Interest rate reduction should be avoided

It was a bolt from the blue to the public as the Union Finance Minister Nirmala Sitharaman announced that the interest rate for small savings will be reduced. But it is appreciable that the minister took it back within 12 hours. 


For one year deposits, the rate of interest was reduced from 5.5% to 4.4% and this announcement created a shock wave among the public.

But as a sigh of relief, Nirmala Sitharaman announced within 12 hours that the order was issued by oversight and it will be withdrawn. She also said that the same rate of interest will continue to exist for the next three months and this order came out with the consent of the commission. 


The former announcement created a shock whereas the latter was a relief.

Though there are political criticisms that the former announcement was taken back as it might create an impact over the five-state Assembly elections, the decision to withdraw the orders is appreciable.

But this should continue to persist. Many people rely on the interest that is generated from the savings as they lost their livelihood due to the pandemic. Especially the elderly completely depend upon the savings interest and calculate their monthly budgets.


It is better not to touch the interest rate for small savings keeping in mind the price hikes and increased medical expenditures. There is a demand to revamp the small savings schemes according to the recommendation of the committee chaired by Shyamala Gopinath, who was a former  RBI Governor. 

The internal savings within a country plays a significant role in stabilising the country’s economy. Therefore the interest rate should be fixed accordingly so that small savings are encouraged rather than driving the people away towards private institutions for savings. 

Leave a Reply

Your email address will not be published. Required fields are marked *