RBI Allows Shorter Interest Payment Intervals on Deposits
Current · Source: Reserve Bank of India · RBI/2013-14/385 · issued 29 Nov 2013 · ~1 min read
Quick answerRBI now permits banks to pay interest on rupee savings and term deposits at intervals shorter than quarterly, replacing the earlier quarterly-or-longer rule. This applies to domestic, NRO, and NRE accounts, but not FCNR(B) deposits.
The rule, in the simplest words
Banks can now pay interest on savings and term deposits (money you keep in the bank) more often than every 3 months, like every month.
This new choice is for rupee accounts (Indian money) for people in India (domestic), Non-Resident Ordinary (NRO), and Non-Resident External (NRE) accounts.
The old rule said banks had to pay interest every 3 months or longer, but now they can pay sooner if they want.
This rule does NOT apply to FCNR(B) deposits (foreign currency accounts for Non-Residents), which keep their old rules.
Banks must check their computer systems (core banking) can handle paying interest more often before offering this.
How it plays out — a real example
A forex & trade-finance officer in Indore, Priya, updates her bank's deposit products after RBI's new rule. She tells a retired customer, Mr. Sharma, that his savings account can now pay interest every month instead of every 3 months, giving him a steady monthly income to cover his bills. Priya checks the bank's core banking system first to ensure it can process these faster payments smoothly.
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
❓ Common questions
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.
📜 Read the original circular — full text as issued by RBI
RBI/2013-14/385
DBOD.No.Dir.BC. 69/13.03.00/2013-14
November 29, 2013
To
All Scheduled Commercial Banks
(Excluding RRBs)
Dear Sir / Madam
Periodicity of Payment of Interest on Rupee Savings/Term Deposits
Please refer to paragraph 23 of the Second Quarter Review of Monetary Policy 2013-14 announced on October 29, 2013 ( extract enclosed ) on periodicity of payment of interest on savings and term deposits.
2. In this connection, a reference is also invited to paragraph 2 (ii) of our circular DBOD.No.Dir.BC.46/13.03.00/2000-2001 dated November 4, 2000 on 'Interest Rates on Rupee Deposits held in Domestic, Ordinary Non-Resident (NRO), Non-Resident Special Rupee (NRSR) and Non-Resident (External) (NRE) Accounts' whereby banks were advised to pay interest on savings and term deposits at quarterly or longer rests. As banks are functioning on core banking platform, it has been decided to review the above instructions. Accordingly, banks will now have the option to pay interest on Rupee savings and term deposits at intervals shorter than quarterly intervals.
3. The above revised instructions are applicable to domestic Rupee deposits including Ordinary Non-Resident (NRO) and Non-Resident (External) (NRE) savings and term deposits. As regard FCNR(B) deposits, the existing guidelines issued in this regard will remain unchanged.
4. All other instructions in this regard, as amended from time to time, will remain unchanged.
Yours faithfully
(Rajesh Verma)
Chief General Manager
Encl: As above
Extract of Second Quarter Review of Monetary Policy 2013-2014
Periodicity of Payment of Interest on Rupee Savings/Term Deposits
23. As per extant instructions, banks are required to pay interest on savings deposits and term deposits at quarterly or longer intervals. As all commercial banks are now on core banking platforms, it has been decided to:
give banks the option to pay interest on savings deposits and term deposits at intervals shorter than quarterly intervals.
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2013-14/385 · issued 29 Nov 2013. The plain-English explanation above is BankPulse’s own independent summary.
Review your core banking system's capability to handle interest payments at intervals shorter than quarterly.
📜 Compliance
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.
Grouped from the action items above — a single circular may involve more than one team.
Worked example & action-note template
Example: if you are an IT/Systems lead at a bank this circular applies to (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), your first concrete step on “RBI Allows Shorter Interest Payment Intervals on Deposits” is: “Review your core banking system's capability to handle interest payments at intervals shorter than quarterly.” (RBI issued this 29 Nov 2013).
Action required: Review your core banking system's capability to handle interest payments at intervals shorter than quarterly.
Action required: Update product terms and conditions for savings and term deposits to reflect the new optional shorter payment intervals.
Action required: Communicate the new option to customers through marketing and disclosure materials, highlighting the flexibility.
Action required: Ensure compliance with unchanged guidelines for FCNR(B) deposits and other existing instructions.
Owner: ____________ Target date: ____________
Board/committee approval needed? Y / N
Evidence filed in compliance register on: ____________
Built only from this circular’s own published fields — not legal advice; always confirm against the official RBI source.
💬 Banker Discussion
Discuss this circular with fellow bankers — reply, upvote what helps, report what doesn’t belong. Be professional; no client data. Views are the commenter’s own, not BankPulse’s.
BankPulse Compliance Evidence Pack — generated 03 Aug 2026 · status cross-checked against RBI’s official withdrawal register (refreshed weekly). Official RBI source: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=8598&Mode=0 — Plain-English summary by BankPulse (bankpulse.ai), reviewed by our expert reviewer, CA Amit Jain. Independent platform, not affiliated with the Reserve Bank of India; is our own plain-English paraphrase, not RBI’s original wording.
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