Investment in PPF can be done as a lump sum or through 12 monthly payments with a minimum of Rs 500 and a maximum of Rs 1,50,000 during the entire financial year. In case of extension, in case of a written request made within one year of the maturity date of the account, the period of 15 years of the account may be extended for one or more blocks of five years without loss of interest.
PPF Account On fulfilling the eligibility, the holder can avail the loan facility in case of cash crunch.
Loan Against PPF
A PPF account holder is eligible to take a loan after the third financial year, however this option is available only till the end of the sixth financial year. However, one cannot take a loan for the full amount. A maximum of 25% of the amount available can be borrowed at the end of the two years immediately preceding the year for which the loan is being requested.
According to the India Post website, “The loan can be availed up to 25% of the balance in its credit at the end of the second year immediately preceding the year in which the loan is applied. (ie if availed during 2012-13) Loan, 25% of the loan balance as on 31.03.2011)
according to
Frequently Asked Questions, “Customers can avail the loan facility between the third financial year to the sixth financial year, i.e., from the third financial year to the end of the fifth financial year.”
Interest Rate on Loan Against PPF
The interest rate of loan from PPF account is 1% more than the interest rate fixed by the current government. If you visit your local PPF branch now to request a loan, the interest rate will be 8.1% (PPF interest rate is 7.1 percent).
Once the interest rate of the loan is determined, it will remain the same till the repayment period.
loan repayment period
The principal of a loan must be repaid in full within 36 months of the month starting with the first of the month following the month in which the loan was approved.
The principal amount of the loan should be paid before the end of thirty-six months from the first day of the month in which the loan was sanctioned. Repayment can be made in lump sum or in two or more monthly installments over a period of thirty six months.
The repayment will be credited to the customer’s account.
according to
website, “After the loan is fully repaid, the interest shall be repaid in not more than two monthly installments at the rate of one per cent per annum of the principal amount for a period commencing from the first day of the next month. The loan is taken till the last day of the month to repay the installment.
If the loan is not repaid or is only partially repaid within the allotted 36 months, interest will be charged at the rate of 6% instead of 1% for each year from the 1st day of the month in which the loan was availed. Last day of the month in which the loan is finally redeemed.
Can withdrawals be made on PPF account other than taking loans?
As per the rules for maintaining PPF account, withdrawal and loan are mutually exclusive. Loans are available to account holders only between the third and sixth year of active account holding, with partial withdrawals allowed from the seventh year onwards. This means you cannot take a loan after the seventh year, and you cannot make a withdrawal before the sixth year.
Note that while the scheme was designed to encourage savings, and while loans and withdrawals are allowed up to some level to allow for some liquidity, the scheme does not in general encourage a reduction in savings potential.
It is to be noted that only one loan can be taken in a financial year, and the second loan will not be issued until the first loan is repaid. The loan can be taken only once per year even if the loan is repaid in the same year as the loan amount is fixed for each year.