New Delhi: The Narendra Modi government has decided to withdraw the sharp cuts in small saving schemes, at least for now.
In an order Wednesday evening, the Union Ministry of Finance had announced sharp cuts in interest rates on small savings schemes for the quarter beginning 1 April. For some schemes, the cut was as steep as 90 basis points. The move drew sharp reactions and could have led to the ruling BJP facing voters’ ire in the ongoing assembly elections, which appears to have prompted the swift damage control from the government.
Announcing a withdrawal of the decision, Finance Minister Nirmala Sitharaman said the order was issued by an “oversight”.
“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Orders issued by oversight shall be withdrawn,” Sitharaman tweeted Thursday morning.
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Orders issued by oversight shall be withdrawn.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
The BJP is caught in a fierce battle in at least two states — Assam and West Bengal — and is hoping to make new inroads into the two southern states of Kerala and Tamil Nadu, besides the Union Territory of Puducherry.
While Assam is voting in three phases till 6 April, it’s an eight phase voting in West Bengal till 29 April. Tamil Nadu, Kerala and Puducherry will go to polls in a single phase on 6 April.
The first phase of elections in Assam and Bengal took place on 27 March, while the second phase is under way Thursday.
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What the 31 March order said
Though the revision in small savings was due before the beginning of the quarter, it would have adversely impacted the earnings on savings of the middle class and senior citizens.
Typically, small savings rates are revised every quarter in line with the interest rates prevalent in the economy.
With the Reserve Bank of India cutting policy rates gradually over the last months, a cut in small savings rates was inevitable. However, the government decided to withdraw the Wednesday order following an uproar.
According to the 31 March order, the interest rate on the senior citizen saving scheme — a preferred savings option for retired senior citizens — was cut by 90 basis points to 6.5 per cent from 7.4 per cent.
The interest rate on public provident fund — an option used by the salaried class to save on taxes — was reduced by 70 basis points to 6.4 per cent from 7.1 per cent. The National Savings Certificate, Kisan Vikas Patras and the Sukanya Samriddhi scheme also saw sharp cuts.
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