What changed
RBI observed wide variations in interest rates offered on single term deposits of ₹15 lakh and above versus smaller deposits of the same maturity, and significantly different rates for deposits with very close maturities. This prompted the central bank to advise banks to put in place a board-approved transparent policy on pricing of liabilities and ensure minimal variation in rates for corresponding maturities.
What it means for you
Banks can no longer offer sharply higher rates on bulk deposits (₹15 lakh+) compared to retail deposits of the same tenor without a clear, board-approved rationale. This will likely compress net interest margins on bulk deposits and force better liquidity management and pricing discipline. Retail depositors should see fairer, more consistent rates across deposit slabs.
What you must do
- Review and revise your deposit pricing policy to ensure board approval and transparency.
- Ensure ALCO minimizes interest rate variation between bulk (₹15 lakh+) and retail deposits for identical maturities.
- Audit current deposit rate schedules to identify and rectify any wide or unjustified differentials.
- Document the rationale for any remaining rate differentials (e.g., senior citizen schemes) as permitted.
Who it affects
All scheduled commercial banks (excluding RRBs), Treasury and ALCO teams, Retail and wholesale deposit customers, Bank boards and risk management functions
What is the threshold for bulk deposits under this circular?
Single term deposits of ₹15 lakh and above are considered bulk deposits for the purpose of this interest rate variation guideline.
Are banks completely banned from offering differential rates on bulk deposits?
No, but any differential must be minimal for corresponding maturities and backed by a board-approved transparent policy. The earlier 1998 circular still permits differential rates, but the new guidance tightens the acceptable variation.
Does this circular affect senior citizen deposit schemes?
No, the circular explicitly notes that the earlier exemption for fixed deposit schemes meant specifically for resident Indian senior citizens remains in place.