However, he added that cutting provident fund rates was a sensitive issue and there would have to be political consensus. At present provident fund offers an interest rate of 12 per cent.

There have been demands from various quarters to reduce provident fund rates so as to bring down overall lending rates. The government has already reduced interest rates on small savings in an attempt to dissuade investors as the burgeoning small savings was putting pressure on fiscal deficit as a sizeable percentage of the savings were transferred to states.