By BS Reporter
The Reserve Bank of India on Thursday revised the definition of wholesale (bulk) deposits for payment of differential interest rates. It said banks can pay differential rates of interest for deposits above Rs 1 crore. Earlier, this limit was Rs 15 lakh.
"It has been decided that the permission to offer differential rates of interest for deposits of the same maturity will be applicable to bulk deposits of Rs 1 crore and above. For deposits below Rs 1 crore, the same rate will apply for deposits of the same maturity. Rupee term deposits will include domestic term deposits as well as term deposits under NRO (Non-Resident Ordinary) and NRE (Non-Resident External) accounts," the Reserve Bank of India said in a circular to banks.
It said banks should disclose in advance the schedule of interest rates payable, including deposits on which differential interest will be paid.
The interest paid should be as in the schedule, not be subject to negotiation with the depositor.
A top public sector bank official said, "The focus should be more on containing the volatility and not just the amount. "
The regulator also said banks could, at their discretion, disallow premature withdrawal of deposits of Rs 1 crore and above by individuals and Hindu Undivided Families, besides institutions.
Earlier, banks didn't enjoy the discretion to reject requests by individuals. However banks should inform the depositors about this discretion while accepting the deposits.