KVP is a small savings scheme – by the Government of India – run by The Directorate of Small Savings – and the Post Offices sell these saving bonds. Post Offices in India have a very wide network, spread all over the country – and hence it makes sense to sell KVPs through the Post Offices as the public will have easy access. It is just like an FD – and the instrument just like FDR is a physical instrument – a certificate named ‘Kisan Vikas Patra’ – which will have the rate of interest, maturity tenure, name of the investor etc. printed on it.
KVP is not an original idea though – KVP had been first launched in 1988 – and ran for 23 years before being discontinued in 2011. As Kisan Vikas Patra is a negotiable instrument and PAN card was not required for making an investment in KVP, it led to money laundering. That's why Kisan Vikas Patra scheme was discontinued. Back in July 2014, the new Finance Minister Arun Jaitley gave us a peek at what was to come and mentioned his intention to re-introduce KVP.
Thus, KVP is really aimed at the mid alow-income groups (they also have the benefit of being under the tax slab or lower brackets) to encourage savings and to mobilize savings in constructive activities.