What changed
Effective April 16, 2005, RBI revised interest rates on amounts disbursed from RIDF IV to VII on or before October 31, 2003. Deposit rates for RIDF IV, V, and VI were reduced to 8% per annum from 11.5%, 11.5%, and 11% respectively. For RIDF VII, the rate was fixed at 7.5% per annum, replacing the earlier variable rate linked to shortfall in agricultural lending.
What it means for you
Banks will earn lower returns on their RIDF deposits for these tranches, impacting their interest income from these funds. The restructuring aligns rates with prevailing market conditions and government policy. Lenders should reassess their liquidity and investment strategies for these legacy deposits.
What you must do
- Update internal systems to reflect new deposit rates for RIDF IV-VII from April 16, 2005.
- Communicate revised rates to relevant treasury and finance teams for accurate interest accrual.
- Review impact on bank's interest income and adjust financial projections accordingly.
- Ensure compliance with RBI circular RPCD. Plan. BC. 91/04.09.42/2004-05 for all affected accounts.
Who it affects
All domestic scheduled commercial banks with RIDF IV-VII deposits, Treasury departments managing RIDF investments, Finance and accounting teams handling interest calculations
Which RIDF tranches are affected by this rate revision?
The revision applies to amounts disbursed on or before October 31, 2003 from RIDF IV, V, VI, and VII.
What are the new deposit rates for RIDF IV, V, and VI?
All three tranches now earn 8% per annum, down from 11.5% for IV and V, and 11% for VI.
How does the RIDF VII rate change?
RIDF VII rate is fixed at 7.5% per annum, replacing the earlier variable rate that ranged between 10% and 7% based on agricultural lending shortfall.