal tells him that when he gets well, he too will become a dairyman carrying curd along the red road by the banyan tree hawking it from cottage to cottage.
The watchman passes by next and Amal calls him. The boy asks him, “what's going on there in that big house on the other side?”. The watchman says, “Oh, there? That's our King’s Post Office.” The watchman says to Amal, “One fine day there may be a letter for you in there from the king”. The boy’s curiosity knows no limits. He enquires out about the postmen who go across the country delivering letters from one house to another. Amal tells the watchman that that’s what he will be when he grows up, a post man.
POST OFFICE SAVINGS SCHEMES
India post’s savings account (SB) - Currently offers an interest rate of 4.00% per annum. You can have all the regular stuff SB accounts come with including mobile banking, phone banking, missed call banking, internet banking and ATM card. There’s more, you can get doorstep banking too! Who else can do that
5-year post office recurring deposit account (RD) - Pays 5.8% interest per annum (compounded quarterly). Interesting feature - After paying into the account for 1 year, the depositor can avail a loan for up to 50% of the balance credit in the account. The RD can be closed prematurely (with a penalty) after 3 years from the date of account opening.
National Savings Time Deposit Account (TD) – Same as fixed deposits offered by banks. It offers 6.7% interest rate rate on 5 year deposits and 5.5% for tenure less than 5 years. Section 80C benefit on income tax applies to the 5-year deposits only.
National Savings Monthly Income Account (MIS) – This is kind of like a fixed deposit, except it pays (taxable) interest each month. It offers 6.6% per annum payable monthly and comes with a maximum account value of Rs.4.5 Lakhs (single) or Rs.9 Lakhs (joint). The account comes with a lock-in period of 5 years and pre-mature closure attracts penalties.
15-year Public provident fund account (PPF) – People looking to save for the long term (15 years can put upto Rs.1.5 Lakhs per annum into this account which earns 7.1% (tax free) interest per annum. The great thing about this account is that the holder can borrow upto 25% of his/her account balance at a rate of interest of just 1% (repayable within 3 years).
Sukanya Samriddhi Account (SSA) – This is for those of you with girl children younger than 10 years of age. It currently offers 7.6% (tax free) interest per annum. The account fully matures when the girl child turns 21 years old.
5-years National Savings Certificate (NSC) – Currently offers 6.8% interest rate and comes with a 5-year tenure. Investments and interests earned on NSC are both eligible for income tax benefits under Section 80C. Premature closure is only allowed in extreme circumstances, but they can be used as collateral for loans with most banks and NBFCs.
Kisan Vikas Patra (KVP) – This is a fixed deposit, with a twist. The name is a bit misleading, but it is open to everyone. The maturity time period is the amount of time it takes for an investment to double. The interest rate however varies. It currently offers 6.9% interest per annum and consequently it takes a little over 10 years for an investment of Rs.1,000 to double.
QUICK SUMMARY - POST OFFICE SAVINGS SCHEMES
Post office savings account
1, 2 & 3 Years Time Deposit
5 Year Time Deposit
5 Year Recurring Deposit
Monthly Income Account
National Savings Certificate (NSC)
Public Provident Fund
Kisan Vikas Patra
Sukanya Sanriddhi Account
THE POST OFFICE - SCENE 2 (By Rabindranath Tagore)
The village headman passes by and Amal calls him. He asks the headman if he’d tell the postmen that it is Amal who sits by the window in case there is a letter for him from the king.
Sudha, the daughter of the flower-seller passes by next. She tells Amal that she picks flowers from the trees and the boy tells her that he wishes to be out with her as well. Sudha promises to come back and let him have a flower.
A bunch of boys pass by the road and Amal pleads them to come and play in front of the window. He offers them all the toys he has and watches them play with it. Amal asks them about the postmen and the boys tell him that the King’s postmen will surely find him if Amal’s name is on the letter.
Gaffer, Madhav’s friend, comes to see Amal dressed up as a fakir. He tells the boy about the Isle of Parrots he’s has just been to, the magical land, a haunt of birds where there are no men, no speaking nor walking – just birds flying and singing. The boy imagines the place to be by the sea with water falling down the hill on little pebbles. Amal says, “I can see it all: there, the King's postman coming down the hillside alone, a lantern in his left hand and on his back a bag of letters climbing down for ever so long, for days and nights, and where at the foot of the mountain the waterfall becomes a stream he takes to the footpath on the bank and walks on through the rye. I can feel him coming nearer and nearer and my heart becomes glad.”
Just then, the village headman walks into the room with a letter in his hand.
Pradhan Mantri JeevanJyoti Bima Yojna(PMJJBY) is a rather simple and easy to get life insurance policy offered by LIC and marketed through banks. The post office also offers this scheme. For a total coverage of Rs.2 Lakhs, an insurance premium of Rs.330 is charged per year. People between the age of 18 and 50 can join thescheme.
Pradhan Mantri Suraksha Bima Yojna(PMSBY)is the government’s accident insuranceschemeoffered by LIC and marketed through the post office. All savings bank account holders between the age of 18 and 70 can join the scheme to get coverage for death/disability due to an accident up to a maximum value of Rs.2 Lakhs. The premium charged is Rs.12 per year and covers death, loss of eye(s), hand(s) or leg(s).
Postal Life Insurance Schemes - Apart from these, the post office offers their own in-house insurance schemesto most employed individuals. There are 5 different endowment schemes in offer depending upon what you want - Suraksha, Santosh, Suvidha, Sumangal & Yugal Suraksha (we want them all 🙂 ). A quick calculation suggests that some of these schemes (whole life assurance Suraksha) can be cheaper than that offered by mainstream insurance companies. However, some of them like the endowment assurance (Santosh) are intended to be more of a savings product than insurance.
Which one should you buy? That entirely depends on what you want. Our recommendation for a young individual looking to get insurance is this - Buy a term life insurance policy that will cover your family’s expenses and any outstanding obligations till at least 5 years before the age of your retirement. While endowment policies have the benefit of a guaranteed payback in case of survival, the premium tends to be higher than term insurance policies and the rate of return offered in such policies are typically lower than what you will get if you invest your money in an equity mutual fund.
“It is possible to buy mutual funds from post office.”
THE POST OFFICE - SCENE 3 (By Rabindranath Tagore)
Just then, the village headman walks into the room with a letter in his hand from the king. The fakir reads the letter to Amal and says that the King is coming to see him tonight. The king’s herald walks in and says that the king has sent for his best physician to attend to his young friend. The boy’s face starts looking paler and paler by the hour. The king’s physician arrives, opens up the curtains and the windows and lets the light from the moon and stars in. He asks Amal if he will be able to go with the king when he arrives. Amal says that he has been dying to be out & about for so long.
The little boy looks at Madhav and says, “I shall ask the king to make me one of his postmen that I may wander far and wide, delivering his message from door to door.” The physician asks everybody in the room to be quiet.
He says, “Sleep is coming over him. I'll sit by his pillow; he's dropping into slumber.”
Sudha walks into the room with flowers in her hand for Amal.
“He’s asleep”, says the physician.
“When will he be awake?”, asks Sudha.
“Directly when the king comes and calls him”
Sudha says, “Will you whisper a word for me in his ear?”
“What shall I say?”, says the physician.
“Tell him Sudha has not forgotten him
PO PENSION SCHEMES & OTHER SCHEMES FOR SENIOR CITIZENS
Atal Pension Yojna(APY) is the government’s flagship pension scheme for people in the unorganised sector. If you are between 18 and 40, you are eligible to subscribe to it through the post office by making a monthly contribution. At the age of 60, your contributions will earn a life long-pension of between Rs.1,000 to Rs.5,000 depending upon how much you put in.
National Pension Scheme – The post office also offers the government’s national pension scheme which was opened up for all in 2009. It works as advertised. You will have to make a minimum contribution of Rs.500 into the account each month. An additional tax benefit of Rs.50,000 for investment in NPS applies. You can read all about the NPS scheme here.
For Pensioners and Other Senior Citizens
Digital Life Certificate - For 70 bucks, the post man will come to your door step to get your Pramaan ID done for submission to your pension disbursing agency. The Post Info app will let you schedule this appointment with your postman.
Senior citizens savings scheme account (SCSS) – Open to anyone over the age of 60 and wants to enjoy 7.4% interest rate per annum (current rate, subject to change). The account has a maximum limit of Rs.15 Lakhs per person. Interest on principal is paid quarterly and enjoys tax benefits under Section 80C. This also comes with a 5-year lock in period.
Payments bank – The post office also operates a payments bank called the IPBB which offers bill payment facilities (mobile, DTH, utilities etc), NEFT, IMPS, RTGS and UPI.
ANSWER TO QUIZ
It is indeed possible to buy some mutual funds from some post offices. Select schemes of UTI mutual fund are being marketed through the post office. The agency recently won an award from UTI and CNBC for enabling last mile access for mutual funds in India.
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