What is Pradhan Mantri Sukanya Samriddhi Yojana? All about PMSSY

Under the Modi government, India has been introduced to several innovative new schemes, each designed to make facilities such as healthcare, education and financial freedom more accessible. One such scheme is the Pradhan Mantri Sukanya Samriddhi Yojana scheme. It specifically focuses on creating a savings plan and nest egg for activities such as education and marriage expenses of girl children in India. The PMSSY scheme came into effect in 2014.

In a developing country like India, the birth of a boy is still more preferred than that of a girl, due to the perceived marriage and dowry (although still illegal) expenses. Sons are educated even at the cost of daughters, thus creating a wide gender gap in education and workspaces as well. It also leads to increased female foeticide.

The “Beti Bachao, Beti Padhao” scheme launched by the Modi government attempts to address these very issues and inequalities by making it easier to deposit small amounts in savings schemes dedicated specifically to daughters. These sums are also income tax-exempt and have attractive interest rates as well to encourage active participation from the less privileged segments of the society. The Pradhan Mantri Sukanya Samriddhi Yojana scheme falls under the wider “Beti Bachao, Beti Padhao” scheme.

Features of PMSSY

The PMSSY scheme is a deposit scheme for small amounts and is tax-exempt. The returns of the PMSSY are tax exempt as well. This account can be opened either at the time of the birth of a girl child or anytime until she turns ten years old.

The minimum deposit amount is INR 250, reduced from the earlier higher INR 1000 amount, as this might have been more difficult to arrange for much of the target audience. Thus, a minimum amount of INR 250 and a maximum amount of INR 1.5 lakhs can be deposited during any current financial year.

The main feature of this account is that it will remain open, or valid, for 21 years, either from its date of opening or till the marriage of the girl, after she turns 18, whichever event happens first.

This account can be opened in an valid branch of a commercial bank, if they provide this service, or else, at any post office across India. Since not all commercial banks may offer this service, it is advisable to check with them first.

Documents Required

Birth certificate of the daughter or any other proof of the legal relationship between the depositor/opener of the account and the child is required. This account can only be opened by a legal or natural guardian of the girl child, and not by any other well-wisher, friend or relatives who may wish to do so. Such an account may also not be opened after the daughter turns 10.

Furthermore, other usual documents of account opening such as proof of address, or residence, ID proofs and so on may also be required, depending on bank to bank. It is important to note that only one account per girl child can be opened and no more. This rule cannot be changed, even if different depositors want to open multiple accounts for the same girl child, as it will be seen as taking advantage of the specially lowered account rates and other rules.

Method of Deposits

Deposits can be made at any post office branch, or any branch of the commercial bank in which the account is opened.

They can be made in cash or by cheque; however, a minimum deposit of INR 250 is required to be able to open the account. Deposits can also not exceed INR 1.5 lakhs, in any given financial year. A minimum deposit amount of INR 250 per financial year is also mandatory to keep the account active and to operate.

Deposits can be made in multiples of 100, as many times as the account holder likes, as long as the total amount in a financial year does not exceed the maximum stated INR 1.5 lakhs. The deposits need to be made for a maximum of 15 years from the date of the account opening. For the remaining six years, until the account matures, after 21 years, the balance in the account will keep earning interest, but no more deposits are needed.

In case the minimum deposits of INR 250 have not been made in one, or a few years, there may be a penalty of INR 50 to be paid. If the penalty or penalties have not been paid either, the amount in the account, prior to the years of default, will keep earning interests of up to 4%, as specified by the government. These accounts are known as irregular accounts and can be regularised on payment of the penalties if any. If any excess interest has been paid, despite minimum deposits not having been made, this will be reversed as well.

Demand drafts are also an acceptable mode of deposit for the PMSSY. The account holder needs to write their name and account number to which the deposit needs to be credited on the back of a cheque or demand draft. They also need to provide their signature along with this information.

In some cases, the bank or post office may also accept e-transfers if they have the required facilities and infrastructure. For cheques and demand drafts, the date considered to be the encashment date will be taken as the date of credit to the account. However, in the case of e-transfers, the date of deposit is considered.

Interest Rate

The interest rate currently applicable to the PMSSY account is 8.5% down from 9.1 % when it was first introduced. The interest rate has fluctuated occasionally with respect to this scheme, and has even dipped to 8.1% in the past, but has been fairly attractive most of the time.

This interest rate is much higher than the rate provided by most commercial banks on their normal savings accounts, which will make this scheme much more attractive to the general population. The low deposit amounts will also help tremendously, as well as the fact that there is no minimum monthly deposit amount, which is a huge relief.  It allows some leeway in terms of the time and frequency of deposits.

Limitations

Although the introduction of this scheme and account has been warmly welcomed across all segments of the population, there are still a few limitations.

One of these is that the PMSSY account cannot be opened for an NRI girl child, as of now. It was not the case a few years ago at the time of the introduction of this account but has been made this way now, due to tax and other legality concerns.

The girl child also needs to provide an affidavit at the time of the account closing, which says that she is above 18 years old at the time of account closure. It is done to ensure that funds are not withdrawn for a child or illegal marriage purposes.

The account also allows only partial, i.e.,  up to 50% of the amount withdrawals before the account matures, which may make it a little difficult to access these funds before the closing of the account in case of emergencies.

Furthermore, the upper limit of INR 1.5 lakhs per financial year may also make it slightly inconvenient for those who may wish to deposit higher amounts or have different financial goals.

Conclusion

However, all in all, this account has proved to be an extremely well-thought and highly appreciated scheme, especially for the lower-income segments of the population. By easing some of the financial burdens on these families, this scheme has also ensured better care and wellbeing of these girl children, by making sure that they are not seen as burdens by their families. It has also prompted families to learn more about good financial planning and to save for future expenses.

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