Government has kept interest rates on small savings schemes like PPF and Kisan Vikas Patra unchanged for the January-March quarter even as banks have started lowering their deposit rates.

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Since April last year, interest rates of all small saving schemes have been recalibrated on a quarterly basis. For the January-March quarter, these have been kept unchanged compared with the October-December quarter.

A finance ministry notification said investments in public provident fund (PPF) scheme will continue to fetch an annual interest rate of 8 %, the same as 5-year National Savings Certificate.

Kisan Vikas Patra (KVP) investments will continue to yield 7.7 % and mature in 112 months.

The one for girl child savings, Sukanya Samriddhi Account Scheme, will continue to give out 8.5 % annually while it will be the same as 8.5 % for the 5-year Senior Citizens Savings Scheme.

Interest rate on senior citizens savings scheme is paid quarterly.

A savings deposit will fetch 4 % interest annually while term deposits of 1-5 years will offer 7-7.8 % that will be paid quarterly. The 5-year recurring deposit will continue to earn you 7.3 % rate.

"On the basis of the decision of the government, interest rates for small savings schemes are to be notified on a quarterly basis," the ministry said while notifying the interest rates for the fourth quarter of 2016-17 starting from January 1, 2017, and ending on March 31.

While announcing the quarterly setting of interest rates, the finance ministry had said the rates of small saving schemes will be linked to government bond yields.

The move is expected to allow banks to pass on policy rate cuts by the central bank -- as and when these happen -- through lower lending rates. Banks said it was high interest rates on small savings schemes that prohibited them from passing on such reduction to borrowers in a significant way.

At the first quarterly rate review in April, interest rate on the PPF scheme was cut to 8.1 % for April 1 to June 30, from 8.7 %. In July-September, the interest rate was 8.1 %, which was lowered to 8 % in October-December.

Similarly, the interest on KVP was reduced to 7.8 % from 8.7 % while the 5-year senior citizen savings scheme was to earn 8.6 % compared with the earlier 9.3 %. Also, the interest rate on Sukanya Samriddhi Account was lowered to 8.6 % as against 9.2 % previously.

Yesterday, largest lender SBI had cut benchmark interest rate across various maturities by 0.9 %. Also, Union Bank of India and Punjab National Bank slashed their lending rates by up to 0.7 %.

On Saturday, Prime Minister Narendra Modi had announced that banks will launch a scheme for senior citizens under which they will get a fixed 8 % return on 10-year bank deposits of up to Rs 7.5 lakh.

Senior citizens -- 60 years and above -- will get monthly interest under this scheme, which will shield them from any decline in interest rates.