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  • Sunil Dhawan

Scared of PMC bank-like crisis? Invest in these four options for 100% safety of your money

Safest Investment in India: Amidst the PMC bank crisis, the concern about the safety of money in the banks has once again emerged. Although there is a limit of Rs 1 lakh on deposit insurance in each of the banks, there has not been any instance in the past where a scheduled commercial bank had collapsed and depositors had lost their money. There were instances of bank failures but they were merged with other banks and thus no depositor lost their money. Currently, under the Deposit Insurance and Credit Guarantee Corporation (DICGC) scheme, bank deposits such as money in a savings account, current account, recurring deposit, bank fixed deposit etc are insured up to Rs 1 lakh, including principal and interest.

However, if you are looking for 100 per cent assurance and safety of the entire principal invested, there are government-backed investments to invest in. Here are a few of them:

1. GOI 7.75% Bonds

Government of India issues 7.75 per cent Savings (Taxable) Bonds with a tenure of 7 years. Even as bank fixed deposit interest rates are falling, this investment option may appear attractive over the long term. The interest is paid either half-yearly or on maturity and is taxable in the hands of the investor. Under the cumulative option, where the interest is paid only on maturity, on an investment of Rs 10 lakh invested., the maturity value is Rs 17.03 lakh in 7 years.

2. Post office schemes

With RBI cutting the policy repo rate by 135 basis points since January 2019 and signalling more rate cuts in the near future, the rate cycle seems to continue its downward trend. However, the government has kept the Post office small savings interest rate for the quarter ending December 2019 the same as they were for September ending quarter. This gives an opportunity for investors to lock-in funds at competitive rates for a longer duration. Incidentally, India Post has recently introduced mobile banking facility for post office savings account holders through which they can invest in PPF, Time Deposits etc.

PO time deposits for 1,2 and 3 year period is offering 6.9 per cent while the 5-year deposit is at 7.7 per cent. The 5-year Senior Citizens Savings is currently offering 8.6 per cent, while 5-year NSC is giving 7.9 per cent. Being backed by the government, the post office schemes offer the highest safety to investors. Sukanya Samriddhi Yojana aimed for girl child needs is offering 8.4 per cent and also has tax benefits to offer, while the Public Provident Fund (PPF) is currently offering 7.9 per cent per annum annual compounding.

3. Government securities

Government securities are issued by the government, therefore, investing in G-Sec is entirely safe. This, however, is subject to the condition that the investor holds them till their maturity. G- Sec can be bought or sold in the secondary market i.e. through NSE platform and may result in loss or gain depending on the price of the bonds. Once held until maturity, the investment is 100 per cent safe for the investor.

4. Pradhan Mantri Vaya Vandana Yojana (PMVVY)

PMVVY is offering a guaranteed return of 8 per cent for 10 years and one can get a regular income on a monthly, quarterly, half-yearly or on a yearly basis. The PMVVY scheme is government-backed and is available only with LIC. The last date of PMVVY is March 31, 2020. The total amount of pension or the purchase price under all the PMVVY policies allowed to a family cannot exceed Rs 1.2 lakh per annum (Rs.10000 Pension per month ) or Rs 15 lakh respectively.

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