The government on Tuesday said it would lower the interest rate on GoI Savings Bonds from 8% to 7.75%, overruling its Monday's decision to scrap the bonds altogether.

The bonds are known for providing a safe harbour to the salaried class and retired people, with an interest rate more than on fixed deposit and small savings.

"The 8% Savings Bonds Scheme, also known as RBI Bonds Scheme, is not being closed. 8% Scheme is being replaced by 7.75% Savings Bonds Scheme," Economic Affairs Secretary Subhash Garg said in a tweet, within hours of the government issuing a statement announcing its cessation.

On Monday, the finance ministry had said the 8% GOI Savings (Taxable) Bonds, 2003, shall cease for subscription with effect from the close of banking business on Tuesday, January 2, 2018.

Soon after the announcement, former Finance Minister P Chidambaram sought an explanation from the government on why it was taking an extreme step, and for whose benefit. "Is the government pushing people into stock market and mutual funds? For whose benefit? Government has a duty to explain," Chidambaram had tweeted.

"The GoI 8% taxable bonds have been the safe harbour of the middle class, especially retirees and senior citizens, since 2003. Government has taken away their only safety net," he said.

The bonds, introduced during the tenure of Vajpayee government in 2003, became more popular after April 2016, when the government started aligning small saving schemes with the market.