RBI withdraws staff interest rate benefit on NRE/NRO deposits

What changed

Earlier, banks could offer an additional interest rate of up to 1% per annum to their own staff on NRE and NRO deposits, as clarified in 2000 and 2005 circulars. Now, RBI has withdrawn this discretion, meaning no additional interest can be paid to non-resident staff members on any type of deposit. The change applies to both existing and retired staff.

What it means for you

Banks must immediately stop offering the extra 1% interest rate to staff on NRE and NRO accounts, treating these deposits like those of ordinary non-resident customers. This aligns with RBI's broader stance on uniform deposit rates for non-residents and prevents preferential treatment. Banks need to update their systems and communication to ensure compliance, as any violation could attract regulatory action.

What banks were required to do at the time

• Cease offering the additional 1% interest rate on NRE and NRO deposits to all staff members, including retired ones.
• Update internal policies and system parameters to remove the staff benefit for non-resident deposits.
• Communicate the change to relevant branches and staff to ensure no further disbursement of extra interest.
• Review existing NRE/NRO staff accounts and adjust interest rates to the standard ceiling from the effective date.

Who it affects

Scheduled commercial banks (excluding RRBs) offering NRE/NRO accounts, Bank staff members (existing and retired) holding NRE/NRO deposits, Treasury and compliance departments managing deposit products