The Centre has pulled back its decision to cut interest rates of small savings schemes announced last evening.
The announcement was made by Finance Minister Nirmala Sitharaman on April 1 on microblogging site Twitter.
Early in the day Sitharaman tweeted: "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."
She added that the orders, which were "issued by oversight", will be withdrawn.
This came after the Ministry of Finance had on March 31 announced a cut in small savings deposit rate from 4 percent to 3.5 percent for the first quarter of the financial year starting April 1, 2021. Besides this, rates of other small saving schemes were also cut.
The ministry said the rate cuts "are in line with overall interest rate movement in the financial system."
Reactions to the reversal came swift. Among these included former PMEAC member Rathin Roy, who was caustic about the back-and-forth: "A decision taken yesterday reversed today. It is very sad for me to see how incompetent and incapable the Finance Ministry has become. Like Air India, the Finance Ministry of India has declined from being an icon to a demonstrably dysfunctional outfit."
Former Finance Minister and Congress leader P Chidambaram also took to Twiiter to criticise the rate cut and called out Sitharaman was phrasing the decision as "issued by oversight," stating: "Announcement of interest rates on savings instruments for the next quarter is a regular exercise. There is nothing “inadvertent” about its release on 31st March." (sic)
He criticised the government for "assault on the middle class" and making "lame excuses" when faced with backlash.
"The BJP government had decided to launch another assault on the middle class by slashing the interest rates and profiting itself. When caught, the FM is putting forward the lame excuse of “inadvertent error”. When inflation is at about 6 per cent and expected to rise, the BJP government is offering interest rates below 6 percent hitting the savers and the middle class below the belt." he added.
The Finance Ministry on March 31 cut one-year time deposit rates to 4.4 percent from 5.5 percent, and two-year, three-year, four-year and five-year recurring deposit rates to 5 percent, 5.1 percent, 5.8 percent and 5.3 percent, from 5.5 percent, 5. 5 percent, 6.7 percent and 5.8 percent, respectively.
It had also cut interest rates of the Senior Citizen Savings Schemes to 6.5 percent from 7.4 percent; of the Public Provident Fund Scheme to 6.4 percent from the earlier rate of 7.1 percent; of the Kisan Vikas Patra scheme to 6.2 percent from 6.9 percent; and of the Sukanya Samriddhi Account Scheme to 6.9 percent from 7.6 percent.
"These interest rate cuts are in-line with overall interest rate movement in financial system. When bank lending deposit rates fall sharply, small savings rates have to follow to align with the larger trend," the ministry had justified.
The announcement was however was met with intense backlash from the public. On Twitter, many pointed out common people's dependency on small savings schemes and criticised the Centre's move.
"Most unfortunate senior citizens who are not getting pension are dependent on fixed deposits are in great trouble," wrote one user.
Another said: "This is not expected from GOVT. Post office was only hope for common people for saving
. Not at all happy with this decision. Pls roll back this decision"