What changed
The Bank Rate was increased by 200 basis points from 8.25% to 10.25% effective July 15, 2013. Consequently, all penal interest rates linked to the Bank Rate—specifically those on shortfalls in reserve requirements—were revised upward as per the annex.
What it means for you
For RRBs and cooperative banks, the cost of failing to meet reserve requirements (CRR/SLR) has risen sharply. Penal rates now start at 13.25% (Bank Rate + 3%) and go up to 15.25% (Bank Rate + 5%), depending on how long the shortfall persists. This tightens liquidity discipline and increases penalty costs for non-compliance.
What you must do
- Update internal systems to reflect the new Bank Rate of 10.25% for all linked calculations.
- Review and revise penal interest rate schedules for reserve shortfalls to the new slabs (13.25% and 15.25%).
- Communicate the change to treasury and compliance teams to ensure accurate penalty application.
- Monitor reserve maintenance closely to avoid shortfalls and higher penal costs.
Who it affects
All Regional Rural Banks (RRBs), State and Central Co-operative Banks, Treasury and compliance departments of these banks
What is the new Bank Rate effective from July 15, 2013?
The Bank Rate has been increased by 200 basis points from 8.25% to 10.25%.
How do the revised penal interest rates on reserve shortfalls work?
Penal rates are now Bank Rate plus 3 percentage points (13.25%) or Bank Rate plus 5 percentage points (15.25%), depending on the duration of the shortfall.
Which banks are covered by this circular?
All Regional Rural Banks (RRBs) and State/Central Co-operative Banks are required to comply.