13:58 GMT12 April 2021
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    India on Wednesday ordered interest rate cuts on a range of federal savings plans, which are hugely popular among the country's salaried class as well as other middle-class savers. The federal decision triggered massive backlash, prompting the Indian authorities to withdraw the controversial order barely 12 hours after it was announced.

    Indian Finance Minister Nirmala Sitharaman on Thursday withdrew a federal order on cutting interest rates for small-time savers invested in federal savings schemes, barely 12 hours after a government circular ordered the cut. It was one of the steepest cuts in recent history.

    ​In an official notification on Wednesday, the federal Finance Ministry slashed interest rates on small saving schemes, such as the National Savings Certificate and the Public Provident Fund (PPF) among others, for the April-June 2021 financial quarter.

    "In exercise of the powers conferred by Rule 9(1) of the Government Savings Promotion General Rules, 2018 the rates of interest on various small savings schemes for the Quarter 1 of FY 2021-22 have been revised", the federal circular said on Wednesday.

    The federal department announces interest rates for the small savings plans popular among India's salaried class employees on a quarterly basis.

    The interest rate cut ordered on Wednesday ranged between 0.5 percent to 3.5 percent, the steepest rate cut in history.

    While the interest for savings scheme PPF was reduced from 7.1 percent to 6.4 percent, that of the NSC was brought down from 6.8 to 5.9 percent. The most significant rate cut was on the one-year fixed term savings plan, whose interest rate was brought down from 5.5 percent to 4.4 percent.

    Introduced in 1968, the PPF is geared towards moblising the savings of small time investors and offers income tax benefits, making it hugely popular among the country's middle-class population.

    The order on Wednesday witnessed the most significant rate cut on the PPF since 1974, immediately triggering massive public outrage.

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