Interest rates have bottomed out and from here the Reserve Bank of India (RBI) will focus more on calibrated exit, said Kaushik Das, Chief Economist of Deutsche Bank.
The Ministry of Finance on March 31 announced a cut in the small savings schemes by 50 to 110 basis points for the first quarter of the financial year starting April 1, 2021. The schemes included public provident fund (PPF), national savings certificate (NSC) and other small savings schemes like the Sukanya Samriddhi Yojana. However, the cut has been reversed by the government within 12 hours.
“We have seen this reversal happening and at least for a quarter now it will stay at same level. So I guess interest rates are bottomed and from here Reserve Bank of India (RBI) will focus on more about calibrated exit and what is the right time,” said Das in an interview with CNBC-TV18.
“The thing is that if the small saving rate remains at a particular level which is different from bank deposits and all, there would be monetary transmission issues, so in that regard the reduction that was being planned was consistent,” he pointed out.
“However, the government will be relying on small savings to fund its fiscal deficit and it is 26 percent of market borrowing that government funds through small savings. So cutting interest rates too much could lead to some bit of money flowing out from there and going somewhere else,” Das said.
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(Edited by : Niral Sharma)
First Published: Apr 1, 2021 12:49 PM IST