The Indian government has reduced the interest rates on small savings schemes by 70 to 140 basis points (bps) for April-June quarter of 2020.
In a notification, the department of economic affairs (DEA)
, says, public provident fund (PPF) interest rates in the June quarter have been brought down by 80bps to 7.1% and for Kisan Vikas Patra (KVP) the rate has been slashed by 70bps to 6.9% and after reduction of 0.8%, the girl child-focused Sukanya Samriddhi scheme will now receive an interest of 7.6%.
Fixed deposits between one year to three years would now receive an interest of 5.5% against 6.9%, while five-year deposit would get an interest of 6.7% instead of 7.7%.
Recurring deposits of five-year duration received the biggest cut in the interest rates. It will now receive an interest of 5.8% as against 7.2% for previous quarter. Even the senior citizen savings scheme got a major cut of 120bps. Many senior citizens are dependent on this scheme for their retirement lives. Deposits in this scheme will now receive an interest of 7.4% instead of 8.6%.
Deposits in monthly income scheme and national savings certificate (NSC) will receive interests of 6.6% and 6.8%, respectively, during the June quarter, the DEA says.
Former minister of finance P Chidambaram has slammed the government for reducing the interest rates on small savings and PPF and said it may be technically correct but it is wrong time as the country is amid lock-down due to fear of COVID-19 and people have no way of increasing income.
"In times of acute distress and uncertainty about income, people depend on the interest income on their savings," Mr Chidambaram tweeted.
The former minister also demanded roll back of this decision, saying, "Government must reconsider immediately and restore old rates until 30th June. While reducing the interest rate on PPF and small savings may be technically correct, it is absolutely the wrong time to do so."