What changed
RBI removed the regulated savings bank deposit interest rate, allowing urban co-operative banks to determine their own rates. A uniform rate is mandatory for deposits up to ₹1 lakh, while differential rates are permitted for deposits above ₹1 lakh, subject to non-discrimination. This applies only to resident Indians; NRE and NRO savings account rates remain regulated at 4% per annum.
What it means for you
Urban co-operative banks now have pricing flexibility to compete for savings deposits, which could improve their liability management. However, the uniform rate requirement for deposits up to ₹1 lakh protects small savers. Banks must ensure no discrimination in interest paid on similar deposits of the same amount and date, adding compliance complexity.
What you must do
- Review and set your savings bank deposit interest rate for resident Indians immediately.
- Ensure uniform interest rate is applied on all savings deposits up to ₹1 lakh.
- If offering differential rates for deposits above ₹1 lakh, implement non-discrimination checks for same amount and date deposits.
- Continue paying 4% per annum on NRE and NRO savings accounts until further notice.
- Update your interest rate policy and communicate changes to branches and customers.
Who it affects
All Primary (Urban) Co-operative Banks, Savings bank depositors (resident Indians), Bank treasury and product teams
Can we offer different savings rates for different customer segments?
Yes, but only for deposits above ₹1 lakh. For deposits up to ₹1 lakh, you must offer a uniform rate to all customers. For higher deposits, you can differentiate, but must not discriminate between deposits of similar amount accepted on the same date at any branch.
Does this deregulation apply to NRE and NRO savings accounts?
No. The deregulation is only for resident Indians' savings deposits. NRE and NRO savings accounts continue to be regulated at 4% per annum until further review.
When does this change take effect?
With immediate effect from November 25, 2011, as per the circular.