What changed
RBI clarified that the earlier deregulation circulars apply solely to domestic savings deposits held by residents in India. Interest calculation must now be based on end-of-day balances, with a uniform rate for balances up to Rs. 1 lakh and optional differential rates for amounts exceeding Rs. 1 lakh. Banks must ensure no discrimination across branches and obtain board or delegated ALCO approval for rate setting.
What it means for you
RRBs, StCBs, and DCCBs now have flexibility to set differential savings deposit rates for balances above Rs. 1 lakh, but must maintain uniformity for the first lakh. This allows product differentiation for high-balance accounts while protecting smaller depositors. Banks need to update their core banking systems for end-of-day balance-based interest calculation and secure formal approval from their board or ALCO before implementing any rate changes.
What you must do
- Update interest calculation systems to use end-of-day balances for all domestic savings accounts.
- Set a uniform interest rate for balances up to Rs. 1 lakh and decide on differential rates for amounts above Rs. 1 lakh.
- Obtain board or delegated ALCO approval before finalizing any savings deposit interest rates.
- Ensure consistent application of rates across all branches without discrimination.
- Acknowledge receipt of this circular to your respective RBI regional office.
Who it affects
Regional Rural Banks (RRBs), State Co-operative Banks (StCBs), District Central Co-operative Banks (DCCBs), Depositors with domestic savings accounts
Does this circular apply to NRI savings accounts?
No, the clarification explicitly states that the revised guidelines apply only to domestic savings bank deposits held by residents in India.
Can we offer a higher rate on balances above Rs. 1 lakh?
Yes, for end-of-day balances exceeding Rs. 1 lakh, banks may apply differential rates as fixed by them, subject to board/ALCO approval.
Do we need board approval for every rate change?
Prior approval of the board or the Asset Liability Management Committee (if powers are delegated by the board) is required when fixing interest rates on such deposits.