FM rolls back small savings rate cut decision, says it was an ‘oversight’

In a bewildering rollback a day after the government cut interest rates on various small savings schemes sharply by 40-110 basis points, Finance Minister Nirmala Sithraman withdrew the decision, saying the orders issued on Wednesday (March 31) were an “oversight.”

The FM’s announcement came on twitter. “Interest rates of small savings schemes of GoI 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 Orders issued by oversight shall be withdrawn,” the FM’s official twitter handle said.

Also read: Nirmala Sitharaman has a solution for petrol, diesel price hike issue

Small saving rates are linked to yields on benchmark government bonds, which have fallen over the last one year as the RBI cut rates to support the economy.

The Centre had slashed interest rates on small savings schemes such as post office deposits and public provident fund by up to 110 basis points, severely affecting those seeking a financial safety net.

The opposition Congress was quick to hit out at the government, asking whether the U-turn was an “oversight” or an “election-driven hindsight”. Rahul Gandhi alleged that the small saving rates would be reduced soon after elections.

“There was already loot on petrol and diesel and soon after the elections end, the small saving rates will be reduced and there will be a loot on the savings of the middle-class. This government is of jumlas (rhetoric) to loot the common people,” Rahul tweeted using the hashtag ‘oversight’.

Party general secretary and chief spokesperson Randeep Surjewala said Sithraman had no right to continue as the finance minister. “Madam FM, are u running a ‘circus’ or a government?” Surjewala asked. “You have no moral right to continue as FM,” he said.

The Wednesday orders on the reduction in small savings rates came amid rising inflation. Latest retail inflation data showed the headline number rising to a three-month high of 5.03 per cent in February from a 16-month low of 4.06 per cent in January.

Also read: I neither had a dream nor role-model: Finance Minister Nirmala Sitharaman

Subsequently, Senior Citizen Savings Schemes interest rates were reduced to 6.5 per cent from 7.4 per cent, while rates on Kisan Vikas Patra were cut to 6.2 per cent from 6.9 per cent.

After the rollback decision, PPF and NSC will carry an annual interest rate of 7.1 per cent and 6.8 per cent, respectively. One-year term deposit scheme will earn a higher interest rate of 5.5 per cent during the first quarter of the current fiscal while the girl child savings scheme Sukanya Samriddhi Yojana account will earn 7.6 per cent as against reduced rate of 6.9 per cent.