Mumbai: The Reserve Bank on Thursday allowed banks to offer differential interest rates on term deposits depending on whether they are with or without premature withdrawal facility.
While all term deposits of individuals (held singly or jointly) of Rs 15 lakh and below should "necessarily" have premature withdrawal facility, RBI said for term deposits of more than Rs 15 lakh, banks can offer deposits without the option of premature withdrawal.
In the sixth bi-monthly Monetary Policy Statement of 2014-15 in February, RBI had decided to introduce early withdrawal facility in a term deposit as a distinguishing feature for offering differential rates of interest.
"Accordingly, banks will have the discretion to offer differential interest rates based on whether the term deposits are with or without-premature-withdrawal-facility," the Reserve Bank said in a notification.
However, banks that offer such term deposits should ensure that at the customer interface point, the customers are given the option to choose between term deposits either with or without premature withdrawal facility, RBI said.
Further, RBI said all deposits mobilised by banks should be strictly in conformity with an advance schedule of interest rates payable on such deposits.
RBI also asked the banks to have a Board approved policy with regard to interest rates on deposits including deposits with differential rates of interest and to ensure that the interest rates offered are reasonable, consistent and transparent.
Banks are allowed to offer differential rates of interest on term deposits on the basis of tenor for deposits less than Rs 1 crore and on the basis of quantum and tenor on term deposits of Rs 1 crore and above.
However, they are not permitted to differentiate on the basis of any other parameter of the deposit contract.
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