New Delhi: The government on Thursday revoked a steep interest rate cut on small savings schemes such as PPF and NSC, with Finance Minister Nirmala Sitharaman saying it was an oversight - a move being seen as an attempt by the BJP to contain the fallout of such a decision hitting common people amid the ongoing elections in West Bengal and Assam.
Elections are also slated in the coming days in Kerala, Tamil Nadu and Puducherry.
While the government routinely announces interest rates for small savings schemes at the end of every quarter, Wednesday's decision to cut interest rates by up to 1.1 per cent across various small savings schemes, including Public Provident Fund (PPF) and National Savings Certificates (NSC), had come a day before the second phase of polling in West Bengal, including at political hotbed Nandigram from where West Bengal Chief Minister Mamata Banerjee is contesting.
It has been decided that the rate of interest on various small savings schemes for the first quarter of 2021-22 starting from April 1 and ending on June 30, 2021 shall remain unchanged from those notified for the fourth quarter January 1, 2021 to March 31, 2021 of 2020-21, the finance ministry said in an office memorandum on Thursday.
"This has the approval of competent authority," it said
The ministry's office memorandum to roll back cut in rates on small savings scheme came hours after the finance minister termed Wednesday's notification as "oversight".
"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 Orders issued by oversight shall be withdrawn," Sitharaman said in an early morning tweet.
Interest rate on PPF was reduced by 0.7 per cent to 6.4 per cent while NSC was to earn 0.9 per cent less at 5.9 per cent.
The highest cut 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.
It is to be noted that the rates on fixed deposits under small savings scheme are regulated by the government while banks are free to decide their deposit and lending rates based on their asset liability position. As a result fixed deposit rates of different banks vary unlike under small savings schemes.
Taking a dig at the finance minister after she announced that the government will withdraw orders to cut interest rate on small savings schemes, the Congress on Thursday said one can imagine the functioning of the economy when such a duly approved order affecting crores of people can be issued by an "oversight".
Senior Congress leader P Chidambaram said when inflation is at about 6 per cent and expected to rise, the BJP government is offering interest rates below 6 percent hitting the savers and the middle class below the belt.
"The BJP government had decided to launch another assault on the middle class by slashing the interest rates and profiting itself. When caught, the FM is putting forward the lame excuse of 'inadvertent error'," the former finance minister said on Twitter.
Congress leader Priyanka Gandhi Vadra said, "Really Nirmala Sitharaman 'oversight' in issuing the order to decrease interest rates on GOI schemes or election driven 'hindsight' in withdrawing it?"
As rates have been restored, PPF and NSC earns an annual interest rate of 7.1 per cent and 6.8 per cent, respectively.
One-year term deposit scheme will continue to earn an interest rate of 5.5 per cent during the first quarter of the current fiscal while the girl child savings scheme Sukanya Samriddhi Yojana account will earn 7.6 per cent as against reduced rate of 6.9 per cent.
The interest rate on the five-year senior citizens savings scheme would be retained at 7.4 per cent. The interest on the senior citizens' scheme is paid quarterly.
Interest rate on savings deposits will be restored at 4 per cent annually from the reduced rate of 3.5 per cent.
Term deposits of one to five years will fetch an interest rate in the range of 5.5-6.7 per cent, to be paid quarterly while the interest rate on five-year recurring deposits will earn a higher interest of 5.8 per cent as against the reduced 5.3 per cent.