Government Takes Back The Slashed Interest Rates On Small Saving Schemes, calls it “Orders Issued By Oversight”

Interest Rates

On Thursday, The Finance Minister on Twitter announced the withdrawal of the order slashing interest rates on small saving 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, i.e., rates that prevailed as of March 2021. Orders issued by oversight shall be withdrawn,” Finance Minister informed on Twitter.

On the last day of FY 2020-21, The Ministry of Finance announced a cut in interest rates of small savings deposit rates from 4 per cent to 3.5 per cent with effect from April 1, 2021, for the first quarter of new FY 2021-22.

  • One-year time deposit interest rates were brought down to 4.4 per cent from 5.5 per cent.
  •  The 2-year Time Deposit rate came down to 5 per cent from 5.5 per cent.
  •  3- and 5-year Time deposit rates were cut down to 5.1 per cent and 5.8 per cent from 5.5 percent and 6.7 percent respectively.
  • The rate of interest for a 5-year Recurring Deposit was levelled down to 5.3 per cent from 5.8 per cent.
  • Interest rates on small saving schemes are compounded quarterly.

The Ministry informed, Senior Citizen Savings Schemes interest rates are cut down to 6.5 per cent from 7.4 per cent. It further added, Public Provident Fund Scheme interest rates were reduced to 6.4 per cent from the earlier rate of 7.1 per cent while Kisan Vikas Patra’s interest rates were brought down to 6.2 percent from 6.9 percent earlier.

The interest rate for Sukanya Samriddhi Account Scheme had also been slashed to 6.9 per cent from 7.6 percent.

If implemented, this would have been a reduction in interest rates for the second time within a year and the one that would have reduced interest rates to the lowest in four-decade. In the first quarter of FY 2020-21, the government had cut down rates of small savings schemes by 0.70-1.4 per cent. The implementation of such cuts would have impacted schemes for the girl child and the elderly.