Small savings scheme interest rate: The courageous gamble of cutting Public Provident Fund (PPF) and senior citizen savings scheme interest rates has dented people’s confidence in the NDA government and the move may also fail to deliver the desired results.

Will small savings interest rate cut work for BJP?

Small savings scheme interest rate: The courageous gamble of cutting Public Provident Fund (PPF) and senior citizen savings scheme interest rates has dented people’s confidence in the NDA government and the move may also fail to deliver the desired results.

By: Santosh Tiwari | March 23, 2016 10:33 AM

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Small savings scheme interest rate: In the absence of other safe avenues to get better returns, the option for senior citizens and others is to either accept the lower interest rate from April 1 or shift to risky investments like the private deposit schemes that robbed many people of their savings in West Bengal’s Saradha-type fraudulent schemes. (PTI)

 Small savings scheme interest rate: The courageous gamble of cutting Public Provident Fund (PPF) and senior citizen savings scheme interest rates has dented people’s confidence in the NDA government and the move may also fail to deliver the desired results.

This is what the Bharatiya Janata Party (BJP) said in its Election manifesto for the Lok Sabha polls 2014, that it won emphatically:

“BJP is committed to the welfare of senior citizens, especially their security and health care. We will take measures to deal with the issues related to the senior citizens in a focused manner.
BJP will:
 — Provide financial support, exploring ideas like additional tax benefits and higher interest rates.
 — Invest in setting up and improving old-age homes.
 — Harness their experience in the National Interest. Devise schemes and programs to engage the senior citizens as volunteers / part time workers in various development programmes of the government, in urban and rural areas. This will not only help in utilizing their time, but also it would be an effective utilization of their experience and may add an additional source of income for them.”

But, 22 months after winning elections, it seems to have forgotten this promise as is the case with regard to several other promises that includes ending the tax terror — the retrospective tax amendment of 2012 is still part of the income tax statute despite Prime Minister Narendra Modi and Finance Minister Arun Jaitleyhinting at its scrapping several times.

Though the reduction in the small savings schemes’ interest rates to align it with the bank fixed deposit rates, which has been seen as a hindrance for cutting the lending rates may be justified citing economic logic, the decision goes against senior citizens and many others who look at these schemes as their social security.

In the absence of other safe avenues to get better returns, the option for these people is to either accept the lower interest rate from April 1 or shift to risky investments like the private deposit schemes that robbed many people of their savings in West Bengal’s Saradha-type fraudulent schemes.

This is how government has revised the small savings schemes’ interest rates: From April 1 to June 30, the interest rate on 1-year time deposit has been cut to 7.1% from 8.4%. Interest rate on Public Provident Fund (PPF) scheme has been reduced to 8.1% from 8.7%, and rate on Kisan Vikas Patra will go down to 7.8% from 8.7%. Even the interest rates on Sukanya Samriddhi Account Scheme, launched by PM Modi for the girl child, too, has been cut to 8.6% from 9.2%.

While the government’s approach appears to be courageous, the outcome will be judged by the people’s response to it and also the RBI and the banks, which are supposed to facilitate cut in lending rates now; but, it certainly has dented people’s confidence on PM Modi dispensation for the time being.