There are not many things I dislike more than policy flip-flops. You cannot make a decision if the Government, bureaucracy or the regulator is trigger happy. Something similar has happened to policy on NRIs holding PPF accounts.
Add to that, incompetence and non-customer-centric outlook of many bankers, the misery of an honest taxpayer and investor can only compound.
In its notification dated October 3, 2017, the Government had specified that NRIs cannot continue their PPF accounts and will have to close their PPF accounts. If such PPF accounts were not closed, the PPF accounts will earn an interest rate of a savings account. Many NRIs rushed to banks to close their PPF accounts and face many hassles. I will talk about this later.
Now, the notification dated October 3, 2017 has been put on hold. This has been notified on February 23, 2018. We will discuss later what this means.
You can read the Government notification dated February 23, 2018 here.
Let’s look at the imeline of PPF policy for NRIs.
#1 Before October 3, 2017
NRIs could not open PPF accounts. However, the PPF accounts that were opened before becoming a non-resident could be continued till maturity.
NRIs were not allowed to extend their PPF accounts.
NRIs earned the same rate of interest on PPF accounts as residents.
#2 After October 3, 2017 notification
NRIs have to close their PPF accounts. With this notification, they couldn’t even continue their accounts till maturity. Therefore, as soon as you become an NRI, you have to close your PPF account. If you (NRI) didn’t close the account, you will earn the interest of a savings bank account on your PPF balance.
In my opinion, this was a senseless move.
Adding to the misery, bank officials and policies started wreaking havoc on hapless investors.
When NRI investors turned to banks, they were first told that there is no such communication.
Here is comment dated December 7, 2017.
However, when bankers finally got their policy in line with Government notification, at least some of the banks gave 4% from the inception of the account (and not from the date of notification), which made little sense. In my opinion, such a notification can’t be retrospective. But bankers don’t care. Not everyone can put in time and effort to take the fight to the bank.
Here are a few comments.
Final nail in the coffin
You can read about the notification and many comments from upset investors in the following post. (NRIs have to close their PPF accounts)
#3 From February 23, 2018 until further notice
The notification dated October 3, 2017 that prohibited NRIs from owning PPF accounts has been put on hold.
This means we are back #1 where NRIs can continue to hold their accounts till maturity.
Though I feel it is a sane move, this notification should have come much earlier and not after almost 5 months.
However, what about the problems that many NRI investors faced? Many were perhaps even asked to visit bank branches to close PPF accounts. I am sure most of them stay abroad.
What about those investors who closed their PPF accounts because of the notification?
What about those investors who were given a meager 4% instead of the regular PPF interest rate? I believe though, such investors can get back the full interest if they fight for it.
Who will answer to them?
What should you do?
If you are an NRI holding a PPF account, there is no rush to close it now. However, in my opinion, you should not make any meaningful contributions from now on in PPF account.
The notification dated October 3, 2017 has simply been put on hold. For all you know, it may be put in place all over again after a few months.
If you are resident and believe that you will become an NRI in the near future, do not open a PPF account. If you already own one, you can’t do much about it.