What changed
Earlier, RRBs could offer an additional 1% interest per annum on FCNR (B) deposits to their own staff (existing or retired), as per earlier circulars. RBI has now withdrawn this discretion, effective July 31, 2012, and clarified that no additional interest benefit is allowed on any type of non-resident deposits.
What it means for you
RRBs must stop paying the extra 1% interest on staff FCNR (B) accounts, aligning them with the standard ceiling. This removes a staff perk and simplifies compliance, but may affect staff retention strategies. All other FCNR (B) deposit rules remain unchanged.
What you must do
- Immediately cease offering the additional 1% interest on FCNR (B) deposits to staff members.
- Update internal policies and system parameters to remove the staff interest rate concession for non-resident deposits.
- Communicate the change to all branches and staff to ensure no further such interest is paid.
- Review existing staff FCNR (B) accounts to ensure no future renewals include the extra interest.
Who it affects
Regional Rural Banks (RRBs), RRB staff members with FCNR (B) deposits, RRB compliance and treasury departments
Does this circular affect all non-resident deposits or only FCNR (B)?
The circular states that RRBs should not allow the benefit of additional interest rate on any type of deposits of non-residents. The withdrawal of the staff benefit is explicitly for FCNR (B) accounts, but the prohibition on additional interest applies to all non-resident deposits.
Can RRBs still offer the additional 1% interest to staff on domestic deposits?
The circular does not address domestic deposits; it only covers non-resident deposits. For domestic deposits, earlier instructions remain unchanged.
When does this change take effect?
The circular is dated July 31, 2012, and is effective from that date. No transition period is mentioned.