After sending shock waves and unleashing distress onto those whose only financial security are small savings in government schemes such as National Savings Certificates (NSC) and Public Provident Fund (PPF), the finance minister has said the announcement of a cut in the interests of those was an “’oversight’. Finance Minister Nirmala Sitharaman has now withdrawn the announcement of the reduction in the small savings’ interest rates, and took to calling it an ‘oversight’.
However, the announcement was official, when made on March 31 evening, which is the last day of the financial year, and most people who make their deposits in such government schemes April onwards, were disappointed and some were in near panic. The government had announced a massive cut in interest rates of up to 1.1 per cent for the first quarter of 2021-22. The interest rate on PPF was reduced from 7.1 per cent to a mere 6.4 per cent. NSC would be cute to 5.9 per cent from 6.8 percent. According to a report in NDTV these reduced interest rates on PPF would have been the lowest since 1974.
In a never seen before move the Finance Minister Nirmala Sitharaman, announced on Twitter that the orders issued by her ministry was an “oversight” and shall be “withdrawn,” she added that “Interest rates of small savings schemes of GoI shall continue to be at the rates which existed in the last quarter of 2020-2021”
Interest rates of small savings schemes of GoI 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Orders issued by oversight shall be withdrawn. @FinMinIndia @PIB_India
— Nirmala Sitharaman (@nsitharaman) April 1, 2021
On Wednesday, the government had cut rates by up to 1.1% for the first quarter of 2021-22 in line with falling fixed deposit rates of banks. Interest rate on Public Provident Fund (PPF) had been reduced by 0.7% to 6.4% while the order clarified that National Savings Certificate (NSC) would now earn 0.9 less at 5.9%.
However, the finance minister offered no explanation as to how these “orders issued by oversight” would be withdrawn. The cuts in schemes ranging from the NSC and PPF, would have hurt millions of middle class depositors. Now the FM has said that the interest rates of these small savings schemes of GoI shall continue to be as they were “in the last quarter of 2020-2021, ie, rates that prevailed as of March 2021.” It was in the April-June quarter of 2020-21, that the government had slashed rates of small savings schemes by 0.70-1.4 per cent, stated news reports.
According to NDTV, the government “had sought the Election Commission’s no-objection for the periodic review of interest rates and had got it before making the announcement in the middle of elections. The government had said a periodic review in every quarter was necessary,” stated the report quoting sources in the election body. According to news reports the interest rate for the five-year Senior Citizens Savings Scheme, paid quarterly, was also to be reduced steeply by 0.9 per cent to 6.5 per cent. Rates on the girl child savings scheme Sukanya Samriddhi Yojana would fall to 6.9 per cent from 7.6 per cent. The interest rate on savings deposits was reduced by 0.5 per cent to 3.5 per cent from the existing 4 per cent annually. The steepest fall of 1.1 per cent would have been applied on the one-year term deposit. The new rate would have been 4.4 per cent as compared to 5.5 per cent.
Now that the withdrawal has been announced, people have begun questioning if this was a mere case of bad timing. Assembly elections are underway in West Bengal and Assam, and Kerala, Tamil Nadu, and Puducerry will go to polls soon too.