A loan against your Public Provident Fund (PPF) allows you to borrow money from your PPF balance during the 3rd to 6th financial year after account opening. It helps in emergencies without affecting the long-term savings plan.
Eligibility & Loan Amount
- You can take the loan from year 3 to year 6 of your PPF account.
- Maximum loan equals 25% of the balance at the end of the second preceding financial year.
- Example: Applying in 2024–25 uses balance as of March 31, 2022.
Interest Rate & Charges
- Charged at PPF rate + 1%. For example, if PPF gives 7.1%, loan rate = 8.1%.
- If not repaid within 36 months, the extra interest jumps to +6%, making it PPF + 6% above the current rate.
- Interest calculated from the first day of the loan month to the last day of repayment month.
Repayment Details
- Principal repayment: within 36 months (starting from next month after loan is sanctioned).
- Interest repayment: within one or two months after the principal is fully paid.
- You can take a second loan only if:
- It’s still within years 3–6, and
- Your first loan has been fully repaid.
Important Considerations
- During the loan period, PPF does not earn interest on that portion .
- Effectively, you lose PPF interest + pay loan interest, reducing returns .
- Loan is allowed only until the 6th year; beyond that, you can use partial withdrawal instead.
- No collateral required—it’s easy and paper-light.
Quick Snapshot
| Feature | Details |
|---|---|
| Eligibility | From FY 3 to FY 6 |
| Loan Limit | Up to 25% of PPF balance 2 years earlier |
| Interest Rate | PPF rate + 1%; jumps to +6% on delay |
| Repayment Period | Principal in 36 months; interest soon after |
| Second Loan | Allowed only after full repayment, within years 3–6 |
| PPF Interest Loss | No interest on borrowed part during loan |
Is It Smart?
Advantages:
- Low interest compared to personal loans
- No collateral required
- Can help in true emergencies
Disadvantages:
- You lose PPF interest and compounding benefits
- Limited loan amount and window
- Penalty if repayment is late
How to Apply
Visit your bank/post office branch where your PPF is held. Submit the PPF loan form (e.g., Form D), account statement, and declaration to repay within 3 years.
Final Thoughts
A PPF loan offers quick, affordable funds during years 3–6 of your account. But it reduces your tax-free returns and should be used only in genuine emergencies. For longer-term needs, withdrawing or using other loan options might be better.
