- V T Gokhale
The government decided that the rates of interest of all savings schemes w.e.f. 1.4.2016 on a quarterly basis would be recalibrated to align them with the market rates of the relevant Government securities and that the rates would be announced on 15th of March, June, September and December every year for forthcoming respective quarter.
Ministry of Finance has since been issuing office memorandums accordingly announcing the rates for the forthcoming quarter. A cursory look at such office memorandums issued since then will reveal that it invariably has a statement “This has the approval of the Finance minister” or “This has the approval of the competent authority” or “This has the approval of the Secretary (Economic affairs)” irrespective of whether it is for increase or decrease of rates or for keeping them same like that of the previous quarter.
The office memorandum F No. 1/4/2019-NS of Government of India, Ministry of Finance, Department of Economic Affairs (Budget Division) (GOI MOF DEA BD) dated March 31, 2019 keeping the rates unchanged for January-March 2020 says “this has the approval of Finance Minister.”
The office memorandum F No. 1/4/2016-NS of June 28, 2019 reducing the rates for July-September 2019 says “this has the approval of Finance Minister.”
The office memorandum F No. 1/04/2016-NS.II dated September 29, 2016 reducing the rates of interests for quarter October-December 2016 says “this has the approval of Finance Minister.
The office memorandum F No. 1/4/2016-NS of September 19, 2018 increasing the rates for October-December 2018 says “this has the approval of Finance Minister.”
The office memorandum F No. 1/4/2019-NS dated March 31, 2021 reducing the rates for quarter 1.04.2021 to 30.06.2021 does not say that “this has the approval of Finance Minister.” But instead it says “This has the approval of competent authority.
The office Memorandum dated December 31, 2019 keeping the rates of interests unchanged for quarter Jan-March 2020 says that “this has the approval of Finance Minister.”
It is thus clear that as and when a specific approval of FM is obtained it is so mentioned in the memorandum. The office memorandum dated March 31, 2021 reducing the interest rates and that dated April 1, 2021 superseding it does not say that “this has the approval of Finance Minister” but instead says “This has the approval of competent authority.”
It was also decided by the government that revised interest rates would be announced just one day before of it’s implementation. This was because it was felt that if interest rates were communicated/notified very much in advance, it may lead to excessive deposits (in case of fall in rates) or holding of deposits (in case of increase in rates).
There is an instance where interest rates were kept unchanged even though they were slated to go down as per the approved procedure/formula after the then Secretary Department of economic Affairs Shri Shaktikanta Das took approval of the then Finance minister. The relevant note, among other things, stated that it may be noted that the interest rates for Q 1 of current year mark a steep reduction over the previous rates. This had led to severe criticism from several quarters at that time. In the above background, although it would mark a deviation from the policy of fixing small savings rates for every quarter, we may take a pause in Q2 of 2016-17. In other words, the interest rates on various small savings instruments currently prevailing in Q1 of 2016-17 may be continued in the Q2 also.”
The above is an enough indication of the working of Ministry of Finance on the matter over the years. Thus the reduction carried out on 31st march 2021 does not seem to have been approved by the Hon. Finance Minister. It would therefore be wrong and unjust to say that it is hard to believe that the civil servants in North Block issued this order without Nirmala Sitharaman being in the loop. This is so for two reasons: one that she has not denied the constructive responsibility in any case and has thus proved her qualities as a true leader and that she is not so politically naïve to approve a decision of such grave sensitivity and political ramifications in the current season of elections in some crucial states.
The action of the “competent authority” in reducing the rates for quarter April-June 2021 may appear technically correct on jurisdictional and policy parameters. However given the sensitivity and political ramifications of the drastic reduction in interest rates (which are so dear to the heart of a common man) more so in the current season of elections in some crucial states without bringing it to the attention of FM has a funky and fusty smell of suspected foul play by some within the ministry to cause severe and serious embarrassment to the political leadership of the day. This creates an anxiety in the minds of well-meaning citizens whether deep state or a mole is/are functioning as a live bomb in the Finance Ministry.