Quick Rollback

Even as the centre reversed a move to reduce interest rates on small savings schemes, experts warn that these cuts will be implemented soon. Investors should invest in high-interest yielding small savings instruments

- Shivanand Pandit

IN one of the quickest rollbacks, the government reversed a move to reduce interest rates on small savings schemes. Restoring the rates through a Twitter message, Finance Minister Nirmala Sitharaman termed the announcement as an “oversight”. On March 31, 2021, the government declared a severe cut of interest rates on all small savings schemes comprising Public Provident Fund (PPF), term deposits and a host of welfare schemes for senior citizens, girl children and farmers. The new rates were to come into effect from April 1, 2021.

These decisions were significant, as the reductions ranged from 40 to 110 basis points across various savings schemes and in the case of PPF, the interest rates touched the lowest point since 1974. The government had declared a drop in small saving rates for the first quarter of the new financial year. It was the second instance that interest rates on small savings instruments were reduced in the past 12 months. Earlier, the government had lowered rates of small savings schemes by 70 to 140 basis points for the April to June quarter of 2020-2021.

Sitharaman mentioned that interest rates of small savings instruments will continue at the rates of 2020-2021 and the orders released by oversight shall be cancelled. It was certainly a sleepless night for many when the government stated the revised rates, but the tweet gave a big relief to many who depend on these savings schemes for survival.