Hours after announcing a cut on interest rates on small savings schemes, the Union government said that it would withdraw the order. The government had said that interest rates for small savings schemes including NSC (National Savings Certificate) and PPF (Public Provident Fund) would be cut by up to 1.1% for the first quarter of 2021-22 in line with falling fixed deposit rates of banks. Interest rates for small savings schemes are notified on a quarterly basis.
Taking to Twitter, Union Finance Minister Nirmala Sitharaman said, "Interest rates of small savings schemes of the Government of India 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 Orders issued by oversight shall be withdrawn."
With this, the rates of interest on various small savings schemes for the first quarter of the financial year 2021-22 starting from April 1 and ending on June 30, 2021, that had been revised, now stand cancelled.
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Orders issued by oversight shall be withdrawn.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_Indiaâ€” Nirmala Sitharaman (@nsitharaman) April 1, 2021
The Interest rate on PPF had been reduced by 0.7% to 6.4% while the NSC would have been 0.9% less at 5.9%. The interest rate for the five-year Senior Citizens Savings Scheme had also been reduced steeply by 0.9% to 6.5%. The interest on the senior citizens' scheme is paid quarterly.
For the first time interest rate on savings deposits had been reduced by 0.5% to 3.5% from the existing 4% annually. The steepest fall of 1.1% had been effected in the one-year term deposit. The new rate would have been 4.4% as compared to 5.5% at the moment. Similarly, two-year fixed deposit would have been 0.5% less at 5%, while three-year term deposit rate would have been down by 0.4% and five- year term deposit rate would have been lower by 0.9% at 5.8%.
The girl child savings scheme Sukanya Samriddhi Yojana account would have offered 0.7% lower rate at 6.9% rate during the first quarter of the next fiscal. The annual interest rate on Kisan Vikas Patra (KVP) had been reduced by 0.7% to 6.2% from 6.9%.
While announcing the quarterly setting of interest rates in 2016, the Finance Ministry had said that rates of small savings schemes would be linked to government bond yields. Last month, the Reserve Bank of India (RBI) kept interest rates static for the fourth time in a row at 4% on inflationary concerns.