Within hours of issuing a Circular notifying cut in interest rates for small savings, the Centre withdrew the order calling it an “oversight”. Finance minister Nirmala Sitharaman made an announcement to this effect on Twitter stating that the rate of interest will remain unchanged as of the the last quarter of 2020-2021.
“Interest rates of small savings schemes of government of India 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 Orders issued by oversight shall be withdrawn,” tweeted the Finance Minister.
Now the earlier rate of interest will remain effective till further orders by the government.
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Orders issued by oversight shall be withdrawn.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
According to an office memorandum of the Ministry of Finance issued on Wednesday, the rate of interest for savings deposits was reduced from 4 per cent to 3.5 per cent annually.
The rate of interest for Sukanya Samriddhi Account Scheme was also reduced from 7.6 to 6.9 per cent.
The other schemes (with annual compounding frequency) for which interest was reduced include Public Provident Fund (reduced from 7.1 to 6.4 per cent) and for National Savings Certificate (6.8 to 5.9 per cent).
For Kisan Kisan Vikas Patra the rate of interest was reduced from 6.6 per cent to 6.2 per cent. The KVP would have then mature in 138 months instead of 124 months earlier.
The rate of interest for the Senior Citizen Savings Scheme was reduced to 6.9 from 7.6 per cent. For schemes with quarterly compounding frequency, the interest of one-year time deposit was reduced to 4.4 per cent from 5.5 per cent.
For two-year time deposit scheme, the interest was lowered from 5.5 per cent to 5.0 per cent. Interest for three-year time deposit scheme was reduced from 5.5 per cent to 5.1 per cent, and five-year time deposit scheme from 6.7 per cent to 5.8 per cent.
For the five-year recurring deposit, the interest was reduced from 5.8 to 5.3 per cent.