What changed
Previously, banks had to pay interest on savings and term deposits at quarterly or longer intervals. Now, with core banking systems in place, RBI has given banks the option to pay interest at shorter intervals, such as monthly or even more frequently.
What it means for you
Banks can now offer more frequent interest payouts, which could be a competitive advantage to attract depositors seeking regular income. However, this may increase operational costs and liquidity management complexity. The change does not affect FCNR(B) deposits, which retain existing rules.
What you must do
- Review your core banking system's capability to handle interest payments at intervals shorter than quarterly.
- Update product terms and conditions for savings and term deposits to reflect the new optional shorter payment intervals.
- Communicate the new option to customers through marketing and disclosure materials, highlighting the flexibility.
- Ensure compliance with unchanged guidelines for FCNR(B) deposits and other existing instructions.
Who it affects
All scheduled commercial banks (excluding RRBs), Depositors with rupee savings and term deposits (domestic, NRO, NRE accounts), Bank treasury and operations teams managing deposit products
Can banks now pay interest monthly on savings accounts?
Yes, RBI has given banks the option to pay interest on rupee savings and term deposits at intervals shorter than quarterly, including monthly, as long as the bank's systems support it.
Does this apply to FCNR(B) deposits?
No, the revised instructions do not apply to FCNR(B) deposits. Existing guidelines for those deposits remain unchanged.
Is this mandatory for banks?
No, it is optional. Banks can choose to offer shorter interest payment intervals or continue with the existing quarterly or longer rests.