PPF rate cut prelude to a low-interest rate regime: Arun Jaitley
21 Mar 2016
Finance minister Arun Jaitley has justified the recent decision to cut interest rate on public provident fund (PPF) (PPF interest rate cut to 8.1% from 8.7%; KVS rate cut by 90 bps to 7.8%), saying it was a right decision by the government and part of routine procedure. It will help to link small savings schemes' interest rates with the market, as happens the world over, he said.
Talking to the media during the BJP's two-day national executive meet that ended on in New Delhi on Sunday, the finance minister articulated his ministry's stance that the country has to move towards lower interest rates.
"There is an old formula which has been running since ages. It states that the government gives subsidies on interest rates, set by the market, on the government securities for small savings. The interest rate on government schemes is determined by the market. This is a market aligned interest rate in which a spread is given from the government budget," he said.
"In between the interest rates went high due to which the government debt also increased. Now, the interest rates have come down. The present economic condition in the country doesn't allow the lending rates of the banks to go down whereas the deposit rates go high," he added.
He also said that government is ensuring that the GST bill gets passed in the Parliament soon.
Answering question on strike by jewellers, he said government has assured them that they will face no harassment at the hands of excise department.
Jaitley also said that the government will try and build consensus on bankruptcy bill. Most parties are in favor of the bill, he added.
On Friday the government cut the interest rate on PPF from 8.7 per cent to 8.1 per cent.