What changed
RBI observed that some RRBs were offering special term deposits with lock-in periods of 6 to 12 months, where premature withdrawal was not allowed or paid no interest, and interest rates differed from normal deposits. The RBI clarified these schemes violate its earlier directives on deposit interest rates, premature withdrawal rules, and non-discrimination among deposits of same maturity and date. RRBs must discontinue such schemes immediately and report compliance to their regional RBI office.
What it means for you
RRBs can no longer offer deposit products that lock in customer funds for 6-12 months with penal or zero interest on early withdrawal, as these are now deemed non-compliant. Banks must ensure all deposit schemes adhere strictly to RBI's interest rate directives, including equal treatment of deposits of same size and maturity. Non-compliance may attract penalties under the Banking Regulation Act, 1949.
What you must do
- Immediately discontinue any special deposit schemes with lock-in periods of 6-12 months that restrict premature withdrawal or pay no interest during lock-in.
- Review all existing deposit products to ensure they comply with RBI directives on interest rates, premature withdrawal, and non-discrimination among deposits of same maturity and date.
- Report compliance to your respective RBI Regional Office without delay.
- Ensure board-approved new deposit schemes strictly follow RBI's standing instructions before launch.
Who it affects
All Regional Rural Banks (RRBs), RRB customers holding special lock-in deposit schemes, RRB board members and compliance teams
What exactly is a lock-in period in these deposit schemes?
It is a period of 6 to 12 months during which the depositor cannot withdraw the deposit prematurely. If they do, no interest is paid for the period the deposit was held.
Why did RBI ban these schemes?
Because they violate earlier RBI directives that require equal interest rates for deposits of same maturity and date, and set rules for premature withdrawal. The schemes also offered interest rates not aligned with normal deposits.
What should RRBs do if they have already sold such schemes?
They must discontinue the schemes immediately and report compliance to their RBI Regional Office. Existing deposits may need to be handled as per RBI's further instructions or general deposit rules.