Interest rates on PPF, KVP, NSC, other small saving schemes to remain same as govt withdraws order

FM Nirmala Sitharaman said that orders issued by oversight shall be withdrawn

Finance Minister Nirmala Sitharaman on Thursday scrapped the steep cuts in interest rates on small savings schemes within hours claiming that the orders were issued by “oversight”.

“Interest rates of small savings schemes of the government of India shall continue to be at the rates which existed in the last quarter of 2020-2021, i.e, rates that prevailed as of March 2021,” Sitharaman said.

“Orders issued by oversight shall be withdrawn,” the finance minister said within hours of the Department of Economic Affairs announcing sharp cuts on interest rates on various small savings schemes by up to 110 basis points.

According to the order issued on March 31, the new rates applicable for the first quarter were to come into effect from Thursday, April 1.

The interest rate on the public provident fund was slashed to 6.4 per cent, the lowest since 1974; while the national savings certificate scheme would now yield 5.9 per cent annually as against 6.8% earlier.

The government on Wednesday had cut interest rates on small savings schemes, including NSC and PPF, by up to 1.1 per cent for the first quarter of 2021-22 in line with falling fixed deposit rates of banks.

Interest rates on Public Provident Fund (PPF) was reduced by 0.7 per cent to 6.4 per cent while National Savings Certificate (NSC) by 0.9 per cent at 5.9 per cent.

The new interest rate on PPF will be the lowest since 1974. According to reports, the PPF interest rate was 7 per cent between August 1974 and March 1975. Prior to that, the rate was 5.8 per cent. Interest rates for small savings schemes are notified on a quarterly basis.