RBI's own words: “Please refer to our circulars RBI/2005/477 and RBI/2011-12/294” — RBI/2011-12/491
Source: Reserve Bank of India · RBI/2011-12/294 · issued 09 Dec 2011 · ~2 min read
Quick answerBanks must now compensate Relief/Savings Bond investors for delayed interest or principal payments using their own savings deposit rate, not a uniform rate, following savings rate deregulation.
The rule, in the simplest words
If a bank is late paying interest or the final amount on a Relief/Savings Bond, it must pay extra money (compensation) to the investor.
The extra money is calculated using the bank's own savings account interest rate, not a fixed rate set by the RBI (Reserve Bank of India).
The bank must use different rates for amounts up to ₹1 lakh and for amounts over ₹1 lakh, and treat all investors the same.
Banks must update their rules and train staff so they know how to calculate this compensation correctly.
How it plays out — a real example
An agency-banking (government business) officer in Indore processes a Relief Bond payment for a customer. The principal is due on March 15, but the bank credits it on March 25. The officer calculates the 10-day delay compensation using the bank's own savings deposit rate for amounts over ₹1 lakh, ensuring the customer gets the correct extra money without any unfair treatment.
What changed
Previously, banks compensated investors at the current Savings Bank Rate for delays in bond payments. With savings deposit rates now deregulated, banks must use their own savings deposit rate for the respective amount slabs (up to ₹1 lakh and over ₹1 lakh) without discrimination.
What it means for you
Banks have flexibility to set compensation rates based on their own savings deposit rates, which may vary by amount slab. This aligns compensation with actual deposit costs but requires banks to ensure no discriminatory treatment between investors. Lenders must update their systems and processes to apply the correct rate for each delay.
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
Update internal policies to use your bank's savings deposit rate for compensating bond investors on delayed payments.
Ensure compensation is calculated separately for amounts up to ₹1 lakh and over ₹1 lakh, using the respective savings deposit rates.
Train staff handling bond transactions on the new compensation calculation method.
Review and amend any existing agreements or circulars that reference the old uniform Savings Bank Rate.
Who it affects
Banks handling Relief/Savings Bonds (SBI, associate banks, public sector banks, IDBI, ICICI, Axis, HDFC, SHCIL), Investors in Relief/Savings Bonds, Government accounts departments of listed banks
Built from our lineage records — each fact carries its provenance; missing history simply is not shown (never guessed).
What rate should we use for compensation if our savings deposit rate differs for amounts above ₹1 lakh?
Use your bank's savings deposit rate applicable to the specific amount slab of the delayed payment—up to ₹1 lakh and over ₹1 lakh—without any discrimination between investors.
Does this circular apply to all types of bonds or only Relief/Savings Bonds?
It specifically applies to Relief/Savings Bonds as referenced in the earlier circular of May 2005, and the compensation requirement is for delays in interest warrants or maturity value payments.
What if our bank has multiple savings deposit rates for the same slab?
You must apply a single, non-discriminatory rate for each slab (up to ₹1 lakh and over ₹1 lakh) to all investors, as per the circular's instruction.
📜 This document’s life story (1 recorded event, each backed by RBI’s own words)
RBI’s words: “Please refer to our circulars RBI/2005/477 and RBI/2011-12/294”
📜 Read the original circular — full text as issued by RBI
RBI/2011-12/294
DGBA.CDD.H- 3657/13.01.298/2011-12
December 09, 2011
The Chairman and Managing Director/Managing Director
Head Office (Government Accounts Department)
State Bank of India/State Bank of Patiala/
State Bank of Bikaner & Jaipur/State Bank of Travancore/
State Bank of Hyderabad/State Bank of Mysore/ Andhra Bank/
Allahabad Bank/Bank of Baroda/Bank of India/
Bank of Maharashtra/Canara Bank/Central Bank of India/
Corporation Bank/Dena Bank/Indian Bank/Indian Overseas Bank/
Punjab National Bank/Syndicate Bank/UCO Bank/
Union Bank of India/United Bank of India/Vijaya Bank /IDBI Bank Ltd. /ICICI Bank Ltd.
Axis Bank Ltd./HDFC Bank Ltd./SHCIL
Dear Sir/Madam,
Committee on Procedures & Performance Audit on Public Services (CPPAPS) – Report No. 2 – Compensation structure for delay in payment of interest and/or principal
Please refer to our circular CO. DT. No. 13.01.298/H-9786/2004-05 dated May 20, 2005 (RBI/2005/477) , on the captioned subject. As per para 3 thereat, an investor in Relief/Savings Bonds has to be compensated by the concerned bank at ‘current Savings Bank Rate’ on account of financial loss incurred by the investor due to late receipt/delayed credit of interest warrants/ maturity value of investments, etc.
2. In this regard, we advise that as the interest rate on savings bank deposits has since been deregulated, the banks shall compensate the investors for the above mentioned financial loss at their own savings bank deposit rate for respective amounts (i.e. upto ` 1 lakh and over ` 1 lakh) without any discrimination.
Yours faithfully,
(Sangeeta Lalwani)
Deputy General Manager
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2011-12/294 · issued 09 Dec 2011. 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=6866&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.
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