Non-Callable Deposits – Master Direction on Interest Rate on Deposits

The Reserve Bank of India (RBI) has recently issued new directions regarding interest rates on domestic term deposits vide circular bearing reference number RBI/2023-24/74 DOR.SPE. REC. No. 51/13.03.000/2023-24, dated October 26, 2023. These directions have been issued after a thorough review of the previous instructions mentioned in Section 7 of the Master Direction (MD) on Interest Rate on Deposits, dated March 3, 2016, and the Master Direction – Reserve Bank of India (Co-operative Banks – Interest Rate on Deposits) Directions, 2016, dated May 12, 2016.

As per Section 7 of the Master Direction (MD) on Interest Rate on Deposits, dated March 3, 2016, and the Master Direction – Reserve Bank of India (Co-operative Banks – Interest Rate on Deposits) Directions, 2016, dated May 12, 2016, banks were authorized to offer domestic term deposits (TDs) without a premature withdrawal option if all TDs accepted from individuals for an amount of Rupees fifteen lakh and below includes a premature withdrawal facility. Additionally, the banks were also authorized to provide varying interest rates on TDs based on the non-callability of deposits i.e., the absence of the option for premature withdrawal as well as the duration and amount of the deposits.

RBI has now made the following amendments:

1. The minimum amount for offering non-callable term deposits may be increased from fifteen lakh to one crore rupees. This means that all domestic term deposits accepted from individuals for amounts of one crore and below shall have the option of premature withdrawal.
2. These instructions shall also apply to Non-Resident (External) Rupee (NRE) Deposits and Ordinary Non-Resident (NRO) Deposits.

This circular applies to all Commercial Banks and Co-operative Banks. The circular is effective from the date of issue.