NEW DELHI: In a move that is bound to hurt the retired people, senior citizens and small investors the government today announced the sharpest cuts ever in the rates on all small savings instruments for the first quarter of 2021-22, effecting cuts ranging from 40 basis points (0.4%) to 110 basis points (1.1%) starting from April 1, 2021. 

The Finance Ministry through a notification on Wednesday announced that interest rate revision across products including on savings deposits has been reduced to 3.5 per cent from 4 per cent for the first quarter of 2021-22. 

Returns on one of the most popular fixed income products, the Public Provident Fund (PPF) will now fetch a rate of 6.4 per cent, down from 7.1 per cent prevailing earlier. National Savings Certificate (NSC) will now give a yield of 5.9 per cent, revised down from 6.8 per cent earlier while interest rates on the girl child savings scheme Sukanya Samriddhi Yojana will fall to 6.9 per cent from 7.6 per cent earlier.

The rate of interest on Kisan Vikas Patra a saving certificate issued by India Post has been reduced to 6.2 per cent from 6.9 per cent earlier. This instrument will now mature in 138 months from its earlier maturity tenure of 124 months. 

In the quarter April to June quarter of 2020, the Finance Ministry had cut interest rates on small savings schemes by up to 140 basis points however for the last three quarters they have been kept steady. 

While the government might have been prompted to revise the rates considering that inflation has been breaching the 6% mark and it is keen to lower interest rates to make it easier to execute its borrowing plans, for the investors who are looking for the security of their investments by parking their funds in government-backed products and institutions this comes as a big dent in their returns.

The move will also severely impact senior citizens and retired people who depend on such products for a regular rate of return.