Govt withdraws rate cut order on small savings schemes, calls it ‘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, tweeted Nirmala Sitharaman

• The withdrawal of the order reverses the rate cut of up to 100 basis points or 1.1 percentage points, which was announced on March 31

New Delhi: A day after announcing reduction in interest rates in small savings schemes like the Public Provident Fund (PPF) and the National Savings Certificate (NSC), the government has withdrawn its rate cut order, calling it an "oversight." In a tweet posted on early Thursday morning, Finance Minister Nirmala Sitharaman said, "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 Orders issued by oversight shall be withdrawn."

Therefore, the rates on small savings schemes will continue to remain as they were during the January-March quarter. The withdrawal of the order reverses the rate cut of up to 100 basis points or 1.1 percentage points, which was announced on March 31.

Govt to maintain status quo on rate for fourth consecutive quarter

The withdrawal of the rate cut order makes Q1 of FY22 the fourth consecutive quarter the government has maintained the rates on small savings schemes. The decision means that PPF and NSC will continue to offer interest of 7.1 percent and 6.8 percent, respectively, for the next three months at least. 

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The backdrop

The government's sharp U-turn on the rate cut order comes in the backdrop of a fierce backlash on social media about how the decision would add to the financial hardship of the middle class at a time when retail inflation has already breached the 6 percent mark and the government has already decided to tax Employees PF savings starting this year. However, it remains to be seen whether the government will allow the status quo on rate cuts to continue in the next quarter (Q2) of FY22 or not.

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