RBI bonds to continue but fetch less

The finance ministry on Tuesday said the government savings bonds, which offered an assured return of 8 per cent a year, were being replaced with a lower interest rate scheme.

By Our Special Correspondent
  • Published 3.01.18
  •  

New Delhi: The finance ministry on Tuesday said the government savings bonds, which offered an assured return of 8 per cent a year, were being replaced with a lower interest rate scheme.

The clarification came following criticism from the Opposition for discontinuing the popular saving instrument that was introduced in 2003.

"The 8 per cent Savings Bonds Scheme, also known as RBI Bonds Scheme, is not being closed. The scheme is being replaced by a 7.75 per cent savings bonds scheme," economic affairs secretary Subhash Chandra Garg said in a tweet.

The government had earlier announced that the 8 per cent GoI Savings (Taxable) Bonds, 2003 - one of the most sought-after investment instruments among the middle class, particularly senior citizens - will be discontinued from January 2.

Former finance minister P. Chidambaram had termed the move to scrap the bonds as an attack on the middle class.

"GoI 8 per cent taxable bonds have been the safe harbour of the middle class, especially retirees and senior citizens, since 2003. The government has taken away their only safety net," he said in a series of tweets.

"The government owes a duty to provide its citizens one safe and risk-free instrument for savings. Taking the only instrument away is a deplorable act," he added.

Chidambaram also questioned whether the move was intended to push people to invest in stock markets and mutual funds.

"Interest rates reduced for small savings instruments. Eight per cent taxable bonds discontinued. But inflation is rising. A double whammy for the middle class," he said.

These taxable bonds are meant for individuals other than non-resident Indians with no maximum limit for investment. In 2003, the government came out with bonds offering 8 per cent interest to encourage retail investors to invest.