What changed
Earlier, RRBs could offer an extra 1% interest on NRE/NRO deposits to their own staff, as clarified in 2000 and 2005 circulars. Now, RBI has withdrawn this discretion, prohibiting any additional interest on non-resident deposits for staff.
What it means for you
RRBs must stop paying the extra 1% interest on NRE/NRO accounts to staff members, including retired staff. This aligns non-resident deposit rates with standard ceilings and removes a preferential treatment that was previously allowed.
What you must do
- Immediately stop offering additional interest on NRE/NRO deposits to staff members.
- Update internal policies and system configurations to remove the 1% staff benefit on non-resident accounts.
- Communicate the change to relevant branches and staff to ensure compliance.
- Review existing NRE/NRO staff deposits and adjust interest rates to standard applicable rates.
Who it affects
Regional Rural Banks (RRBs), Staff members (current and retired) holding NRE/NRO accounts, Compliance and operations teams at RRBs
Does this apply to domestic rupee deposits of staff?
No, this instruction specifically applies only to non-resident deposits (NRE and NRO accounts). Domestic staff deposits are not affected.
What about existing NRE/NRO staff deposits that already have the extra interest?
The circular does not specify a transition period, so RRBs should adjust these deposits to standard rates immediately to comply with the withdrawal of the benefit.
Are retired staff members also covered?
Yes, the circular explicitly mentions both existing and retired staff members, so the restriction applies to all staff categories.