Indian govt reverses decision to cut interest rates on savings schemes

The Indian government did a major U-turn on Thursday, with the finance ministry abruptly withdrawing the interest rates cut on small savings schemes.

“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Orders issued by oversight shall be withdrawn,” finance minister Nirmala Sitharaman tweeted on Thursday morning, hours after her ministry had the previous night slashed the rates.

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Orders issued by oversight shall be withdrawn.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_India

— Nirmala Sitharaman (@nsitharaman) April 1, 2021

The most severe cut proposed by the ministry for the quarterly interest rate was for one-year term deposits, from 5.5 per cent in the January-March quarter, to 4.4 per cent for the current April-June one.

Interest rates on senior citizen savings scheme was also slashed from 7.4 per cent to 6.5 per cent, and for the Sukanya Samriddhi account from 7.6 per cent to 6.9 per cent. For the Public Provident Fund scheme, the interest was lowered from 7.1 per cent to 6.1 per cent.

The Congress was quick to lash out at the government. “The BJP government had decided to launch another assault on the middle class by slashing the interest rates and profiting itself,” tweeted P. Chidambaram, the former Congress finance minister.

“When caught, the FM is putting forward the lame excuse of 'inadvertent error',” he added.