Why you should not invest in Post Office schemes? Reasons
Short Answer
One would not want to choose to invest in post office schemes because of its non-core banking services, non-digitalization of documents, the reduced interest rate advantage and lack of competitive advantage. Let's get details on the same.
Detailed Answer
Post office department has been the pillar of small savings in India. With a total investment base of about 6 lac crores, they are one of the biggest deposit mobilizers in Indian banking sector. While traditionally Post office schemes enjoyed huge popularity due to round the corner presence , local trust and the fact that they offered slightly higher returns than similar schemes from banks but they have not at all kept pace with improvements in banking services and customer facilities. Here are 5 reasons why I do not recommend investing in post office schemes
Non-Core Banking Service
Most of the post offices are still not on Core banking platform as a result whatever investments or savings you park with them stay with the local branch. For any changes, pre-mature withdrawals etc you need to go the branch where you opened the account or made the investments
Non-Digitization of Documents
NSC ( national saving certificates or KVP ( Kisan visas patra) etc all these investment documents are given in the physical form. In the case of theft or damage or lost of the physical document, Its not very easy getting records updated and in general who keeps all these physical documents.
Reducing Interest rates advantage
One of the traditional advantages of Post office schemes was they enjoyed higher spread and hence interest rates were 50 bps to 100 bps more than similar products from banks that gap has come down now
Unfriendly Staff
Post office staff is not the most friendly staff you will encounter around certainly something which needs massive makeover
Competitive advantage of schemes no longer exists
In my parents time there were limited financial products and as a result, some of the post office schemes were very popular for example if you wanted to save taxes Kisan Vikas Patra or the NSC were most important schemes .Now there are many more options available in the market both on debt and equity side. Also with increased distribution power of banks, they are distributing mutual funds and lot of other products as a result post office schemes no longer remain very attractive.
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