Government withdraws order to cut interest rates for small saving schemes

The government on Thursday withdrew the order cutting rates for small saving schemes. The announcement was made by Union finance minister Nirmala Sitharaman on Twitter.

Nirmala Sitharaman twitted: "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 Orders issued by "oversight" shall be withdrawn,".

Her statement meant that the interest rate on Public Provident Fund (PPF) would become 7.1 per cent for the current quarter and not 6.4 per cent as was stated on Wednesday. This applies to other small savings schemes as well.

For instance, interest rates on National Savings Certificate will be 6.8 per cent against 5.9 per cent announced. Also those on kisan vikas patra will be 6.5 per cent against 6.2 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 Centre had slashed interest rates on small savings schemes, such as post office deposits and public provident fund, by up to 110 basis points, dealing a fresh blow to savers seeking safety.

The steepest fall of 1.1 per cent was effected in the one-year term deposit. The new rate was brought down to 4.4 per cent as compared to 5.5 per cent.

"In exercise of the powers conferred by Rule 9(1) of the Government Savings Promotion General Rules, 2018, the rates of interest on various small savings schemes for the Q1 of FY 2021-22 have been revised," the Finance Ministry said on Wednesday.

This is the first time that the Centre has scrapped the notified interest rates on small savings schemes after switching to a quarterly interest rate setting system in April 2016.