A day after reports claimed that the Finance Ministry was discontinuing the 8 per cent Savings (Taxable) Bonds, 2003, Subhash Chandra Garg, Economic Affairs Secretary clarified that it is being replaced by 7.75 per cent Savings Bonds Scheme. Taking to Twitter, Garg said, “8% Savings Bonds Scheme, also known as RBI Bonds Scheme, is not being closed. 8% Scheme is being replaced by 7.75% Savings Bonds Scheme.”
Earlier, on Monday, a statement from Finance Ministry suggested that the subscription for the bonds would be closed with effect from January 2. “The Government of India (GoI) announced here today that 8 per cent GOI Savings (Taxable) Bonds, 2003 shall cease for subscription with effect from the close of banking business on Tuesday, the 2nd January, 2018,” the finance ministry said, without elaborating on the reasons behind the move.
8% Savings Bonds Scheme, also known as RBI Bonds Scheme, is not being closed. 8% Scheme is being replaced by 7.75% Savings Bonds Scheme.
— Subhash Chandra Garg (@SecretaryDEA) January 2, 2018
Calling the decision to scrap the bonds a “deplorable act,” former finance minister and Congress leader P. Chidambaram had said, “Modi government scraps 8% taxable bonds dealing a severe blow to the middle class. How will the risk-averse average citizen save? Government owes a duty to provide its citizens one safe and risk free instrument for savings. Is Government pushing people into the stock market and mutual funds? For whose benefit? Government has a duty to explain.”
The scheme started by the government to encourage investment by retail investors had become popular as it offered a higher rate of interest than small savings and fixed deposit rates. The bonds, with a tenure of 6 years, minimum investment of Rs 1,000, no limits on maximum investment and the option to receive interest on a half-yearly basis, are available in physical form only and are not listed or tradable on stock exchanges.
Last week the Finance Ministry had reduced interest rate on various small saving schemes by 0.2 per cent.
(With inputs from agencies)