By Aditya Raghunath
Investing.com — Everyone who read their newspapers today (on April 1) would have seen the news report that said the Indian government cut the savings rate on small savings schemes by 40-90 bps (basis points) for the April-June 2021 quarter.
This meant interest rates on financial products like PPF (public provident fund) fell to 6.4% (down 70 bps), the lowest it has been in 46 years.
However, at 7:54 AM today morning, Finance Minister Nirmala Sitharaman tweeted from her handle @nsitharaman: 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Orders issued by oversight shall be withdrawn.
This rollback affects millions of Indian households positively. According to a report in Livemint.com, in 2019-20 “84.24% of the household financial savings were made in these financial instruments [fixed deposits, small savings schemes, provident and pension funds and life insurance]. Investment in shares and debentures (which includes mutual funds), despite all the hype, formed a minuscule 3.39% of the overall savings. A fall in interest rates negatively impacts a bulk of India’s savers, with the return on their investments coming down.”