Finance Minister Nirmala Sitharaman on Thursday tweeted saying that a government decision to reduce the interest rates on a number of small saving scheme categories - issued less than 24 hours ago - has been reversed, calling the order an 'oversight'.
The schemes - part of National Small Savings Fund - are popular interest-bearing instruments in financial planning among small savers and the middle-class income earners. The rate cuts were as deep 1.1 percentage point (110 basis points) on the one-year time deposit which faced the steepest cut., falling from 5.5% to 4.4%
The step caused the government to draw flak from users on social media, and the opposition parties. This withdrawal of the rate cuts is also being linked to the election season, where four states and one union territory are currently going to the polls.
The schemes covered include the public provident fund (PPF), savings deposits, senior citizen savings scheme.
According to data from the National Savings Institute, in FY21 (upto January 2021), the fund managed gross savings worth ₹7.07 lakh crores (which is the total savings) and net savings worth ₹1.98 lakh crore (net over FY20).
What are the small savings schemes?
The small savings schemes is a government run initiative under Ministry of Finance, targeting several groups of savers, such as small depositors, farmers, senior citizens and those who want to save for their girl child.
The schemes fall under the Public Account of India, which is one of the three accounts in the government's annual financial statement.
The schemes are known for their safety and carry a degree of trust due its its governmental backing.