Home › Circulars › RBI/2009-10/447

UCBs get freedom to set own deposit conversion policies

No longer current — withdrawn, no replacement on file yet

Source: Reserve Bank of India · RBI/2009-10/447 · issued 05 May 2010 · ~2 min read

Quick answerRBI now allows Primary Urban Co-operative Banks to set their own policies for converting term, daily, or recurring deposits into new term deposits without mandatory penalty waiver, replacing earlier prescriptive rules.

What changed

Earlier, UCBs were required to allow depositors to close a term, daily, or recurring deposit and reinvest the amount in a new term deposit with the same bank without any penalty, provided the new deposit's tenure exceeded the original remaining period. Now, RBI has withdrawn that mandatory penalty waiver and permitted UCBs to formulate their own board-approved policies for such conversions, effective immediately.

What it means for you

UCBs gain flexibility to design deposit conversion terms that suit their asset-liability management needs, potentially adjusting penalty structures or eligibility conditions. This could improve deposit stability and reduce premature withdrawal risks, but also shifts responsibility to banks to ensure fair treatment of depositors. Lenders must now draft clear, transparent policies and communicate them to customers.

Historical instruction — do not use for current compliance. This is what was required at the time; it no longer reflects current RBI requirements. If no replacement rule is linked above, that only means none is recorded on our register yet — it does not prove no later applicable rule exists. Confirm on the official RBI source below.

What banks were required to do at the time

Formulate a board-approved policy for conversion of term, daily, and recurring deposits into new term deposits, covering penalty, interest, and tenure conditions.
Communicate the new policy clearly to all depositors and branch staff to ensure consistent implementation.
Review existing deposit products and systems to align with the new policy, ensuring no unintended regulatory breaches.
Monitor ALM impact of conversion requests under the new policy and adjust pricing or terms as needed.

Who it affects

Primary (Urban) Co-operative Banks (UCBs), Depositors holding term, daily, or recurring deposits with UCBs, Treasury and ALM teams of UCBs

❓ Common questions

Regulatory timeline

Decoded by BankPulse 2026-06-19 06:25 IST
repealed_by — Consolidation of Regulations — Withdrawal of circulars (28 Nov 2025)
Status change: withdrawn 03 Aug 2026, 04:00 IST

Built from our lineage records — each fact carries its provenance; missing history simply is not shown (never guessed).

Does this circular remove the earlier penalty waiver for deposit conversion?

Yes, the earlier mandatory requirement to waive penalty on conversion of deposits for reinvestment in a longer-term deposit has been withdrawn. UCBs can now decide penalty terms in their own policy.

Can a UCB still choose to offer penalty-free conversions under its new policy?

Absolutely. The circular permits banks to formulate their own policies, so they may retain penalty-free conversion if it aligns with their business strategy and ALM needs.

When does this change take effect?

The circular states it is effective immediately from the date of issuance, i.e., May 5, 2010.

📜 This document’s life story (1 recorded event, each backed by RBI’s own words)

Repealed by RBI/2025-26/100 — Consolidation of Regulations — Withdrawal of circulars (28 Nov 2025)

RBI’s words: “Official withdrawal register entry #1709: UBD.BPD.PCB.Cir.No.65/13.01.000/2009-10 — "Conversion of Term Deposits, Daily Deposits or Recurring Deposits for Reinvestment in Term Deposits by Primary (Urb”

📜 Read the original circular — full text as issued by RBI

RBI/2009-10/447 
 UBD. BPD. PCB. Cir. No. 65/ 13.01.000/ 2009-10 
 May 05, 2010 
 The Chief Executive Officers of 
 All Primary (Urban) Co-operative Banks
 Dear Sir,
 Conversion of term deposits, daily deposits or recurring deposits for reinvestment in term deposits by Primary (Urban) Co-operative Banks (UCBs) 
 Please refer to paragraph 104 of the Annual Policy Statement for the year 2010 -11 of Reserve Bank of India ( extract enclosed ).
 2. As per instructions contained in paragraph 12 of circular UBD.DC.102/V.1-86/87 dated June 25, 1987 on Interest Rates on Deposits and paragraphs 9.1 and 9.2 of Master Circular UBD.No.BPD.MC.No.11/13.01.000/2009-10 dated July 01, 2009 on Interest Rates on Rupee Deposits, UCBs, on request from the depositor, should allow closure of a term deposit, a deposit in the form of daily deposit, or recurring deposit, to enable the depositor to immediately reinvest the amount lying in the aforesaid deposits with the same bank in another term deposit. UCBs should pay interest in respect of such term deposit without reducing the interest by way of penalty provided that the deposit remains with the bank after reinvestment for a period longer than the remaining period of the original contract. 
 3. On a review of the extant regulatory norms, and in order to facilitate better Asset Liability Management (ALM), it has been decided to permit banks to formulate their own policies towards conversion of deposits with immediate effect.
 Yours faithfully, 
 (A. Udgata)
Chief General Manager 
 Extract of Paragraph 104 of Annual Policy Statement for the Year 2010-11 
 Conversion of Term Deposits, Daily Deposits or Recurring Deposits for Reinvestment in Term Deposits 
 104.    As per extant guidelines, banks should allow conversion of term deposits, daily deposits or recurring deposits to enable depositors to immediately reinvest the amount lying in the aforesaid deposits with the same bank in another term deposit. Banks are required to pay interest in respect of such term deposits without reducing the interest by way of penalty, provided that the deposit remains with the bank after reinvestment for a period longer than the remaining period of the original contract. On a review of the extant regulatory norms and in order to facilitate better asset-liability management (ALM), it is proposed:
 to permit banks to formulate their own policies towards conversion of deposits.

Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2009-10/447 · issued 05 May 2010. The plain-English explanation above is BankPulse’s own independent summary.

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BankPulse Compliance Evidence Pack — generated 03 Aug 2026 · status cross-checked against RBI’s official withdrawal register (refreshed weekly).
Official RBI source: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=5655&Mode=0 — Plain-English summary by BankPulse (bankpulse.ai), reviewed by our expert reviewer, CA Amit Jain. Independent platform, not affiliated with the Reserve Bank of India; is our own plain-English paraphrase, not RBI’s original wording.