NEW DELHI: The government on Thursday said it will lower interest rates on small savings from April, a move that will not only reduce earnings on Public Provident Fund Deposits and National Savings Certificate but may also impact rates on bank fixed deposits.Economic affairs secretary Shaktikanta Das, however, said the rates for schemes related to senior citizens and girl child will remain unchanged. “The decisions have been taken and executive order and notification would be issued in a day or two. Broadly, the underlying philosophy of small savings rate changes is to make the rate more frequently market-aligned, make it as closely market-aligned as possible,“ he told reporters.Currently , small savings rates are linked to government securities and readjusted annually but Das said, they will now be adjusted on a quarterly basis. In its January 14 edition, TOI was the first to report about the small savings rate cut. Banks and RBI have been prodding the government to reduce interest rates on small savings schemes to enable banks, which compete for deposits, to reduce deposit rates.While RBI has cut policy rates by 1.25 percentage points since January 2015 but the reduction in deposit rates have been much lower as banks have argued that they are unable to price FDs lower. Lower deposit rates are expected to enable banks to cut lending rates.From April onwards, the finance ministry will alter the spread over government securities, Das said. In other words, the mark up over the yield on government bonds will be tweaked to lower the return on the small saving products. While the longer-tenure schemes such as PPF will not see a major impact those with maturity of around five years, will be affected more.“Whatever policy rates are being announced by the Re serve Bank, the small savings rate will also pass it on. But, at the long end of the (maturity) curve, the spread will be protected. The government has taken into consideration the interest of small savers and the need to encourage long term savers,“ Das said.Asked if the banks would pass on the benefit of the rate cut to customers, the economic affairs secretary said “Banks are free to decide on the interest rate. It is for banks to decide by what basis points they will cut interest.“