Small savings schemes, such as post-office savings schemes, will generate lower earnings for their holders as the government has marginally reduced interest rate on such schemes.

The Union Finance Ministry on Monday announced its decision to lower interest rates on small savings schemes by 0.1 per cent, in line with a cut in the interest rate on Public Provident Fund from 8.8 per cent to 8.7 per cent.

The lower interest rate will take effect from 1st of April this year.

Announcing the decision, the ministry said on Monday, "The interest rate of Public Provident Fund (PPF) has been lowered from 8.8 per cent to 8.7 per cent with effect from April 1, 2013."

The National Savings Certificates with maturity of 5 and 10 years will now generate earnings at a rate of 8.5 per cent and 8.8 per cent, respectively; while Monthly Income Schemes with maturity of 5 years will provide interest earnings at a rate of 8.4 per cent.

The rate of interest for the Senior Citizens Savings Scheme will now be at 9.2 per cent, as against 9.3 per cent in the last fiscal.

However, interest on post-offices' savings deposit schemes and fixed deposit (FD) of up to one-year period will remain the unchanged at 4 per cent and 8.2 per cent interest rates, respectively.

The lowering of the interest rate was Shyamala Gopinath Committee's recommendations.