Former finance minister P Chidambaram on Wednesday hit at Finance Ministry's decision to cut interest rates on small savings and said the decision must be immediately reconsidered. On Tuesday, the government slashed the interest rates on small savings schemes between 70 basis points to 140 basis points for the April-June quarter of 2020. "In times of acute distress and uncertainty about income, people depend on the interest income on their savings. Government must reconsider immediately and restore old rates until June 30," Chidambaram tweeted. For Kisan Vikas Patra (KVP) the rate has been slashed by 70 bps to 6.9 per cent and the girl child-focussed Sukanya Samriddhi scheme will now get an interest of 7.6 per cent after reduction of 0.8 per cent. Raising questions on the timing of the decision, Chidambaram said, "While reducing the interest rate on PPF and small savings may be technically correct, it is absolutely the wrong time to do so."
"I know that sometimes government acts on stupid advice, but I am amazed how stupid this advice was!", he also said, adding that people depend on the interest income on their savings in times of acute distress and uncertainty. Chidamabaram also asked the government to withdraw the decision and restore old rates until June 30.
The rate on 5-year recurring deposits has been cut by 140 bps from 7.2 percent to 5.8 percent. Similarly, the rate on time deposits has been slashed by 100 bps, from 7.7 percent to 6.7 percent. The revision of interest rates on the small savings schemes is done on a quarterly basis. This is the lowest interest rate offered on the popular small savings scheme since 1977. PPF accounts used attracted 7.9 per cent interest till the March quarter of FY20