Norms for differential rate for non-callable deposits soon: RBI

MUMBAI: High value fixed deposits of over Rs 1 crore by individuals without premature withdrawal option can avail of differential interest rats, RBI today said.

As per the existing rules, all deposits accepted from individuals and Hindu undivided family (HUF) up to Rs 1 crore are callable, that is having the facility of premature withdrawal.

"This results in asset-liability management issues, especially under the Liquidity Coverage Ratio (LCR) requirement under the Basel III framework," RBI Governor Raghuram Rajan said in the sixth bi-monthly monetary policy review.

"It is, therefore, proposed to allow non-callable deposits. Callability in a deposit will then be a distinguishing feature for offering differential rates on interest on deposits. Detailed guidelines will follow shortly," he said.

Currently, banks are allowed to offer differential rates of interest on deposits on the basis of tenor for deposits of less than Rs one crore and on the basis of quantum for deposits of Rs one crore and above.

Banks are, however, not permitted to differentiate on the basis of any other parameter of the deposit contract.

Commenting on this development ICICI Bank CEO and Managing Director Chanda Kochhar said the introduction of differential rate structures for non-callable deposits will help banks in asset-liability management.