Reserve Bank of India (Interest Rate on Deposits) Directions, 2016
(Last updated on 26th October 2023)
(Only Non-Resident deposits related guidelines are mentioned here)
CHAPTER – II
GENERAL GUIDELINES
Interest Rate framework
Scheduled commercial banks shall pay interest on deposits of money (other than current account deposits) accepted by them or renewed by them in their Domestic, Ordinary Non-Resident (NRO), Non-Resident (External) Accounts (NRE) and Foreign Currency (Non-resident) Accounts (Banks) Scheme {FCNR(B)} deposit account on the terms and conditions specified in these directions:
(a) There shall be a comprehensive policy on interest rates on deposits duly approved by the Board of Directors or any committee of the Board to which powers have been delegated.
(b) The rates shall be uniform across all branches and for all customers and there shall be no discrimination in the matter of interest paid on the deposits, between one deposit and another of similar amount, accepted on the same date, at any of its offices.
(c) Interest rates payable on deposits shall be strictly as per the schedule of interest rates disclosed in advance. The banks shall maintain the bulk deposit interest rate card in their Core banking system to facilitate supervisory review.
(d) The rates shall not be subject to negotiation between the depositors and the bank.
(e) The interest rates offered shall be reasonable, consistent, transparent and available for supervisory review/scrutiny as and when required.
(f) All transactions, involving payment of interest on deposits shall be rounded off to the nearest rupee for rupee deposits and to two decimal places for FCNR (B) deposits.
(g) Deposits maturing on non-business working day
(i) If a term deposit is maturing for payment on a non-business working day, Scheduled Commercial Banks shall pay interest at the originally contracted rate on the original principal deposit amount for the non-business working day, intervening between the date of the maturity of the specified term of the deposit and the date of payment of the proceeds of the deposit on the succeeding working day.
(ii) In case of reinvestment deposits and recurring deposits, Scheduled Commercial Banks shall pay interest for the intervening non-business working day on the maturity value.
(h) Consequence of transfer of branch of one bank to another bank
Deposits accounts transferred from one bank branch to another bank branch on account of takeover of bank branches in rural and semi-urban centres shall adhere to the following conditions:
(i) deposit accounts shall deemed to be transferred to the new bank and will continue to be governed by the terms of contract agreed to between the customer and the bank branch that is being taken over.
(ii) the same rate of interest shall be payable till maturity on such transferred deposits, as was payable at the time of takeover of the branch.
CHAPTER – IV
RUPEE DEPOSITS OF NON-RESIDENTS
15. Interest rates on Rupee Deposits-Non-Residents
Interest on deposits of money accepted or renewed under NRE/NRO deposit scheme shall be on the terms and conditions specified in the ensuing paragraphs:
(a) The interest rates shall be subject to the conditions laid down in section 4 of these Directions.
(b) Interest rates on savings deposits under Non-Resident (External) Rupee (NRE) Deposit / Ordinary Non-Resident (NRO) Deposits shall be in accordance with section 6 of these Directions.
(c) Interest rates on NRE/NRO term deposits shall vary only on account of one or more of the following reasons:
(i) Tenor of Deposits:
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 one year and that of NRO term deposits shall be seven days.
(ii) Size of Deposits
Differential interest rate shall be offered only on bulk deposits
(iii) 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 Rupees one crore and below shall have premature-withdrawal-facility.
(d) Interest rates on NRE/ NRO deposits shall not be higher than those offered by the banks on comparable domestic rupee term deposits.
(e) The benefit of additional interest rate on deposits on account of being bank’s own staff or senior citizens shall not be available to NRE and NRO deposits.
(f) Interest on savings deposits shall be credited at quarterly or shorter intervals.
(g) If an NRE account holder, immediately on return to India, requests for conversion of the NRE term deposit into Resident Foreign Currency Account (RFC), interest shall be paid as under:
- if the NRE deposit has not run for a minimum period of one year, interest shall be paid at a rate not exceeding the rate payable on savings deposits held in RFC accounts.
- In all other cases, interest shall be paid at the contracted rate.
16. Prohibition on marking lien
Scheduled Commercial Banks shall not mark any type of lien, direct or indirect, against NRE saving deposits.
17. Penalty on premature withdrawal of NRE deposits
There shall be a comprehensive policy on penalties for premature withdrawal of NRE term deposits approved by the Board of Directors or any committee of the Board to which powers have been delegated, subject to the following:
- The components of penalty shall be clearly brought to the notice of the depositors at the time of acceptance of the deposits.
- No penalty shall be levied for premature withdrawal of NRE term deposits for conversion into Resident Foreign Currency (RFC) Account.
- Penalties for premature withdrawal shall be levied for conversion of NRE deposit into FCNR (B) deposit and vice versa.
- No penalty for premature withdrawal shall be levied, where depositors of the branch as mentioned in section 4(h) of this direction desires premature withdrawal of deposit consequent to the transfer of business to another bank.
18. Interest payable on the NRE term deposit account of deceased depositor
In case the claimants of an NRE term deposit account of a deceased depositor are residents, the deposit on maturity shall be treated as a domestic rupee term deposit and interest shall be paid for the subsequent period at a rate applicable to a domestic term deposit of similar maturity.
CHAPTER – V
FOREIGN CURRENCY DEPOSITS
19. Foreign Currency (Non-resident) Accounts (Banks) Scheme
Interest on deposits of money accepted or renewed under the Foreign Currency (Non-Resident) Accounts (Banks) Scheme shall be in accordance with the terms and conditions specified in the ensuing paragraphs:
(a) The interest rates shall be subject to the conditions laid down in section 4 of these Directions.
(b) Interest rates on term deposits under the FCNR (B) scheme shall vary only on account of one or more of the following reasons:
(i) Tenor of deposits
The maturity period for term deposits under the FCNR (B) scheme shall be as under:
- One year and above but less than two years
- Two years and above but less than three years
- Three years and above but less than four years
- Four years and above but less than five years
- Five years only
Provided that, no bank shall accept or renew FCNR (B) deposits over five years and no recurring deposits shall be accepted under the FCNR (B) Scheme.
(ii) Size of deposits
Scheduled Commercial Banks shall, at their discretion, decide the currency-wise minimum quantum on which differential rates of interest may be offered.
(c) The interest rates on all deposits, including where differential rates of interest are offered, shall be subject to the overall ceiling prescribed at 19 (g) below.
(d) Interest on floating rate deposits shall be paid within the ceiling of swap rates for the respective currency/ maturity and in case of fixed rate deposits, interest shall be paid within the ceiling of Overnight Alternative Reference Rate2 for the respective currency / maturity.
(e) The interest reset period shall be six months for all floating rate deposits.
(f) The Overnight Alternative Reference Rate2 for the respective currency /SWAP rates as on the last working day of the preceding month shall form the base for fixing ceiling rates for the interest rates offered effective in the following month.
(g) The interest rates ceiling on FCNR (B) deposits shall be as under:
| Period of deposit | Ceiling rate |
| 1 year to less than 3 years | Overnight Alternative Reference Rate for the respective currency/ Swap plus 250 basis points |
| 3 years and above upto and including 5 years | Overnight Alternative Reference Rate for the respective currency / Swap plus 350 basis points |
(h) The Overnight Alternative Reference Rate for the respective currency / Swap rates quoted/displayed by Financial Benchmarks India Pvt. Ltd. (FBIL) shall be used as the reference for arriving at the interest rates on FCNR(B) deposits.
20. Manner of calculation of interest on FCNR(B) deposits
- Interest on the deposits accepted under the scheme shall be calculated on the basis of 360 days to a year.
- The interest on FCNR (B) deposits shall be calculated and paid at intervals of 180 days each and thereafter for the remaining actual number of days.
Provided that the option to receive the interest on maturity with compounding effect shall vest with the depositor.
21. Calculation of interest on renewal of FCNR (B) deposits
Interest calculation on renewal of FCNR(B) deposits shall be as under:
- If the period from the date of maturity till the date of renewal (both days inclusive) does not exceed 14 days, the rate of interest payable on the amount of the deposit so renewed shall be the appropriate rate of interest for the period of renewal as prevailing on the date of maturity or on the date when the depositor seeks renewal, whichever is lower.
- In all other cases of renewal, interest rates for the overdue period on the renewed amount shall be determined by treating it as a fresh term deposit.
- If, after renewal, the deposit is withdrawn before completion of the minimum stipulated period under the scheme, scheduled commercial banks may, at their discretion, recover the interest paid for the overdue period i.e. period beyond the original date of maturity.
22. Interest payable on the deposit of a deceased FCNR(B) depositor
Scheduled commercial banks shall pay interest on the term deposits standing in the name(s) of a deceased FCNR(B) individual depositor or two or more joint depositors where one of the depositors has died, as under:-
- If paid on the maturity of the deposit, interest shall be paid at the contracted rate;
- If the deposit is claimed before the maturity date, interest shall be paid not at the contracted rate but at the rate applicable to the period for which the deposit remained with the bank and without charging penalty for pre-payment;
- In case the depositor dies before the date of maturity of the deposit but the amount of the deposit is claimed after the date of maturity, interest shall be paid at the contracted rate till the date of maturity and simple interest at the applicable rate operative on the date of maturity for the period for which the deposit remained with the bank beyond the date of maturity.
- In case of death of the depositor after the date of maturity of the deposit, the interest rate operative on the date of maturity in respect of savings deposits held under Resident Foreign Currency (RFC) Account Scheme shall be paid from the date of maturity till the date of payment.
- In case the claimants are residents, the maturity proceeds shall be converted into Indian Rupees on the date of maturity and interest shall be paid for the subsequent period at the rate applicable to a domestic term deposit of similar maturity.
23. Payment of interest on FCNR (B) deposits of NRIs on return to India
Scheduled commercial banks may, at their discretion, on receipt of the request from the depositor, allow FCNR (B) deposits of persons of Indian nationality/origin who return to India for permanent settlement to continue till maturity at the contracted rate of interest subject to the conditions that:
- The rate of interest as applicable to FCNR(B) deposits shall continue.
- Such deposits shall be treated as resident deposits from the date of return of the account holder to India.
- The FCNR (B) deposits on maturity shall be converted into Resident Rupee Deposit Account or RFC Account (if eligible) at the option of the account holder.
- The rate of interest on the new deposit (Rupee account or RFC Account) shall be the relevant rate applicable for such deposit account.
24. Conversion of FCNR (B) Accounts of Returning Indians into RFC Accounts/Resident Rupee Accounts- Payment of interest
Subject to the conditions given in section 4 of these Directions, a Scheduled Commercial Bank shall pay interest at the time of conversion of FCNR(B) Account into RFC/Resident Rupee Account even if the deposit has not completed the minimum maturity period mentioned in section 19(b)(i) above.
Provided that the rate of interest shall not exceed the rate payable on savings bank deposits held under RFC Account Scheme.
25. Premature withdrawal of deposits
- Scheduled Commercial Banks shall, on request from the depositor, permit premature withdrawal of deposits under the FCNR(B) Scheme.
- If the premature withdrawal of FCNR(B) deposits takes place before completion of the minimum stipulated period as mentioned in section 19(b)(i) above, no interest shall be paid .
26. Penalty on Premature Withdrawal of deposits
There shall be a comprehensive policy on penalties for premature withdrawal of FCNR(B) term deposits approved by the Board of Directors or any committee of the Board to which powers have been delegated, subject to the following:
(a) The components of penalty shall be clearly brought to the notice of the depositors at the time of acceptance of the deposits. If not, the exchange loss arising out of premature withdrawal shall be borne by the Scheduled Commercial Banks.
(b) Penalty shall be levied on premature withdrawal of FCNR(B) deposits
- when the depositors return to India for permanent settlement.
- for conversion of FCNR (B) deposits into NRE deposits or vice-versa.
(c) In case of splitting of the amount of term deposit at the request from the claimant/s, no penalty for premature withdrawal of the term deposit shall be levied if the period and aggregate amount of the deposit do not undergo any change.
(d) Scheduled Commercial Banks shall, at their discretion, levy penalty to recover the swap cost in the case of premature withdrawal of FCNR(B) deposits.
(e) No penalties shall be levied in the case of premature conversion of balances held in FCNR (B) deposits into RFC Accounts by Non-Resident Indians on their return to India.
(f) No penalty for premature withdrawal shall be levied, where depositors of the branch as mentioned in section 4(h) of this direction desires premature withdrawal of deposit consequent to the transfer of business to another bank.
27. Resident Foreign Currency Accounts Scheme
A Scheduled Commercial Bank shall have the freedom to determine interest on deposits of money accepted by it or renewed by it under the Resident Foreign Currency Account Scheme, in accordance to the comprehensive policy on interest rates on deposits duly approved by the Board of Directors or any committee of the Board to which powers have been delegated.