New Delhi: The government on Wednesday cut the interest rate on small savings schemes, including public provident fund (PPF), national savings certificate (NSC) and Kisan Vikas Patra, by 0.2 percentage points for the January-March quarter, a move that will prompt banks to lower deposit rates.

Interest rates in the five-year Senior Citizens Savings Scheme, however, has been retained at 8.3%. The interest rate on the senior citizens’ scheme is paid quarterly.

A finance ministry notification said interest rates have been reduced across several small savings schemes but that for savings deposits has been retained at 4% annually.

Since April 2016, interest rates of all small saving schemes have been recalibrated on a quarterly basis, but there was no change in small savings interest rates in the October-December quarter.

As per the finance ministry notification, PPF and NSC will fetch a lower annual rate of 7.6% while KVP will yield 7.3% and mature in 118 months. The girl child savings scheme Sukanya Samriddhi Account will offer 8.1 from existing 8.3% annually. Term deposits of 1-5 years will fetch a lower interest rate of 6.6-7.4%, to be paid quarterly, while the five-year recurring deposit is pegged at 6.9%.

On the basis of the decision of the government, interest rates for small savings schemes are to be notified on a quarterly basis,” the finance ministry said, adding that rates of small savings schemes would be linked to government bond yields.