The Finance Ministry today clarified that the government was not closing 8 per cent saving bonds but replacing it with 7.75 per cent Savings Scheme. The clarification comes a day after the Ministry announced that it would stop the subscription for Savings (Taxable) Bonds from January 2.

On Monday, the Finance Ministry put out a statement, saying 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.'

Soon after the announcement, Former Finance Minister P Chidambaram hit out at the Modi government and said: "GoI 8% taxable bonds have been the safe harbour of the middle class, especially retirees and senior citizens, since 2003. Government has taken away their only safety net."

He further said that the government has a duty to provide its citizens one safe and risk free instrument for savings. "Taking the only instrument away is a deplorable act," Chidambaram said.

However, today Finance Ministry Secretary Subhash Chandra Garg clarified and 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."

The government had introduced this bonds in 2003 to encourage retail investors to invest. The bond was open for subscription April 21, 2003, and had a fixed tenure of 6 years. The decision to discontinue the bond comes in the backdrop of declining interest rate in other saving instruments, especially the Post Office small saving schemes.

Last week the Finance Ministry had cut interest rate on various small saving schemes by 0.2 per cent. Following the reduction, term deposits of 1-5 years will fetch a lower interest rate of 6.6-7.4 per cent, to be paid quarterly, while the five-year recurring deposit interest is pegged at 6.9 per cent.