Big dharam sankat: FM Nirmala Sitharaman on small savings rates

Finance Minister Nirmala Sitharaman highlights policy dilemma between protecting small savers and managing rising government borrowing costs amid shifting savings trends

The central government has to ensure that small savers are protected from falling interest rates even as its own cost of borrowing from these funds rises — an approach that also helps sustain the pool’s overall corpus, Union Finance Minister (FM) Nirmala Sitharaman said on Monday.

 

For the government, it may not be a “double whammy”, but it is costing on both sides, Sitharaman said, adding that it has to attend to both.

 

The FM was responding to a question from M Govinda Rao, former director of the National Institute of Public Finance and Policy, on declining household savings.

 

 

Sitharaman said savings today are moving to different platforms. She added that every quarter, the finance ministry discusses lining up savings rates with the recommendations of the Shyamala Gopinath-led panel, a former Reserve Bank of India deputy governor.

 

“We are so far away from Gopinath, and also because the interest rate itself has gone through a different level.”

 

The FM said it was a “very big dharm sankat” sitting in the ministry: “Whether you will bring this down and cause hurt to senior citizens, who are probably living on that little interest rate that they earn out of it… But equally, if I just look at the kitty of the National Small Savings Fund (NSSF), it is from that same kitty that I’m borrowing.”

 

The formula for small savings rates, recommended by a panel led by Gopinath, mandates a quarterly reset linking returns to the average yields on government securities in the first three of the preceding four months.

 

“People seem to think that they can take care of their investments and/or savings, which transfer to investments in markets,” the FM said.

 

In a March 30 notification, the government kept interest rates unchanged for various small savings schemes, including the Public Provident Fund and National Savings Certificate, for the eighth straight quarter, beginning April 1, 2026.

 

The government last changed interest rates on some small savings schemes — mainly operated by post offices and banks — in the fourth quarter of 2023–24.

 

All deposits received under National Savings Schemes are credited to the NSSF. Withdrawals by depositors are made from the fund’s accumulations. The balance is invested in special securities of the state and central governments, according to norms decided by the central government from time to time.