Differential interest only on term deposits of Rs 1 cr or more
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Differential interest only on term deposits of Rs 1 cr or more

Last Updated: Thursday, January 24, 2013, 23:14
 
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Differential interest only on term deposits of Rs 1 cr or more
Mumbai: The Reserve Bank has tightened norms for differential interest rates asking banks to offer them only on term deposits of Rs 1 crore or more, and permitted them to refuse premature withdrawal of such deposits.

"The permission to offer varying rates of interest for deposits of the same maturity shall apply to single Rupee term deposits of Rs 1 crore and above.

"Banks may therefore offer same rate of interest or differential rates of interest for deposits of Rs 1 crore and above of the same maturity," the RBI said in a notification.

The changes will be applicable from April 1, 2013.
For deposits below Rs 1 crore of the same maturity, RBI said, the same rate will apply.

On premature withdrawal of large size term deposit, it said: "The bank at its discretion, may disallow premature withdrawal of large Rupee term deposits of Rs 1 crore and above" of all depositors, including deposits by individuals and Hindu Undivided Families (HUFs).

The bank shall have the freedom to determine its own penal interest rate of premature withdrawal of term deposits, it added.

RBI also said that henceforth the expression "bulk deposit" would be used for single Rupee term deposits of Rs 1 crore and above.

As of now, the term "bulk deposit", though not specifically defined, has been interchangeably used with "wholesale deposits" -- deposits of Rs 15 lakh or above.

The country's monetary authority said that banks should disclose in advance the schedule of interest rates on deposits including those on which differential interest will be paid.

"Interest paid by banks should be as per the schedule and not be subject to negotiation between the depositor and the bank," RBI added.

Earlier also, banks were permitted to disallow premature withdrawal of large deposits held by entities except for those held by individuals and HUFs.

RBI also modified the memorandum of instructions for opening and maintenance of Rupee/foreign currency Vostro accounts of non-resident exchange houses.

Through the amendment, payments to medical institutions and hospitals in India, for medical treatment of NRIs/their dependents and nationals of Hong Kong, Singapore and Malaysia, have been included in the list of "Permitted Transactions".

Also, payments to hotels by nationals of Hong Kong, Singapore and Malaysia and NRIs for their stay has been included in the list.
PTI



First Published: Thursday, January 24, 2013, 23:14


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