Non-Resident Indians (NRIs) were previously permitted to keep contributing to Public Provident Fund (PPF) accounts opened while they were resident Indians although they could not open fresh accounts. They were also permitted to earn interest on these accounts, on par with resident Indians.
In case of National Savings Certificates (NSCs), instituted by India Post, there is no annual investment. However, NRIs were permitted to earn interest (currently 7.8%) on them, on par with resident Indians, if they had invested in the NSCs before becoming NRIs.
Now, according to new rules announced by the government in October 2017, the PPF and NSC investments will be ‘deemed closed’ from the date of the investor becoming an NRI. Besides, they will only earn the interest that was applicable to a post office savings account in the previous quarter (currently 4%). This in effect halves the interest rate on these instruments for NRIs.
With such a drastic reduction in rates for NRIs in these instruments, they can look at alternatives such as debt mutual funds whose average one-year returns for income funds stand at 7%.