Government to move cautiously on trimming small savings rate: Arun Jaitley

New Delhi: Government will bring down interest rates on small savings "cautiously" so as to protect the interest of weaker and vulnerable sections, Finance Minister Arun Jaitley said on December 4.

Citing example of girl child scheme launched last year, he said that "if after one year you immediately slash it down radically, it may not be very politically prudent and therefore, you have to move in that direction but you have to move a little cautiously".

As a lot of people depend on small schemes, the Finance Minister said, "we as an elected government have to look at it in addition to the economic principles with a sense of political pragmatism."

Sukanya Samriddhi Scheme currently gives the highest interest rate of 9.2 per cent and this was to incentivise the people investing in the name of girl child. RBI and banks have been pressing for reduction of small savings rates and bring them in line with market rate for effective transmission of monetary policy.

"It has been always suggested by the RBI, the Governor of RBI even publically suggested it and that also has been a view expressed by a lot of very reasonable people, that small savings rate must come down," he said at the HT Leadership summit.

Earlier this week, RBI Governor Raghuram Rajan said the rate reduction on small savings like PPF and post office deposit is also going to bring down the cost of fund for banks.

"The government is considering small saving rates and tying them more to market interest rates. I think these actions will help (effective monetary policy) transmission," Rajan had said.

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