P Chidambaram
P Chidambaram|File Photo
Business & Economy

Chidambaram says wrong time to reduce interest on small savings

NetIndian News Network

New Delhi, April 1, 2020

Former Finance Minister and senior Congress leader P Chidambaram has urged the government to reconsider its decision to reduce the interest rates on various small savings schemes and the Public Provident Fund (PPF).

"While reducing the interest rate on PPF and small savings may be technically correct, it is absolutely the wrong time to do so," Chidambaram said on micro-blogging site Twitter.

"In times of acute distress and uncertainty about income, people depend on the interest income on their savings. Government must reconsider immediately and restore old rates until June 30," he added.

The government had yesterday announced a cut in interest on various small savings schemes and the PPF for the first quarter of financial year 2020-21 ending June 30, 2020.

Accordingly, the rate of interest on small savings schemes such as the Kisan Vikas Patra, the National Savings Certificate, the Senior Citizens Savings Scheme and the Public Provident fund (PPF) scheme has been revised downwards by between 70 and 140 basis points for the period.

Interest rates on the PPF and the Sukanya Samriddhi Yojana have been cut by 0.8 per cent or 80 bps each. Post office time deposits have seen the sharpest cut of 1.4 per cent or 140 bps.

The PPF scheme that is subscribed by millions of salary earners will get you an annual return of 7.1 per cent as against 7.9 per cent earlier. Senior citizens will also have to do with just 7.4 per cent interest rate from the earlier 8.6 per cent. The popular five-year recurring deposit will get you 5.8 per cent now.