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Guidelines
Commercial banks
should pay interest on NRO and NRE accounts only on the terms and conditions
mentioned hereunder.
Domestic
Deposits
A domestic rupee account may be opened
as current, savings or term deposit.
Minimum tenor of Term
Deposits
The
minimum tenor of domestic term deposits is seven days
Interest Rates on Savings Deposit
Banks
are free to determine their savings bank deposit interest rate, subject to:
(i)
Each bank will have
to offer a uniform interest rate up to Rupees one lakh.
(ii)
Banks may provide
differential rate of interest for balance exceeding Rupees one lakh but will not discriminate between deposits of similar amount,
accepted on the same date, at any of its offices.
Calculation of Interest on Savings Deposits
Interest
is to be calculated on a daily product basis.
Interest
Rates on Term Deposits
Banks
are free to fix their own interest rates on domestic term deposits. Banks are,
however, not allowed to discriminate between deposits accepted on the same date
and for the same maturity. Interest rates should not be subject to negotiations.
Banks
are allowed to offer differential rate of interest on the basis of
(a)
Tenor of Deposits
(b) Size of Deposits: single term deposits of
1 crore and
above.
(c) Availability of early
withdrawal option
i. All term deposits of individuals of
15 lakh and below should, necessarily, have premature
withdrawal facility.
ii. For deposits over 15 lakh, banks
can offer deposit schemes without the option of premature withdrawal as well.
However, customers are to be given the option to choose between term deposits
with or without premature withdrawal facility.
iii. Banks should disclose in advance
the schedule of interest rates payable on deposits.
iv. The banks should have a Board
approved policy with regard to interest rates on deposits.
Calculation of Interest on Term Deposits
Banks are free to adopt any methodology for
calculation of interest on deposits. If a Fixed Deposit Receipt matures, the
amount left unclaimed with the bank will attract savings bank rate of interest.
Floating
Rate Term Deposits
A bank may offer
floating rate domestic term deposit clearly linked to an anchor rate. Only
market-based rupee benchmark rates should be used for pricing the floating rate
deposits.
Frequency of payment
of interest on Savings and Term Deposits
Banks have the option
to pay interest on savings deposit and term deposits at intervals shorter than
quarterly intervals. Interest on savings bank accounts should be credited on
regular basis whether the account is operative or not.
Payment of interest on accounts frozen by banks
In case of Term Deposit Accounts frozen by the orders of the enforcement
authorities, following procedure is to be followed:
(i) A
request letter for renewal may be obtained from the customer on maturity. In
case the depositor does not choose the term for renewal, banks may renew it for
a term equal to the original term.
(ii) A suitable note should be made regarding renewal in the deposit
ledger.
(iii) Renewal of deposit should be conveyed to the concerned
Government department under advice to the depositor with reference to the rate
of interest paid thereon.
(iv) The deposit should be renewed from the date of maturity if the request
is received within 14 days of maturity. For request received after 14 days of
maturity, banks should pay interest for the overdue period as per the policy
adopted by them, and keep it in a separate interest free sub-account, to be
released when the original fixed deposit is released.
In case of savings bank accounts, banks should continue to credit interest
on a regular basis.
Discretion to pay additional interest not
exceeding one percent on deposits of bank’s staff and their exclusive
associations
A bank
may allow additional interest rate of one per cent per annum over card rate
subject to following conditions:
(i)
In case of the depositor ceasing to be eligible, additional
interest will be paid till the maturity of the deposit account;
(ii)
In case of mergers, the additional interest is
allowed only if the card rate together with the additional interest does not
exceed the rate, which could have been allowed if such employees were
originally employed by the parent bank.
In respect of a savings or a term deposit account opened in the name of:
(a)
a member or a retired member of the bank’s staff,
either singly or jointly with any member or members of his/her family; or
(b)
the spouse of a deceased member or a deceased
retired member of the bank’s staff; and
(c)
an
Association or a fund, members
of which are members of the bank’s staff;
The bank should obtain a declaration from the depositor, that the money
deposited into such account belongs to him
For the purposes of
the above para:
(i) “a
member of the bank’s staff” means a person employed on a regular basis,
recruited on probation, employed on contract or deputation and an employee
taken over in pursuance to amalgamation. It does not include a person employed
on casual basis.
(a) The bank from which an employee is deputed may allow additional interest on
accounts opened with it during the same period of deputation;
(b) In the case of fixed duration deputation or contract, the benefit will
cease to accrue on the expiry of such duration.
(ii) “A
retired member of the bank’s staff” means a retired employee, but does not
include an employee retired compulsorily or in consequence of disciplinary
action;
(iii) “Family”
includes the spouse and dependent (children, parents, brothers and sisters). It
does not include legally separated spouse;
Bank Employees’
Federations in which bank employees are not direct members are not eligible for
additional interest.
In case of domestic deposits, banks
may pay the benefit of higher interest rates as admissible to senior citizens
over and above the additional interest as mentioned above to the retired
members of the banks' staff.
Discretion to pay additional interest not
exceeding one per cent on deposits of Chairman and Managing Director and
Executive Directors of the bank: only during the period of their tenure.
Discretion to pay interest on current
accounts maintained by Regional Rural Banks with sponsor banks:
Banks may pay interest on the current
accounts maintained by RRBs with them but they are encouraged not to do so.
Discretion to pay interest on the minimum
credit balance in the composite cash credit account of a farmer
A bank may pay
interest on the minimum credit balance during the period from the 10th
to the last day of each calendar month.
Discretion
to pay
Additional interest to Army Group
Insurance Directorate (AGID), Naval Group Insurance Fund (NGIF) and Air-Force
Group Insurance Society (AFGIS)
A Public Sector
Bank may pay additional interest of 1.28 per cent per annum over and above the
normal rate of interest, only on the term deposits for two years and above,
provided such deposits are not in any way linked with payment of insurance
premia by the bank.
Deposit Scheme for Senior Citizens
(i) Banks may offer
higher rate of interest to resident Indian senior citizens. The scheme should
allow automatic transfer of the deposit to the nominee in the event of death of
the depositor.
(ii) The Karta of the
Hindu Undivided Family (HUF) cannot be offered higher rate of interest, even if
he is a resident Indian senior citizen.
Prohibition on
payment of additional interest rate on Term Deposits
Banks should not
offer higher/differential rate of interest, as compared to other deposits of
similar tenure. Banks should not offer higher/ differential rate on deposits received under the Capital Gains
Accounts Scheme, 1988 too.
Penalty on premature withdrawal of term deposit
Banks
are free to determine their own penal interest rate on premature withdrawal of
term deposits. Interest will be paid at the rate applicable to the period the
deposit actually remained with the bank. No interest is payable, where
premature withdrawal of deposit takes place before completion of the minimum
period prescribed.
Conversion of a term deposit, a deposit in
the form of daily deposit or a recurring deposit for reinvestment in term
deposit
A bank should allow the conversion of a
daily deposit or recurring deposit account into another term deposit account.
Renewal of Overdue deposits
All aspects concerning renewal of overdue deposits may
be decided by individual banks.
Interest payable on the deposit account of deceased
depositor
(a) In the case of a term
deposit standing in the name/s of
(i) individual depositor,
or
(ii) two or more joint depositors, where one of them has died,
The criterion for payment of interest on matured deposits, where the
depositor has died, has been left to the discretion of individual banks.
(b) In case of balances in current account of a deceased individual /sole
proprietor, interest should be paid at the rate applicable to savings deposit
as on the date of payment.
(c)
Addition or deletion of the name/s of joint account
holders
A bank shall allow the addition or deletion of names of joint account
holders or allow an individual depositor to add the name of another person as a
joint account holder. However,
the amount or duration of the original deposit should not undergo a change.
A bank shall also allow the splitting up of the joint deposit, in the
name of each of the joint account holders, provided the duration and the amount
of deposit do not undergo any change.
Rounding off of transactions
All interest related transactions, should be rounded off to the nearest
rupee. Issue prices of cash certificates should also be rounded off in the same
manner.
Issue of term deposit receipt
(a) A bank should issue term deposit receipt
indicating date of issue, period of deposit, due date, applicable rate of
interest, etc.
(b) Issue of TDR/ FDR without a
corresponding term will amount to violation of the extant guidelines on
acceptance of deposits. The rate of interest payable on such deposits would be
subject to the extant guidelines on ‘Interest Rates on Rupee Deposits’.
Payment of interest on term deposit maturing
on Sunday/holiday/non- business working
day
Banks should pay
interest at the contracted rate on the principal deposit for the holiday period
if it happens to fall on the date of maturity, upon payment of the proceeds on
the succeeding working day.
In case
of reinvestment deposits, banks should pay interest for the intervening holiday
on the maturity value.
Deposit Mobilisation Schemes
Before launching a new
domestic deposit mobilisation scheme, banks should ensure that the provisions
of RBI on interest rates, premature withdrawal, sanction of loans/advances
against term deposits, etc., are strictly adhered to.
Special Term Deposit Products with Lock-in
Period
Some banks were offering special term deposit
products, ranging from 300 days to five years, with the following features:
i.
Lock-in periods ranging from 6 to 12 months;
ii.
In case of premature withdrawal during lock-in
period, no interest is paid;
iii.
Rates of interest are not in tune with the normal
deposits;
iv.
Part pre-payment is allowed, subject to certain
conditions.
Banks have been advised to discontinue such schemes.
Advance against term deposit - Manner of charging
interest
When an advance is granted against a term deposit and the deposit stands in
the name of-
(i) the borrower,
either singly or jointly;
(ii) one of the partners and the advance is made to his
firm;
(iii) the proprietor and the advance is made to his
concern;
(iv) a ward whose guardian is competent to borrow on his
behalf and the advance is made in the capacity of a guardian;
Bank would be free to charge interest without reference to its Base Rate on
advances granted against domestic/ NRE term deposits.
If the term deposit against which an advance was granted is withdrawn
before completion of the minimum maturity period, interest should be charged as
per RBI’s directive on Interest Rates on Advances.
Margin on advance against term deposit
Margin on advance against term deposit is to be decided by individual
banks.
Non-Resident (External) Rupee (NRE) Deposit /
Ordinary Non-Resident (NRO) Deposits
An Authorised Dealer
shall pay interest as per instructions given below:
Interest Rates on NRE/
NRO Deposits
Banks are free to
determine their interest rates on both savings deposits and term deposits of
maturity of one year and above under NRE Deposit accounts and savings deposit
under NRO account . However, such interest rates cannot be higher than domestic
rupee deposits.
Differential Rate of Interest on NRE/ NRO Term
Deposits
Banks are allowed to offer differential rates on the
basis of tenor and on the basis of quantum for single term deposits of
1 crore and
above.
Maturity
period of NRE/ NRO deposits
The minimum maturity
period for NRE deposits is one year. Maximum Maturity period for fresh NRE term
deposits is three years. However, banks are allowed to accept NRE deposits
above three years, provided the rate of interest is not higher than that
applicable to domestic deposits of comparable maturity.
Banks
are free to accept term deposits of various maturities under the NRO scheme
with the prior approval of their respective Board of Directors/Asset Liability
Management Committee (ALCO). The minimum tenor of NRO term deposit is seven
days.
Payment of interest on NRE/ NRO term deposit
maturing on Saturday/Sunday/holiday/non-business
working day
Banks should pay
interest at the contracted rate on the principal deposit for the holiday period
if it happens to fall on the date of maturity, upon payment of the proceeds on
the succeeding working day.
In case
of reinvestment deposits, banks should pay interest for the intervening holiday
on the maturity value.
Frequency of payment
of interest on NRE/ NRO savings/ term deposits
Banks have the option
to pay interest on savings deposit and term deposits at intervals shorter than
quarterly intervals. Interest on savings bank accounts should be credited on
regular basis whether the account is operative or not.
Renewal of Overdue
NRE/ NRO deposits
All aspects concerning renewal of overdue deposits may
be decided by individual banks
Marking of lien
Banks should not mark
lien, direct or indirect, against NRE savings deposits.
Premature withdrawal
of NRE deposits
Premature conversion
of NRE term deposits into RFC Account will not attract penalty. If the deposit is withdrawn for conversion
before one year, the bank may pay interest at a rate not exceeding savings
deposits rates held in RFC accounts, provided the request for such a conversion
is made by the NRE account holder immediately on return to India.
Conversion of NRE
deposits
Conversion of NRE
deposit into FCNR(B) deposit and vice versa before maturity should be subject
to the penal provisions.
Interest payable on
the NRE deposit account of deceased depositor
A deceased
NRE deposit account should be treated as a domestic rupee deposit on maturity
and interest should be paid for the subsequent period at a rate applicable to a
domestic deposit of similar maturity.
Prohibition on payment of additional interest
on deposits of Senior Citizen
Banks are prohibited from payment of additional interest on Non-Resident
deposits of Senior Citizens.
Prohibition on payment of additional interest
not exceeding one percent on deposits of bank’s staff
Banks are not allowed
to pay additional interest rate on deposits of non-residents.
Compliance
with Foreign Exchange Management (Deposit) Regulations, 2000
As regards NRE / NRO
deposit scheme, banks should adhere to the directions of Foreign Exchange
Management (Deposit) Regulations, 2000.
Exemptions
The provisions in the above paragraphs will not apply to:
(i)
a deposit received by the bank:
(a) from the institutions permitted to participate in the Call/Notice/Term
Money Market both as lenders and borrowers;
(b) for which it has issued a participation certificate;
(c) under FCNR (B) Scheme, RFC and EEFC Accounts;
(d) under the Capital Gains Accounts Scheme,; and
(e) under the Certificate of Deposit Scheme.
(ii)
payment of interest on delayed collection of
outstation instruments like cheques, drafts, bills, telegraphic/mail transfers,
etc.
Prohibitions
No bank should -
(a) pay interest on Current except for RRBs
and deceased accounts as mentioned earlier;
(b) pay countervailing interest on any
current accounts maintained with it by its borrowers;
(c) pay
brokerage on deposits to any individual, firm, company, association,
institution or any other person except -
(i) commission paid to agents employed to
collect door-to-door deposits under a special scheme. The agreement with the
Business Facilitators/ Correspondents should specifically prohibit them from
charging any fee to the customers directly for services rendered by them on
behalf of the bank.
(ii) inexpensive gifts costing not more than
Rupees two hundred fifty ; and
(iii)
incentives
granted to staff members as approved by RBI.
(e) Engage any individual for collection of
deposit or selling deposit linked products on payment of remuneration, except
to the extent permitted above.
(f) launch prize oriented deposit mobilisation
schemes. .
(g) resort to raising of resources through
agents to meet the credit needs of the borrowers or to grant loans to the
intermediaries.
(h) solicit deposits from public
highlighting only the compounded yield on term deposits and not the actual rate
of simple interest for the particular period.
(i) pay interest on margin money held in
current account.
(j) pay interest on “deposit at call”
receipts against money held in current account.
(k) accept interest-free deposit other than
in current account or pay compensation indirectly.
(l) accept deposits from people at the
instance of private financiers which entitles them to receive the deposits on
maturity by way of POA, nomination etc.
(m) grant advances against term deposits of
other banks.
(n) (i) open a savings deposit account in the
name of Government departments/bodies depending upon
budgetary allocations or any political party or any business or
professional concern, whether such concern is a proprietary or a partnership
firm or a company or an association.
(ii) The
above prohibition will not apply in certain cases mentioned in annexures 2 of
the master circular.
(o)
Creation
of any fund to be utilized for charitable purposes in consultation with the
depositors will not be in order.
Based on RBI master circular dated 1/7/15. Please refer www.rbi.org for further clarification if
required………………….Poppy
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