Disadvantages of Public Provident Funds


Public Provident Funds, also known as PPF is a fairly good scheme in terms of small savings.  However, just like anything has its own disadvantages, PPF too has a number of demerits that may not meet your specific needs. It is rightly said that an advantage for some can be a disadvantage for many.  In this article, we would discuss about few short comings of this much popular saving scheme and Disadvantages of Public Provident Funds.

Disadvantages of Public Provident Funds

Disadvantages of Public Provident Funds

There we have to list the 5 Reasons why you may not opt for Public Provident Funds (PPF) and what is the Disadvantages of Public Provident Funds.

  1. Less or No Liquid Cash

Liquid Cash to be available anytime and every time is the need of every middle and lower income individual in India.  As per the PPF scheme, you need to keep investing till the 7th year when you can start withdrawing the money.

Even after 7th year, only 50 per cent of the accumulated amount can be transferred.  This long span of investment stops many investors from pouring money in their PPF account.  They can’t use their money till 7th year.

  1. Hindu Undivided Family and Trusts are not eligible to open PPF Account

While opening of PPF account was permissible for Trusts and Hindu Undivided Families (HUF), the facility is no more available.  This is one of the shortcomings of the scheme.  These groups now have to look for alternative modes of investment.

  1. Joint Accounts not allowed under PPF Scheme

One another disadvantage of PPF scheme is that joint account holders can’t apply together for the scheme.  The entire basis of joint account services offered by several banks fails with this restriction.  However, joint account is certainly permissible in case of opening an account with a minor.  The PPF account holder can also nominate someone for the account, which is an alternative for joint account.

  1. No PPF Accounts for NRIs (Non Resident Indians)

PPF account is not permitted for Non Resident Indians.  NRIs bring in a lot of foreign exchange to the domestic economy and thus such schemes could have been a great source of investment. This is a big Disadvantages of Public Provident Funds.

However, those who opened a PPF account at the time of them being an Indian Citizen and later became an NRI can continue to operate their PPF account in the same manner and are eligible to get the proceeds accordingly. You can also read the article Public Provident Fund/ PPF for NRIs

  1. The maximum investment cap of Rs 1.5 lakh

Considering the devaluation of Rupee in the recent past, a lot of economist believe that the maximum limit of PPF investment, i.e. Rs 1.5 lakh is a little on the lower side.  This amount is not really a substantial amount in terms of modern well earning Indian youth.  If the investment would be less, so would be the returns.

  1. Not an appealing choice for those already contributing to other provident funds

There are a lot of government as well as multi national employees who already contribute to GPF or other provident funds, made compulsory by their employers.  This section of population hardly feels any need to open up a fresh PPF account altogether. This is the very big Disadvantages of Public Provident Funds.

Inspite of having the above mentioned shortcomings or so called disadvantages, PPF still continues to be the number one choice if we talk about small saving investment scheme for the lower and middle income group.  The complete EEE tax exemption coupled with a high rate of interest makes it a preferred choice.

In the our article Disadvantages of Public Provident Funds discuss about the all the disadvantages of PPF. If you have any query so ask us.

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