Govt withdraws order to cut interest rates, cites oversight; faces flak

Two people with direct knowledge of the matter said that the decision was taken fearing a political fallout in the ongoing assembly elections

Less than 12 hours after announcing sharp cuts in interest rates of small savings schemes, such as Public Provident Fund (PPF), senior citizen savings, Sukanya Samriddhi Scheme and Kisan Vikas Patra, the government withdrew the order on Thursday morning.

Union finance minister Nirmala Sitharaman. (ANI)

Union finance minister Nirmala Sitharaman on Thursday morning tweeted that the order was an “oversight” and there would not be any change in the interest rates.

“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 Orders issued by oversight shall be withdrawn,” she said.

While a spokesperson of the finance ministry did not respond to HT’s queries, one person who works in the 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 due to political compulsion,” the person said.

Two people with direct knowledge of the matter said, requesting anonymity, that the decision was taken fearing a political fallout in the ongoing assembly elections.

Also Watch | Govt rolls back decision to cut interest rates on small saving schemes

The withdrawal, however, faced severe backlash from the Opposition on social media.

“Really @nsitharaman ‘oversight’ in issuing the order to decrease interest rates on GOI [government of India] schemes or election driven ‘hindsight’ in withdrawing it?” tweeted Congress general secretary Priyanka Gandhi Vadra minutes after the order was withdrawn.

Former minister of finance and external affairs Yashwant Sinha said the government had outdone even him in terms of roll-backs.

“I am very sad today. I thought I alone had the monopoly of roll backs. This govt has outdone even me. Labour laws, small savings interest rates are a couple of examples. Roll Back Modi,” he tweeted.

Congress leader Salman Soz also took a jibe at the inconsistency of decisions of the minister and tweeted: “I am joining BJP.” In another tweet, Soz said his earlier comment was an “oversight”.

Congress leader P Chidambaram alleged that Sitharaman’s claim of the decision of lowering interest rates on small savings schemes being an “inadvertent error” is baseless, pointing out that such announcement “for the next quarter is a regular exercise”.

“Announcement of interest rates on savings instruments for the next quarter is a regular exercise. There is nothing ‘inadvertent’ about its release on 31st March,” he tweeted.

“The BJP government had decided to launch another assault on the middle class by slashing the interest rates and profiting itself. When caught, the FM is putting forward the lame excuse of ‘inadvertent error’,” he added.

Chidambaram added that the current interest rate on saving schemes is still lower than the inflation rate and thus is “hitting the savers and the middle class below the belt”.

“When inflation is at about 6 per cent and expected to rise, the BJP government is offering interest rates below 6 per cent hitting the savers and the middle class below the belt,” the Congress leader said.

Trinamool Congress leader Derek O’Brien also took to Twitter slamming the PM Narendra Modi-Amit Shah combine, saying, “Egg on the face again. Because MO-SHA too busy throwing petals from trucks and cracking April Fool jokes of false promises at election rallies.”

Trinamool Congress lawmaker Mahua Moitra cited Sitharaman’s statement and tweeted: “What is the biggest April Fool’s joke here? That a now-rolled back small savings rate cut was issued by ‘oversight’? Or that Nirmala Sitaraman is Fin Min of this country?”

Congress leader Randeep Surjewala wrote Sitharaman has “no moral right to continue as a finance minister”. “Madam FM [finance minister], Are u running a ‘Circus’ or a ‘Govt’? One can imagine the functioning of economy when such duly approved order affecting crores of people can be issued by an ‘oversight’. Who is the competent authority referred in order?”

Gopal Agrawal, BJP’s spokesperson on economic affairs, responding to the Opposition’s sarcasm, said, “I appreciate the concern of FM Nirmala Sitharaman [regarding the] interest rate cut for small savings. Post Covid19, interest income is one of the main sources of income for the common man. Any reduction is uncalled for. Surely the FM will look into the faux pas on the issue by the ministry officials.”

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 interest rate on Public Provident Fund was lowered from 7.1% to 6.4%, and that on National Savings Certificates from 6.8% to 5.9% for the June quarter. The Senior Citizens Savings Scheme rate was cut from 7.4% to 6.5%. The rate on Sukanya Samriddhi Scheme, the highest paying small savings instrument, was lowered from 7.6% to 6.9%.

“The 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%.