Govt to move cautiously on small savings: FM

 Close on the heels of the Reserve Bank of India suggesting that small savings rates should be aligned with the market rate, Finance Minster Arun Jaitley on Friday said the government will move cautiously on cutting interest rates on retail deposits as the step will have an adverse impact on vulnerable sections like retired employees.

 “It has been always suggested by the RBI. The Governor of RBI publically suggested it and it also has been a view expressed by a lot of very reasonable people, that small savings rate must come down," Jaitley said at a media event here.

 He, however, made it clear that it will not be politically prudent to cut interest rates so drastically.  “Take for example the girl child scheme launched last year. If after one year you immediately slash it down radically, it may not be very politically prudent and therefore, you have to move in that direction but you have to move a little cautiously,”  Jaitley said.

 The government had said in September that it wished to review interest rates on small savings, which includes Post Office Savings and Public Provident Fund after bankers said that high rates on such schemes run by the government make it difficult for banks to cut fixed deposit rates. It, had, however, said that it would move slowly on schemes related to girl child and retired people. Most of government’s small saving schemes give interest rate in between eight-nine per cent.

, barring saving deposits which has a four per cent rate of interest. Jaitley also said that the government was not worried about this year’s fiscal deficit target as there would be no slippage. He, however, said that the seventh Pay Commission payout will put an additional burden on the government, the effect of which will be felt for two years.
 
List of small savings and their rates as announced in April this year

 Public Provident Fund: 8.7 per cent
Kisan Vikas Patra: 8.7 per cent
--10 year National Savings Certificate: 8.8 per cent
--5 year NSC: 8.5 per cent
--5 year Monthly Income Scheme: 8.4 per cent
--5 year time deposit: 8.5 per cent
--5 year recurring deposit: 8.4 per cent
--1-3 year time deposits: 8.4 per cent
--Savings deposit - 4 per cent