New Delhi: Parliamentary standing committee on finance has hit out at the recent government decision to cut interest earned on small saving schemes saying “savers will find it difficult to make long term financial plans.”
“While resetting these administered rates for 2016-17, the government has chosen to prune them across the board tilting the scales against the small saver... With rates on even long-term schemes such as the Public Provident Fund now set to float up and down every quarter, savers will find it difficult to make long term financial plans,” said the committee in a report tabled in the Parliament.
The Centre had slashed interest rates on small savings including PPF and KVP from April to align them closer to market rates. The committee headed by Dr M. Veerappa Moily said that this “drastic reset in rates also appears to have been triggered by the demand from bankers for a level playing field vis-a-vis bank FDs.”
“However, in the view of the committee, this threat from small savings may be over-stated, as small savings schemes (with about Rs 7 lakh crore) manage only a fraction of the funds parked as bank deposits (about Rs 90 lakh crore),” said the report. Moreover, it said with individual ceilings, savers cannot possibly allocate unlimited funds to these schemes in any case.