Andhra Bank is a public-sector financial institution in India, with branches across 25 states and 3 Union Territories. In April 2020, Andhra Bank merged with the Union Bank of India, in line with the Finance Ministry’s announcements. Individuals can access an array of financial services with this banking institution, including investing in Andhra Bank PPF accounts.
What is a PPF Account with Andhra Bank?
The Public Provident Fund is a GOI-sponsored savings instrument, which allows individuals to contribute a certain sum periodically until maturity, and earn lucrative returns and benefits. Andhra Bank, including several other financial institutions in India, hosts this scheme. People can start investing their idle funds into a PPF account in Andhra Bank to secure a nest egg for retirement or any other long-term objective.
Who is Eligible for an Andhra Bank PPF Account?
PPF with Andhra Bank is functional under the guidelines of the Public Provident Fund Scheme, 2019. This act stipulates the following conditions concerning eligibility –
- HUFs and NRIs cannot open a PPF account with Andhra Bank or any other financial institution.
- Individuals with valid Indian citizenship above 18 years qualify for this scheme.
- Individuals below 18 years, i.e. minors, can also open a PPF account, provided their legal/natural guardian represents them.
A person cannot hold more than one account under his/her name. However, accountholders can keep one PPF account under their name, and represent a minor.
How to Open PPF Account in Andhra Bank?
Individuals can open an Andhra Bank PPF account by adhering to the following steps –
- Visit the nearest Andhra Bank branch and acquire Form A, which is the application form.
- Alternatively, one can download Form A from Andhra Bank’s official website.
- Fill out the form with details as presented in relevant official documents.
- Provide such form along with pertinent documents and their photocopies to the nearest branch.
- Also, provide Rs. 500 in cash or cheque for account opening.
The official overseeing such application will verify an applicant’s credentials subsequently. An applicant will need to provide such documents as mentioned below –
- Address proof
- ID proof
- Form E
- 2 photos (passport-sized)
Form E is necessary when declaring nominee(s), which can be done at the time of opening an Andhra Bank PPF account or later during the maturity period. It is also possible to declare shares of each nominee in such a form.
What are the Salient Features of PPF Account in Andhra Bank?
- Limit of contributions
It’s mandatory to deposit a minimum of Rs. 500 per year in an Andhra Bank PPF account throughout the tenure. One can contribute several times a year in this scheme. However, the total amount an accountholder can invest is capped at Rs. 1.5 lakh yearly.
If an individual represents a minor alongside holding his/her own PPF account, combined deposits in both these accounts cannot exceed Rs. 1.5 lakh per year either.
- Maturity tenure
An Andhra Bank PPF account matures after 15 years from the date of opening it. An individual is not allowed to close such an account before that period under normal conditions. However, it is possible to prolong this maturity period by 5-year blocks without any limit. For example, a person can choose to continue his/her PPF account by another 15 years (three 5-year blocks).
- Deposits in the extended period
An account holder can choose not to further deposit any sum during such period post initial maturity. However, as per the new guidelines of the PPF Act, 2019, individuals cannot contribute any amount to their accounts if more than 1 year passes in such extended maturity period. For example, if Priti decides to extend her PPF account in Andhra Bank from 2020 – 25 and does not deposit any sum from ’20 – ’21, she is ineligible to contribute going further until ’25.
- Withdrawals before maturity
Individuals can withdraw from their PPF accounts in Andhra Bank from the 7th year as counted from such date of account opening. Withdrawals are limited to the lower of the following –
- 50% of the balance at the end of the 4th year immediately prior to such withdrawal.
- 50% of the previous year’s closing balance.
However, premature withdrawals are limited to only once a year.
- Loan against PPF
Accountholders can avail of a loan against their PPF balance. However, the window for such a loan facility is from the 3rd – 6th year of account opening. Moreover, individuals cannot borrow more than 25% of the amount in their account in the financial year’s end, that’s two years before the date of application.
Let’s consider Mr Ranjan has opened a PPF account in Andhra Bank in FY16. This following table illustrates the balances at each year’s end till 2021.
|Year||Opening balance (rs.)||Total deposit (Rs.)||Closing balance (Rs.)|
|2015 – 16||0||50,000||50,000|
|2016 – 17||50,000||100,000||150,000|
|2017 – 18||150,000||70,000||220,000|
|2018 – 19||220,000||80,000||300,000|
|2019 – 20||300,000||100,000||400,000|
|2020 – 21||400,000||50,000||450,000|
Note – This example does not include the interest for ease of understanding.
Now, if he applies for a loan in FY18, he can avail only up to Rs. 12500, since that’s 25% of FY16’s closing balance.
Borrowers also need to incur a 1% interest on such amount. They shall repay this loan within 3 years from the date of borrowing, and pay such interest in two instalments after principal payment. It is effectively 1% + Andhra Bank PPF interest rate since the accountholder won’t earn any interest until such loan is repaid.
- Closure before maturity
Accountholders can terminate their Andhra Bank PPF account and withdraw the entire amount after 5 years from opening it. However, foreclosure is only allowed when –
- Self, spouse, or dependent child is suffering from a life-threatening disease.
- He/she has changed address.
- The applicant needs to cover higher education expenses of self or dependent children.
It involves a penalty of Andhra Bank PPF account interest rate reduction by 1% for the entire period. If a person earned 9% interest in 8 years, he/she should receive only 8% interest for those years.
- Tax exemptions
The Public Provident Fund is an EEE (exempt-exempt-exempt) savings instrument. One can avail tax exemption on the contributions up to Rs. 1.5 lakh u/s 80C. The interest earned each year as well any withdrawals are exempt from tax entirely.
How is Interest Earned on Andhra Bank PPF Account?
Andhra Bank calculates interest for any given month against the PPF balance on 5th of every month or the last date, whichever is lower. It also adds yearly interests to such year’s closing balance. Subsequently, interest compounds on that amount as well.
The Andhra Bank PPF account interest rate is set by GOI and revised quarterly. It depends on market interest rates and overall economic conditions.
Individuals can consider including PPF in their portfolio if they want risk-free, tax-exempt returns or want to dilute the overall risk quotient of their investments.