'Was an oversight': Govt drops reduction in interest rates on small savings

In the fastest rollback so far, the Union government on Thursday morning reversed the move to lower interest rates on small savings schemes such as the public provident fund (PPF). Restoring the rates through a Twitter message, Finance Minister Nirmala Sitharaman called the previous evening’s announcement an “oversight”.     

“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, ie, rates that prevailed as of March 2021. Orders issued by oversight shall be withdrawn,” she said. This came about 12 hours after the order by the Department of Economic Affairs on Wednesday, prompting the Opposition to attribute the rollback to the ongoing elections in four states.

The government had announced a cut in small savings rates by 50-100 basis points for the first quarter of the new financial year. It was the second time that interest rates on small savings schemes had been cut in the past one year. 

Before this, the government had slashed rates of small savings schemes by 70-140 basis points for the April-June quarter of 2020-21.

The rollback implies that the interest rate on PPF would remain 7.1 per cent for the current quarter and not 6.4 per cent.   

Similarly, interest rates on National Savings Certificate will be 6.8 per cent and Kisan Vikas Patra 6.5 per cent. The highest rate will be fetched by Sukanya Samridhi Account Scheme at 7.6 per cent against 6.9 per cent announced on Wednesday.

The cuts in schemes would have hurt millions of depositors and were announced when elections to assemblies of four states and union territory Puducherry are on. Sources said the government had got the Election Commission's approval for the periodic review of interest rates.

Congress leader Priyanka Gandhi Vadra, in a Twitter post, termed the rollback decision an "election-driven hindsight”. Yashwant Sinha, who was called a rollback minister when he was the finance minister in the Vajpayee government during early 2000, tweeted, ‘’I am very sad today. I thought I alone had the monopoly of rollbacks. This government has outdone even me. Labour laws, small savings interest rates are a couple of examples. Roll Back Modi.’’ Sinha is now with Trinamool Congress.