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Centre withdraws order on an interest rate cut on small savings schemes

Hours subsequent to telling huge cuts in little reserve funds instruments' profits for this quarter, the public authority has backtracked on these sharp cuts. This is the first occasion when the Center has rejected the told loan fees on little reserve funds plans in the wake of changing to a quarterly financing cost setting framework in April 2016.

“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 Orders issued by oversight shall be withdrawn”, Finance Minister Nirmala Sitharaman said in a tweet early Thursday morning.

This would make the fourth consecutive quarter in which the government has maintained the rates on such schemes. According to the recent decision, PPF and NSC will continue to offer interest of 7.1% and 6.8% for the coming three months. The now-withdrawn order would have otherwise made the effective rates from April 1, 6.4% and 5.9% for the PPF and NSC, respectively.

The Finance Ministry on March 31 have cut one-year time deposit rates to 4.4 percent from 5.5 percent, and two-year, three-year, four-year, and five-year recurring deposit rates to 5 percent, 5.1 percent, 5.8 percent, and 5.3 percent, from 5.5 percent, 5. 5 percent, 6.7 percent, and 5.8 percent, respectively.

It had also cut interest rates of the Senior Citizen Savings Schemes to 6.5 percent from 7.4 percent; of the Public Provident Fund Scheme to 6.4 percent from the earlier rate of 7.1 percent; of the Kisan Vikas Patra scheme to 6.2 percent from 6.9 percent; and of the Sukanya Samriddhi Account Scheme to 6.9 percent from 7.6 percent.

"These interest rate cuts are in line with overall interest rate movement in the financial system. When bank lending deposit rates fall sharply, small savings rates have to follow to align with the larger trend," the ministry had justified.

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