The government savings bonds, 2003, one of the most sought-after investment instruments among the middle class, particularly senior citizens, which gave an assured return of 8 per cent per annum, will be closed for subscription from January 2.
“The eight per cent GOI Savings (Taxable) Bonds, 2003, shall cease for subscription with effect from the close of banking business on Tuesday, January 2, 2018,” the Ministry of Finance said in a statement on Monday.
The bond, which the Reserve Bank of India (RBI) started issuing on the behalf of the Union government in 2003, was considered to be one of the safest savings instruments for retail investors. It got more traction in recent years as interest rates on bank fixed deposits and small savings schemes gradually declined. The bond had a lock-in period of six years and was available for purchase by individuals on tap.
Former finance minister P Chidambaram said the move to scrap the bonds was an attack on the middle class. “GoI eight per cent taxable bonds have been the safe harbour of the middle class, especially retirees and senior citizens, since 2003. Government has taken away their only safety net,” he said in a series of tweets, adding, “Government owes a duty to provide its citizens one safe and risk-free instrument for savings. Taking the only instrument away is a deplorable act.”
Chidambaram also questioned whether the move was intended to push people to invest in stock markets and mutual funds. “Interest rates reduced for small savings instruments. Eight per cent taxable bonds discontinued. But inflation is rising. A double whammy for the middle class,” he said.
Last week, the government had slashed interest rates on small saving schemes, such as public provident fund (PPF), National Savings Certificate (NSC), and Kisan Vikas Patra, by 0.2 percentage points for the January-March quarter.