Loan Facility against PPF Deposit: A subscriber of Public Provident Fund (PPF) can avail of loan facility between the third and sixth financial year from the financial year in which the PPF account was opened. A subscriber need to submit an application in prescribed form (FORM D) along with subscribers passbook for availing of loan. In case, the loan is sought from minors Account, the guardian will have to make a declaration that the money is required for the use of the minor. The section 7 of Public Provident Act ,1968 has clearly mentioned it.
“A subscriber may be granted loans out of the amount standing to his credit in the Fund on such terms and conditions as may be specified in the Scheme and where the subscriber is a minor, such loans shall be granted to his guardian only for the use of the minor.”
Calculation of Loan Amount:
The loan can be taken up to 25 per cent of the amount standing of the credit of subscribers Account at the end of the second year immediately preceding the year in which the loan is applied for. This facility is available till the end of fifth Financial Year from the end of the Financial Year in which initial subscription was made. The loan is repayable in lump sum or convenient installments. Where loan is repaid within 36 months, interest is charged at one per cent and if it is not repaid within 36 months, the interest at the rate of six per cent will be charged on the outstanding balance. The interest is to be paid in not more than two installments after the loan amount is fully repaid. Once the first loan is repaid, second loan can be obtained on same terms.
Lets explain the loan facility through an example, if the account is opened during the financial year 2007-08, the first loan can be taken during financial year 2009-2010 (the financial year is from April 1 to March 31). The loan amount will be up to a maximum of 25% of the balance in your account at the end of the first financial year. In this case, it will be March 31, 2008. If you repay the loan in 36 months, interest will be charged at 12% pa. Otherwise, interest will be charged on the outstanding sum at 6% per month. You can obtain a second loan before the end of the sixth financial year if the first one is fully repaid.
The loan can be taken only once in a year even though the loan taken in the year is repaid in the same year as the limit of amount of loan is fixed for each year.
If PPF account is opened during 2006-07, the first loan can be taken during 2008-09 to the extent of 25% of the balance as on 31.3.2007. If the said loan is also repaid during 2008-09 the second loan cannot be taken again during 2008-09 as the limit of loan i.e. 25% of the balance as on 31.3.2007 has already been exhausted. The next loan can be taken only during 2009-2010 to the extent of 25% of the balance as on 31.3.2008.