The Finance Ministry on Thursday revoked its order regarding rate cut reduction on small savings, within 12 hours of taking the decision. This action means that the interest rates on various small saving schemes such as National Saving Certificates (NSC), Public Provident Fund (PPF) will remain for at least three more months starting from April 1.

The Ministry on Wednesday issued an office memorandum affecting a cut in the range of 50 basis points to 90 basis points. This was one of the highest reductions following the unchanged interest rate after a long period. Finance Minister Nirmala Sitharaman tweeted on Thursday that the Orders issued by oversight shall be revoked. The Interest rates of small savings schemes of the government of India shall continue to be at the rates which existed during the last quarter of 2020-2021, i.e., the rates that prevailed as of March 2021. No reason has been given for withdrawal, but it seems like the strong reaction on social media, TV, and newspapers forced the Government to change its decision. It is also assumed that the ongoing elections in West Bengal and four other states could also be one of the reasons for the withdrawal.

Apparently, as advised by the Shyamala Gopinath Committee, since 2016, the interest rate resetting has been done based on yields of government securities of the corresponding maturity with some spread on the scheme for senior citizens. Though, practically, the interest rate changes are performed considering numerous additional factors, including political factors as well. The small savings schemes basket comprises 12 instruments including the National Saving Certificate (NSC), Public Provident Fund (PPF), Kisan Vikas Patra (KVP), and Sukanya Samridihi Scheme and the government resets the interest rate at the beginning of each quarter.