‘It was an oversight’: government abandons interest rate cut on small economies

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In the fastest setback to date, the Union government on Thursday morning overturned the decision to lower interest rates on small savings schemes such as the Public Provident Fund (PPF). Restoring rates via a Twitter message, Finance Minister Nirmala Sitharaman called the announcement of the day before “an oversight.”

“The interest rates on the Government of India (Government of India) Small Savings Plans will continue to be at the rates that existed in the last quarter of 2020-2021, that is, at the rates that prevailed in March 2021. The orders issued by surveillance will be withdrawn, “she said. This happened about 12 hours after the order from the Ministry of Economic Affairs on Wednesday, prompting the opposition to attribute the setback to the ongoing elections in four states.

READ ALSO: U-turn on monitoring interest rate orders or retreating polls: Congress

The government had announced a reduction in savings rates for small economies from 50 to 100 basis points for the first quarter of the new fiscal year. It was the second time that interest rates on small savings plans had been cut in the past year.

Previously, the government reduced the rates for small savings plans from 70 to 140 basis points for the April-June 2020-2021 quarter.

The decline implies that the interest rate on PPFs would remain at 7.1 percent for the current quarter and not 6.4 percent.

Likewise, the interest rates on the National Savings Certificate will be 6.8% and the Kisan Vikas Patra 6.5%. The highest rate will be recovered by Sukanya Samridhi Account Scheme at 7.6% against 6.9% announced on Wednesday.

READ ALSO: Impact of Covid: India enters FY22 with demand for electricity at mid-2019 level

The cuts in the schemes are said to have injured millions of depositors and were announced during the elections to the assemblies of four states and the Union Territory of Pondicherry. Sources said the government had obtained approval from the Election Commission for the periodic review of interest rates.

Congress leader Priyanka Gandhi Vadra, in a Twitter post, called the dismantling decision “an election-driven setback.” Yashwant Sinha, who was called the dismantling minister while he was finance minister in the Vajpayee government in early 2000, tweeted: ‘I am very sad today. I thought I was the only one with a monopoly on flashbacks. This government has surpassed me even. Labor laws, low savings interest rates are a few examples.

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