Government Withdraws Cut In Small Savings Schemes Citing ‘Oversight’

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Hours after slashing the interest rates on small savings schemes, the central government has decided to withdraw the order.

The interest rates of small savings schemes of the government will continue to be the same as in the last quarter of 2020-21, Finance Minister Nirmala Sitharaman said in a tweet on Thursday. “Orders issued by oversight shall be withdrawn,” she said.

On Wednesday, the central government cut interest rates applicable on various small savings schemes by 50-110 basis points for April-June 2021, compared to the previous quarter.

One of the sharpest cuts was in term deposit schemes — the rate on a one-year time deposit was lowered from 5.5% to 4.4%. The return on the five-year time deposit was cut from 6.7% in January-March to 5.8% in April-June.

The interest rate on the public provident fund savings scheme was reduced to 6.4% from 7.1% for the period. With this, the interest rate on PPF stood at a 46-year-low.

From April 1, the interest rate on National Savings Certificate was supposed to be 5.9%, down from 6.8% earlier. The rate on Senior Citizen Savings Scheme was also reduced to 6.5% against 7.4% earlier; and on savings deposits, it was lowered to 3.5% from 4% at present.

Since the onset of the Covid-19 pandemic, this was the second time in a year that the government had issued an order to reduce interest rates on these schemes. Interest rates on small savings schemes were last reduced by 70-140 basis points in the April-June 2020 period.

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