What changed
RBI has withdrawn the discretion allowing banks to pay an additional 1% interest on FCNR(B) deposits to staff members. No non-resident depositor, including staff, can now receive any extra interest beyond the prescribed ceiling. The effective date is not specified in the circular.
What it means for you
Banks must stop paying the staff premium on FCNR(B) accounts. This aligns non-resident deposit pricing with the general ceiling, removing a preferential treatment. Lenders need to update their systems and communication to ensure compliance and avoid penal action.
What you must do
- Immediately stop crediting any additional interest (including the 1% staff benefit) on FCNR(B) deposits of staff members.
- Review all existing FCNR(B) staff accounts and adjust interest rates to the applicable ceiling as per the circular's instructions.
- Update internal policy documents and product literature to reflect the withdrawal of the staff interest rate discretion.
- Communicate the change to relevant branches and treasury teams handling NRI deposits.
Who it affects
Scheduled commercial banks (excluding RRBs) offering FCNR(B) accounts, Existing and retired staff members holding FCNR(B) deposits, NRI depositors and bank staff handling NRI accounts
Does this circular affect only FCNR(B) deposits or other non-resident deposits too?
The circular states that banks should not allow the benefit of additional interest on any type of deposits of non-residents. So it applies to all non-resident deposit categories, not just FCNR(B).
What about existing FCNR(B) staff deposits that were opened before this circular?
The circular does not provide specific grandfathering or retroactive adjustment instructions. Banks should apply the new restriction as per the circular's terms.
Can banks still offer the staff interest rate on resident deposits?
This circular specifically addresses non-resident deposits. The restriction on additional interest applies only to non-resident accounts. Resident staff deposit benefits are not covered here.