Public Provident Funds and HUFs: The untold story

HUFs cannot open a PPF or even a post-office account since May 2005; but people continue to be taken for a ride and the accounts continue to be opened out of ignorance

This is an issue that is several years old, but we revisit it because too many people are still unaware of how the government functions with regard to schemes that use banks and post offices as collection points.

Here is what is happening to a lot of people. A reader, RJ, wrote to us: "I have a Public Provident Fund (PPF) account with State Bank of India (SBI) in the names of two HUFs (Hindu Undivided Family) of which I am the karta. The account has been operative for over 25 years and was renewed in April 2007 for a five-year period. Since then, the Bank accepted the maximum investible amount of Rs70,000 every year until March 2010 and also credited interest on the amount for three years until March 2010. Now, the branch manager says that I cannot get interest as per a government notification issued in May 2005. Why then did the Bank renew my account in 2007 and accept my deposits every year? How do I get justice?"

While this story may sound outrageous, the Reserve Bank of India (RBI) tells us that getting justice may not be so easy. It is, indeed, a fact that HUFs cannot open a PPF or even a post-office account since May 2005; but people continue to be taken for a ride and the accounts continue to be opened out of ignorance. Does that make the bank liable?

According to sources in RBI, it does not. The bank only acts as a collection agent for what is essentially a government scheme and earns a tiny commission for the service rendered. It is the job of the customer to know the rules and regulations. Incidentally, the bank does not get to use the funds or the float on it, so it is not possible to hold it accountable or ask it to pay interest. Bankers also say that after a spate of complaints, the government issued advertisements informing HUFs about the changed rules.

However, the bottom line is that when it comes to government schemes, the banker is only a facilitator and investors need to know the rules. A bit of sage advice from a banker to the thousands of angry customers who have threatened to take SBI to court is: First safeguard your principal by withdrawing the money, even if it is after deduction of interest. Only then, launch a battle. If a lawsuit is filed, it is clear that the Supreme Court will, ultimately, decide whether collecting banks or post offices are supposed to know the rules and are liable to pay interest. Until then, the best course is for such depositors to come together for a legal fight.

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    COMMENTS

    THAKKAR

    9 years ago

    Dear Sir / Madam,

    My PPF account has matured on 31/03/2010. If I extend it ''with contribution'', can I close the account whenever I want (e.g. after 1 year or 2 years), or do I have to compulsorily continue it for 5 years ?

    REPLY

    Deepak R Khemani

    In Reply to THAKKAR 9 years ago

    If your account has matured on 31-3-2010 then before making a deposit this year before 31-3-2011 you have to get an extension done for 5 years, you can close it only after 5 years but you can make withdrawals upto 60% of your balance dated 31-3-2010 anytime in these extended 5 years

    Thakkar

    In Reply to Deepak R Khemani 9 years ago

    Sir,

    In the current high interest rate scenario, do you think it is wise to extend my PPF account for another 5 years ? or should I close the account and invest the amount in some bank fixed deposits which can give more than 8% even after deduction of 10% tax (as I fall in 10% tax bracket) ? If you suggest to withdraw, please try to suggest where ( in bank FD or any other better avenue) can I invest the amount received from my PPF account. Thanks

    Deepak R Khemani

    In Reply to Thakkar 9 years ago

    Thakkarji, That depends on your age, If you have no other source of income then it makes sense to withdraw the full tax free amount and keep it on interest for a long period and as you are in the 10% slab this makes a lot of sense, you can open a new PPf account and continue to deposit up to 70,000/= per year and enjoy tax free 8% interest and tax benefits under 80C.

    THAKKAR

    9 years ago

    Your article on PPF was very informative. Thanks for the same. Regarding PPF, can you please provide the following information :

    1) My PPF account has matured on 31/03/2010, but I have not closed it till now. If I close it, say on 01/03/2011, at what rate will I get interest for the period from 31/03/2010 to 01/03/2011 ? 8% or 3.5% ?

    2) After maturity, if I want to choose option "Continue the PPF account without making any further contribution", do I have to submit any form or application ?

    3) Do you have any updated information about the provisions of new direct tax code applicable to PPF ? Is the provision of EET going to be implemented from 01/04/2011 for PPF Accounts ?

    Please reply at the earliest.

    Thanks in advance.

    CBT

    REPLY

    A Sundaram

    In Reply to THAKKAR 9 years ago

    1)8%
    2)No
    3)While it would be prudent to await the actual implementation of DTC prior to taking any action,certainly no amendments are proposed from 1.4.2011.

    krish

    9 years ago

    MONEYLIFE! CAN U PL CLARIFY THE SAME ISSUE wrt INDIVIDUAL PPF accounts? WHAT ARE THE NO. OF YEARS ETC. ?
    IF PPF IS ACCEPTED BY ANY BANK, GOVT. OF INDIA, RBI & CO. ETC. ARE BOUND TO GIVE INTEREST AT THE PREVAILING NORMS. THEY CAN NOT REFUSE. IF THE STATE ITSELF DOES FRAUD WITH THE PUBLIC, WHAT WOULD THE PUBLIC DO? NO WONDER ALL 'BADDIES'(IN HINDI) WILL CONTINUE IN INDIA AS THE PUBLIC DOESNT TRUST GOVT. AND VICE VERSA!

    Jatin Gandhi

    9 years ago

    In fact in one of my clients case, bank has dedcuted interest credited in his HUF account from the date of renewal of account. So the money remained with the bank without any interest.Pl let us know the way out, if there is any.

    REPLY

    Deepak R khemani

    In Reply to Jatin Gandhi 9 years ago

    If the HUF account was renewed(Extended for 5 years) after the notification then nothing can be done take your money and close the account and invest it somewhere else. However if the 5 year extension was done before the notification came then the account will be operative till the end of those 5 years and full interest is payable. I hope this helps,there is no other way out though.

    SUNIL HEMNANI

    9 years ago

    It does appear to be a very big uphill task for customers who are willing to get involved in such a case.I totally agree the smartest thing to do would be firstly withdraw the amount from the account. However i would have a question that if you do actually win would it be with a compensation and how would that actually benefit a customer.This definately a battle for those with a big heart.For the greater good of the public and for the principle of the issue what is banks responsibility as a issuer of service.

    REPLY

    Deepak Khemani

    In Reply to SUNIL HEMNANI 9 years ago

    If the matter goes to the supreme court the customer will never win. As it is said it is the duty of the subscriber to know the rules.
    I can tell you that we as agents for the PPF scheme advised our clients as soon as we came to know of the rules most of our clients withdrew their money. Those smart ones who thought they knew more than us and didn't want advice continued and now are the sufferers having lost all the interest for all these years. The rules are very clear HUF's cannot open accounts after that date and also extensions are not permissible, the same being the case with accounts in a minor's name.

    Sundaram

    In Reply to Deepak Khemani 9 years ago

    I was under the impression that Minor's PPF A/cs can be opened with Father as the guardian,the only restriction being that the annual contributions to the Guardian's self A/c plus the Minor's A/c should not exceed Rs.70,000/-.Since you are an agent for PPF,request your guidance.Is my understanding correct?

    shrigopal jhunjhunwala

    In Reply to Sundaram 9 years ago

    yes you are correct, You are allowed to open the account in the name of minor with the cap on total investment of 70000 during a financial year

    Deepak Khemani

    In Reply to Sundaram 9 years ago

    The total contribution in a year under self and minors names cannot exceed 70,000 in a financial year. Here the condition being that the minors accounts were opened prior to the 2005 notification.

    ramchandran

    9 years ago

    Individuals cannot have more thatn one PPFaccount . There is a norm among people that they open multiple PPF accounts (say in a minor's name) . I do not see the point of not allowing an other account to be initiated

    MLM company MAXFOREX alters name and website without informing its ‘investors’

    MLM company MAXFOREX has changed its name and website to ‘Dream Worldwide’, leaving many of its 'investors' high and dry

    In May, Moneylife had reported on how a multi-level marketing (MLM) company was offering 'trading' in foreign exchange through a high-risk investment module.
    (See: http://www.moneylife.in/article/8/5289.html).

    Maximus Trades Inc (MAXFOREX), a Mauritius-based company, has now closed down its earlier website and opened a business under a new name, 'Dream Worldwide Inc'. The 'investors' who have been duped are now planning to join hands to nail the company.

    All the details that MAXFOREX carried on its earlier site (maxforexonline.biz) have been replicated on the new site (dreamworldwide.biz). However, in its new avatar, the company is claiming that it trades in real estate and diamonds - besides forex. All the information that was there on the erstwhile MAXFOREX site - founders, offices and the business model - are the same. Just the moniker has changed.

    What could have forced the company to change its name and website all of a sudden? There has been an upsurge in complaints about MAXFOREX all over the Internet, as well as the reports that Moneylife has carried. Even 419scam.org, the site that tracks spam and scams on the Internet, has labelled MAXFOREX as a Ponzi scheme and provided the MLM company's bank account details. According to the website, MAXFOREX had an account (28037304495) with Barclays Bank at Mauritius under the name of Maximus Trade Incorporation.

    For both maxforexonline.biz and dreamworldwide.biz, the domain registrar is Ranger Registration (Madeira) LLC. Even the status of both the sites on Who.is is the same - "clientDeleteProhibited, clientRenewProhibited, clientTransferProhibited, clientUpdateProhibited" is what the site throws up.

    Another company, Royal Forex Trading Ltd, which claims to offer trading in forex and commodities, has now surfaced. Royal Forex plans to focus only on the US and India. It claims to offer 1% return per day on an 'investment' of $20 to $99 for 200 working days. The higher your 'investment', the more will be your returns (3.5% per day for a plan of $2,000 to $10,000 for 60 working days). In addition, it also offers 'rewards' (mobile phones, cars) on business worth $5,000 and above. However, it also fails to specify or clarify how it manages to offer such returns.

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    User

    COMMENTS

    GOVINDAN

    9 years ago

    Speak Asia, Nano Excel, Tycoon International, Visarev & Unipay2u – biggest scam is on its way

    GOVINDAN

    9 years ago

    'NANO EXCEL' MLM WILL SOON FOLLOW MAX FOREX MLM

    MATHU

    9 years ago

    FOR,DETAILS

    manoj sharma

    9 years ago

    i'm looking which s best investment ?

    shakil

    9 years ago

    maxforexonline.im.invest.1LACK..SITE.IS.NOT.OPEN.KAB.OPEN.HOGI

    sandip kumar pradhan

    9 years ago

    please send latest position of the maxforexonline.biz

    Hira Nand Pandey

    9 years ago

    Maxforex should transfer their old accounts on its new website. This will be in the favour of the company to work more in future. Now maxforex has earned more money from this business. This is not good for its future planing. Is there any way to get the money back from maxforex ?. Maxforex should repply their all customers on their website address.

    messanger

    9 years ago

    unitedfund.biz its working new maxforexonline.biz site for india

    REPLY

    anshveer

    In Reply to messanger 9 years ago

    when this site unitedfund.biz will be in operation. please reply about this.

    Ashwani Kumar

    In Reply to messanger 9 years ago

    Please reply me how many days to work on http://www.unitedfund.biz

    Dinesh

    In Reply to messanger 9 years ago

    It doesn't open

    Pls clearify,,

    pramod gaur

    9 years ago

    could u pls tell me about speakasiaonline.com current status

    REPLY

    DEEPAK

    In Reply to pramod gaur 9 years ago

    speakasia is a largest survey compeny.it is honest copeny they giveyou money only your work'what's your mobile no?/////////////////////

    Dinesh Singh

    9 years ago

    Pls tell from when the MAXFOREX will start working....

    REPLY

    santosh

    In Reply to Dinesh Singh 9 years ago

    All of you peoples invested with this company Please be patient and wait till the end of your life to start MAXFOREX working again....

    PRAMOD GAUR

    9 years ago

    i can not understand what is happened with side

    sukhjeet singh

    9 years ago

    max chala ge
    sandhu 32 m.l

    REPLY

    saurabh

    In Reply to sukhjeet singh 9 years ago

    kya chalega max kab

    monika

    9 years ago

    plz tell me wht happend wth maxforex and how much tme towork start

    REPLY

    Ashwani Kumar

    In Reply to monika 9 years ago

    Hello Monika, someone said, http://www.unitedfund.biz is new site of maxforexonline.biz. Have u any news plz. tell me. Thanx & Regards

    ankit

    9 years ago

    maxforexonline.biz website is not open,why?

    Ashwani Kumar

    9 years ago

    I don't know what happened in maxforexonline.biz. But site name is change now new name is dreamworldwide.biz. Before 2-3 days, I open new site but now new site is not opened. If u have any information plz. write me. Thanx

    Killing education, by degrees: MBA seats are vacant, so the authorities do away with the mandatory written test

    More than 7,000 management course seats are lying vacant for the current academic year, across Maharashtra. The state has decided to scrap the CET to fill up these seats. The biggest beneficiaries will be those institutes which prefer donations over talent for admission

    This year, more than 7,000 MBA and MMS seats are lying vacant across Maharashtra. The Directorate of Education (DTE), in its circular issued on 16 September, has given permission to colleges, which are approved by the AICTE (All India Council for Technical Education), to fill up the vacant seats even for students who did not appear for the Common Entrance Test (CET).

    The circular says that the institutes should give first preference to students who have cleared the CET. But if seats remain vacant even after the admission of students who have cleared the CET, institutes can fill up this deficit with students from any stream (arts, science or commerce) depending on their final graduation scores.

    So in a stroke the authorities have decided that CET is not compulsory any more.

    "This is complete injustice for those students who had passed the written test but could not clear the group discussion or the final interview," a senior officer from DTE who wished to remain unidentified told Moneylife.

    "Even I was surprised when I came across this circular. Everything happened in a short time and now everything has been messed up," admitted the officer.

    "It shows how much our education system and politicians are corrupt. Now with this new circular, admissions will not be given on a merit basis but on donations," a professor, who teaches at the University of Pune, told Moneylife, preferring anonymity. "These kinds of actions not only fuel corruption but also spoil the future of our youth," added the professor.

    Justifying the government's step, Rajesh Ankushrao Tope, minister of higher & technical education, has told the media that the government wants "more and more students" to pursue professional courses like MBA to meet industry demand.

    But what is the true picture? "What output can we expect from these students when they are not technically qualified for the course? They don't even have basic knowledge about the industry," said the professor.

    By the looks of it, it appears that this move could be politically motivated - a number of higher institutes are controlled by politicians.

    "There was no adequate preparation from the DTE and the government. Anyhow, this circular will help those institutes which prefer donations rather then talent," added the DTE officer.

    There is also a glut in the number of MBA seats available. There are about 290 colleges, including departments attached to various universities across the state, which have been offering the MBA course this year. There are about 27,000 seats for the taking. 

    "Even the government knew that many new colleges have been permitted to start the MBA course and existing colleges are increasing their intake capacity by almost 50% to 100% over the past two to three years. (But) no concrete steps were taken to avoid this chaos," added the officer.

    There is also a question over the ministry of education's evaluation system before a college is allowed to start an MBA course or increase its intake capacity. "Nowadays it's easy to get AICTE approval to start courses and it's (even) easier for politician-owned colleges," said the professor.

    The game starts right from the luring of students with false advertisements. Fancy and thick brochures and impressive websites, which contain colourful photos of buildings, groups of foreign and Indian students with high-tech laptops, long lists of alumni and attractive job offers by MNCs in the name of placements are just a few of the tactics that are used.
     
    A reputed college in Pune, which claims itself as one of the best management colleges in India, shows on its website that for the last year, 127 recruiters had visited the campus for placement. It claims that the average annual remuneration package was Rs9.27 lakh, the highest domestic package and the highest international package were Rs16.6 lakh and Rs24 lakh respectively.

    When Moneylife contacted the placement coordinator and asked detailed information about this college's claims, the coordinator refused to comment and said that he was not allowed to provide such information. According to him, he could give out these details only with the dean's permission.

    Until the time of writing this story, no information has come in from this college.

    "There is a big question over institutes which are situated in smaller cities," said a lecturer from Dr Babasaheb Ambedkar Marathawada University at Aurangabad. "Due to strong financial backing, institute owners set up buildings. But qualified faculty, research scope and market exposure are lacking," added the lecturer. Many institutes in semi-urban cities in Maharashtra like Nashik, Aurangabad and Kolhapur are facing a massive shortage of skilled teachers and research facilities.

    "I was really horrified when I came to know that in many institutions (including those offering MBA courses) students are taught by alumni who have just passed the course. What will be the future of students in such institutes?" asked the professor from the University of Pune.

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