On October 26, 2023, the Reserve Bank of India ("RBI") issued a circular on Non-Callable Deposits – Master Direction on Interest Rate on Deposits ("Circular") amending certain provisions under section 7 of the Master Direction on Interest Rate on Deposits issued by the RBI on March 3, 2016 ("Master Directions 1"), applicable to scheduled commercial banks, small finance banks, payment banks and local area banks and the Master Direction – RBI (Co-operative Banks – Interest Rate on Deposits) Directions, 2016 issued by the RBI on May 12, 2016 ("Master Directions 2"), applicable to co-operative banks (the Master Directions 1 and Master Directions 2 are hereinafter collectively referred to as "Master Directions").
The changes introduced pursuant to the Circular are as follows:
|
Section of the Master Directions |
Existing Provision under the Master Direction 1 |
Existing Provision under the Master Direction 2 |
Amendment under the Circular |
|
7(a)(iii) |
Banks shall offer domestic term deposits ("TDs") without premature withdrawal option, subject to TDs accepted from individuals for an amount of INR 15,00,000 (Indian Rupees fifteen lac) and below to have the option of premature withdrawal. |
Banks shall offer TDs without premature withdrawal option, subject to TDs accepted from individuals (held singly or jointly) and HUFs for an amount of INR 15,00,000 (Indian Rupees fifteen lac) and below to have the option of premature withdrawal. |
Banks shall offer TDs without premature withdrawal option, subject to TDs accepted from individuals for an amount of INR 1,00,00,000 (Indian Rupees one crore) and below to have the option of premature withdrawal. |
|
15(c) |
Interest rate on non-resident (external) rupee ("NRE") deposit/ Ordinary non-resident ("NRO") deposit can vary on account of the following reasons: Tenor of deposit: Banks shall have the freedom to determine the maturity/ tenor of the deposit subject to the condition that minimum tenor of NRE term deposits shall be 1 (one) year and that of NRO term deposits shall be 7 (seven) days. Size of deposit: Differential interest rate shall be offered on bulk deposits. |
Same as provided under the existing provisions for Master Direction 1. |
In addition to the existing provisions for Master Direction 1, the following is added: Non-availability of Premature withdrawal option: Banks shall have the freedom to offer NRE / NRO term deposits without premature withdrawal option, provided that all NRE / NRO term deposits accepted from individuals (held singly or jointly) for amount of INR 1,00,00,000 (Indian Rupees one crore) and below shall have premature withdrawal facility. |
The Circular shall be applicable to commercial banks and co-operative banks and shall be effective immediately.
Please find attached a copy of the Circular.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.