The Centre has withdrawn the notification highlighting cuts in small savings schemes just hours after release. It is expected that the move to withdraw the notification was following sharp criticism on social media suggesting that the middle class will suffer.
Since April 2016, this will be the first time that the government has scrapped the notification about interest cut rates on small savings schemes after changing to a quarterly interest rate-setting system.
Through Twitter, 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 Orders issued by oversight shall be withdrawn."
On Wednesday, the Finance Ministry through a circular said that the interest rate on savings deposits has been reduced from 4% to 3.5% for the first quarter of 2021-22. Even rates on time deposits were also significantly reduced.
Earlier, it was decided to reduce the rate of Public Provident Fund (PPF) to 6.4 percent from 7.1 percent, also National Savings Certificate (NSC) was to yield 5.9 percent down from 6.8 percent earlier. While Sukanya Samriddhi Yojana, the girl child savings scheme, would fall to 6.9 percent from 7.6 percent earlier.
The Ministry's circular came out at a time when inflation was gearing up. According to the latest retail inflation data released by the government showed that the number was rising to a three-month high of 5.03 percent in February from a 16-month low of 4.06 percent in January.