The interest rates reduction in small savings rates decision has been withdrawn by the government.
Finance Minister Nirmala Sitharaman now says that the orders pertaining to interest rates shall be withdrawn. The government had Wednesday cut interest rates on the small savings schemes. Besides, the cut was sharp by 40-110 basis points.
Small saving rates are linked to bond yields. These have fallen over the past year. This is because the Reserve Bank of India cuts rates to support the economy.
The reduction in interest rates basically helps the government reduce costs. But this also hurts investors, particularly senior citizens and the middle-class.
Interest rates on small savings schemes come on a quarterly basis. These also come in line with the movement in benchmark government bonds of similar maturity.