Small savings interest rate cut had Finance Minister, Election Commission nod: Report

An RTI response revealed the DEA and EC had been in communication regarding the rate cut

The interest rate cuts on small savings schemes announced at the end of March, which was later withdrawn, had been reportedly signed off by the Finance Minister and the Election Commission (EC), according to a response to an RTI application filed by The New Indian Express.

The RTI reply revealed that the Department of Economic Affairs (DEA) and the EC were in communication regarding approval for the rate cut as the DEA was mandated to seek clearance from the EC as per the model code of conduct during the Assembly polls, the publication reported.

"For the first quarter of FY 2021-22 starting from April 1 and ending on June 30, the rates have been revised with the approval of Hon'ble FM, as per the confidential draft enclosed," the DEA letter allegedly read marked with the subject “revision of interest rates for small saving schemes”. The letter also reportedly ended with a line in bold that read, “The matter may be treated as urgent as the revision has to be affected from 1.04.2021.”

According to the report, the Election Commission gave it a green signal on the same day.

On March 31, the government announced rate cuts on small savings schemes, including national saving certificates and public provident funds, by up to 1.1 per cent, in step with declining fixed deposit rates at banks, before backtracking on the decision as it faced almost an immediate backlash against the move. Finance Minister Nirmala Sitharaman deemed it an “oversight.”

Small savings schemes are the backbone assured investment plans for many aging or risk-averse Indians who rely on the safety of government-backed savings tools. The relatively high interest rates these instruments offer have become much more attractive as banks lower fixed deposit rates.