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'Issued by Oversight': Govt Rolls Back Small Savings Rate Cut Within Hours, Interest to be Same as Last FY

File photo of FM Nirmala Sitharaman.

File photo of FM Nirmala Sitharaman.

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 Orders issued by oversight shall be withdrawn, says Nirmala Sitharaman.

The government on Thursday morning rolled back the cut on interest rates on small savings schemes. The Centre had a day ago announced to cut the rates on schemes, including NSC and PPF, by up to 1.1 per cent for the first quarter of 2021-22 in line with falling fixed deposit rates of banks.

“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 Orders issued by oversight shall be withdrawn,” Nirmala Sitharaman tweeted.

This came after the Ministry of Finance had on March 31 announced a cut in small savings deposit rate from 4 percent to 3.5 percent for the first quarter of the financial year starting April 1, 2021. Besides this, rates of other small saving schemes were also cut.

The ministry said the rate cuts “are in line with overall interest rate movement in the financial system.”

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Former Finance Minister and Congress leader P Chidambaram took to Twiiter to criticise the rate cut and called out Sitharaman was phrasing the decision as “issued by oversight,” stating: “Announcement of interest rates on savings instruments for the next quarter is a regular exercise. There is nothing “inadvertent” about its release on 31st March.”

He criticised the government for “assault on the middle class” and making “lame excuses” when faced with backlash.

“The BJP government had decided to launch another assault on the middle class by slashing the interest rates and profiting itself. When caught, the FM is putting forward the lame excuse of “inadvertent error”. When inflation is at about 6 per cent and expected to rise, the BJP government is offering interest rates below 6 percent hitting the savers and the middle class below the belt.” he added.

The Finance Ministry on March 31 cut one-year time deposit rates to 4.4 percent from 5.5 percent, and two-year, three-year, four-year and five-year recurring deposit rates to 5 percent, 5.1 percent, 5.8 percent and 5.3 percent, from 5.5 percent, 5. 5 percent, 6.7 percent and 5.8 percent, respectively.

The interest rate for the five-year Senior Citizens Savings Scheme had also been reduced steeply by 0.9 per cent to 6.5 per cent. The interest on the senior citizens’ scheme is paid quarterly. For the first time interest rate on savings deposits has been reduced by 0.5 per cent to 3.5 per cent from the existing 4 per cent annually.

The Congress also hit out at Finance Minister after and asked whether the U-turn was an “oversight” or an “election-driven hindsight”. Congress leader Rahul Gandhi alleged that the small saving rates would be reduced soon after elections. “There was already a loot on petrol and diesel and soon after the end of the election, the small saving rates will be reduced and there will be a loot on the savings of the middle-class.

“This government is of jumlas (rhetoric) and the loot of common people,” Gandhi said in a tweet in Hindi using the hashtag “oversight”.

Congress leader Priyanka Gandhi Vadra said, “Really Nirmala Sitharaman ‘oversight’ in issuing the order to decrease interest rates on GOI schemes or election driven ‘hindsight’ in withdrawing it?” Party general secretary and chief spokesperson Randeep Surjewala hit out at Sitharaman and said she has no right to continue as the finance minister.

first published:April 01, 2021, 08:13 IST