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Hours after announcing it, govt withdraws cuts in rates for small saving schemes
Union finance minister Nirmala Sitharaman tweeted on Thursday morning that it was an “oversight” and there would not be any change in the interest rates
In less than 12 hours after announcing sharp cuts in the interest rates on small savings schemes such as Public Provident Fund (PPF), senior citizen savings, Sukanya Samriddhi Scheme and Kisan Vikas Patra, the government on Thursday morning withdrew the order fearing its political fallout in the ongoing assembly elections, two people with direct knowledge of the matter said, requesting anonymity.
Union finance minister Nirmala Sitharaman on Thursday morning said in a tweet that it was an “oversight” and there would not be any change in the interest rates.
Watch: Govt rolls back decision to cut interest rates on small saving schemes
“Interest rates of small savings schemes of GoI [Government of India] shall continue to be at the rates which existed in the last quarter of 2020-2021, i.e; rates that prevailed as of March 2021. Orders issued by oversight shall be withdrawn,” she said in the tweet.
While, spokesperson of the finance ministry did not respond to HT queries, one person who works in the finance ministry said the order to cut interest rates was issued after the “competent authority” had approved the proposal. “The bureaucracy acts on the basis of well laid procedures and no decisions could be taken without proper approvals. The withdrawal appears to be a political compulsion,” the person said.
Also Read | Centre slashes interest rates on PPF, other small savings schemes
The office memorandum, issued on March 31, 2021 by the department of economic affairs (DEA) of the Union finance ministry said that the interest rates for “various” small savings schemes were revised “for the first quarter of financial year 2021-22 starting from 1st April, 2021 and ending on 30th June, 2021”. It also said: “This has the approval of competent authority.” HT reviewed the order issued late Wednesday evening.
The government had announced a sharp reduction in the interest rates PPF from 7.1% to 6.4% and the rate on National Savings Certificates (NSCs) was cut from 6.8% to 5.9%, HT reported it in its Thursday edition.
“Politically sensitive Senior Citizens Savings Scheme (SCSS) saw its rate cut from 7.4% to 6.5%, which is a major political constituent and the government cannot afford to alienate this segment,” a second person said.
According to the Wednesday order that was later withdrawn, the Sukanya Samriddhi Scheme, which was the highest paying small savings instrument, saw its rate cut from 7.6% to 6.9%. Also, the Kisan Vikas Patra (KVP) that has a tenure of 124 months would mature in 138 months, amounting to a rate cut of 6.2% from 6.9%.
Other small savings products with interest rate reductions, according to the Wednesday order, included post office term deposits, post office savings accounts and post office monthly income scheme. The rates on post office term deposits were reduced from 5.5%-6.7% for tenures of 1-5 years to 4.4%-5.8%. The post office savings account saw its rate reduced from 4% to 3.5%.
