Cut in rate on small saving schemes withdrawn by Finance Minister

Synopsis – The Union government rolls back interest cut on small saving schemes interest rates, blaming the decision on an oversight.

Introduction –

• The finance ministry has reversed its decision to cut interest rates on small savings accounts, citing an error.
• Reversing a rate cut of up to 110 basis points (1.1 percentage points) announced the day before.
  • Interest rates on savings deposits have been cut from 4% to 3.5%. The rate of interest in PPF was cut from 7.1% to 6.4.

Reason for the sudden withdrawal of an order

• Due to the elections– The government is attempting to contain the implications of a decision that will affect ordinary citizens in the upcoming elections in West Bengal, Assam, and three other states.

Impact of sudden withdrawing of orders –

• Negative effect on the picture of the bureaucracy’s working – The abrupt rollback decision would damage the bureaucracy’s image.
• Bank aspect- The rollback would make the government’s annual borrowing program of 12.05 lakh crore more difficult. Because the central bank has complained about high small savings rates as a barrier to lower interest rates.

Way forward-

Any deviation or reversal from routine administrative decisions should be scrutinised by the Election Commission

Source – The Hindu