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Government withdraws interest rate cut on small savings

Our Bureau New Delhi | Updated on April 01, 2021

Rates as on March 31 to continue for April-June quarter

Within 12 hours of taking decision regarding rate cut reduction on small savings, the Finance Ministry on Thursday withdrew the order. This means interest rates on various small saving schemes such as National Saving Certificates (NSC), Public Provident Fund (PPF) will continue for at least three more months starting April 1.

On Wednesday, the Ministry issued an office memorandum effecting cut in the range of 50 basis points to 90 basis points. This was one of the biggest reductions after the interest rate unchanged for longest period.

“Interest rates of small savings schemes of GoI shall continue to be at the rates which existed in the last quarter of 2020-2021, i.e, rates that prevailed as of March 2021. Orders issued by oversight shall be withdrawn,” Finance Minister Nirmala Sitharaman said in a tweet posted around 7.55 am on Thursday.

Although no reason has been given for withdrawal, but it seems strong reaction on social media, TV and newspaper forced the Government to reverse its decision. Nevertheless, election in West Bengal and four other states could also be one of reasons for reversal.

The small savings schemes basket comprises 12 instruments including the National Saving Certificate (NSC), Public Provident Fund (PPF), Kisan Vikas Patra (KVP) and Sukanya Samridihi Scheme. The government resets the interest rate at the beginning of every quarter.

Theoretically, since 2016, interest rate resetting has been done based on yields of government securities of the corresponding maturity with some spread on the scheme for senior citizens, as advised by the Shyamala Gopinath Committee. However, in practice, the interest rate changes are made considering several other factors, including political ones.

Small Saving Schemes

Saving Deposits

4

4

1 Yr Time Deposit

5.5

5.5

2 Yrs Time Deposit

5.5

5.5

3 Yrs Time Deposit

5.5

5.5

5 Yrs Time Deposit

6.7

6.7

5 Yrs Recurring Deposit

5.8

5.8

Sr Citizen Saving Scheme

7.4

7.4

Monthly Income A/C

6.6

6.6

NSC

6.8

6.8

PPF

7.1

7.1

Kisan Vikas Patra

6.9 (Maturity in 124 mths)

6.9 (Maturity in 124 mths)

Sukanya Samridhi

7.6

7.6

Published on April 01, 2021

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