“Orders issued by oversight” Quotes Finance Minister; U-Turn on Interest Rate Cuts on Small Savings

Story Highlights
  • FY20-21 closure lamented middle-class depositors' hopes
  • The interest rate on PPF was reduced from 7.1 percent to 6.4 percent
  • NSC would be down to 5.9 percent from 6.8 percent
  • Small savings have become key to financing the government deficit owing to the pandemic

New Delhi: 31st March being the final day of the financial year, the government had slashed interest rates up to 1.1 percent for the first quarter of 2021-22.  The interest rate on PPF was reduced from 7.1 percent to 6.4 percent. NSC would be down to 5.9 percent from 6.8 percent. 

However, this morning came as a surprise for the middle-class depositors after the finance minister Nirmala Sitharaman declared that “orders issued by oversight” would be withdrawn.  “Interest rates of small savings schemes of the 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 Orders issued by oversight shall be withdrawn,” Finance Minister Nirmala Sitharaman tweeted this morning. 

If implemented these would have been the lowest interest rates on PPF since 1974. This would have been the second cut in interest rates on small savings within a year. In the April-June quarter of 2020-21, the government had slashed rates of small savings schemes by 0.70-1.4 percent.

 As part of the cuts, the interest rate for the five-year Senior Citizens Savings Scheme paid quarterly, was also to be reduced steeply by 0.9 percent to 6.5 percent. Rates on the girl child savings scheme Sukanya Samriddhi Yojana would have fallen to 6.9 percent from 7.6 percent. For the first time, the interest rate on savings deposits would have reduced by 0.5 percent to 3.5 percent from the existing 4 percent annually. 

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