What changed
RBI observed wide variations in interest rates offered by RRBs on single term deposits of Rs 15 lakh and above compared to smaller deposits of similar maturities, as well as significantly different rates for deposits with very close maturities. This prompted the RBI to advise RRBs to adopt a board-approved transparent policy on liability pricing and ensure minimal rate variation between bulk and retail deposits.
What it means for you
RRBs must now align their deposit pricing more closely, reducing the gap between rates for large (Rs 15 lakh+) and small deposits of the same tenure. This aims to protect retail depositors from unfair rate discrimination and signals that RBI expects better liquidity management and pricing discipline. Banks may need to revise their ALCO policies and deposit product structures to comply.
What you must do
- Review and update your board-approved policy on liability pricing to ensure transparency and minimal rate variation between bulk (Rs 15 lakh+) and retail deposits of corresponding maturities.
- Instruct ALCO to assess current deposit rate spreads and adjust offerings to reduce differences for similar tenures.
- Document the rationale for any remaining rate differentials and ensure they are justified and minimal.
- Communicate the revised pricing approach to all branches and treasury teams for consistent implementation.
Who it affects
Regional Rural Banks (RRBs), ALCO members of RRBs, Deposit pricing and product teams at RRBs, Retail depositors of RRBs
What is the threshold for bulk deposits under this circular?
The circular refers to single term deposits of Rs 15 lakh and above as bulk deposits, and other term deposits below Rs 15 lakh as retail deposits.
Does this circular apply to all banks or only RRBs?
This specific circular is addressed to all Regional Rural Banks (RRBs). However, similar guidelines were issued for other banks via the Monetary Policy Statement.
What action is required if our RRB currently has wide rate variations?
You must put in place a board-approved transparent policy on liability pricing and ensure that the variation in interest rates between bulk and retail deposits of corresponding maturities is minimal.