Reserve Bank of India (Urban Co-operative Banks – Interest Rate on Deposits) Directions, 2025 (Updated as on June 17, 2026)

1. Date of issue

These Directions were issued on November 28, 2025, as part of RBI's UCB rule clean-up.

2. Non-resident deposits included

Non-resident deposits under NRE, NRO and FCNR foreign-currency schemes are covered too.

1. Start date

The Directions took effect the moment RBI placed them on its official website.

2. One deposit rulebook

This document gives Urban Co-operative Banks one single rulebook for pricing every kind of deposit.

3. Who is covered

These rules apply to every Urban Co-operative Bank regulated by the Reserve Bank of India.

4. Accounts covered

The rules cover every domestic rupee current, savings and term deposit account.

1. Board-approved deposit policy

Every bank needs one policy on deposit interest and withdrawal penalties, approved by its Board.

2. Same rate for all

Every customer must get the same interest rate for the same deposit size and date.

3. Published schedule binding

Every rate a bank actually pays must match its own publicly disclosed rate schedule.

4. No negotiated rates

Depositors can no longer negotiate a special one-off interest rate with the bank.

1. No current account interest

Banks cannot pay any interest on money kept in current accounts, with narrow exceptions.

2. Daily balance calculation

Savings account interest must be worked out on the daily closing balance, not a monthly average.

3. First Rs 1 lakh rate

Every savings balance up to the first Rs 1 lakh must earn the same interest rate.

4. Seven-day minimum term

The shortest term deposit a bank can accept is seven days.

BankPulse example. A customer asks for a term deposit of four days. The bank cannot accept it. The minimum tenor of a deposit is seven days, so seven days is the shortest term it can offer.

5. Bulk deposit exception

Banks may only offer a different interest rate for large, defined bulk deposits.

6. Early withdrawal right

Individual and HUF term deposits of Rs 1 crore or less must always allow early withdrawal.

7. Zero interest before minimum

Withdrawing a deposit before its minimum period earns zero interest, not a reduced rate.

8. Staff rate concession

Banks may pay staff, and some retired staff, up to one extra percent interest on deposits.

9. Senior citizen schemes

Banks can design special higher-rate term deposit schemes just for senior citizens.

10. Quarterly interest credit

Interest on savings accounts must reach the customer at least once every quarter.

11. Frozen accounts earn interest

Savings accounts frozen by enforcement authorities must keep receiving interest as normal.

12. Penalty policy approval

The Board, or a Board committee, must approve the bank's premature-withdrawal penalty policy.

13. Penalty disclosure duty

Any premature-withdrawal penalty must be shown to the depositor before the deposit is accepted.

14. Undisclosed penalty barred

If a penalty was never disclosed when the deposit was opened, the bank cannot levy it.

1. NRE minimum term

Non-resident external term deposits must run for at least one year.

2. Temporary rate easing

A temporary easing of some NRE and FCNR rate ceilings runs only until September 30, 2026.

3. No lien on NRE

Banks cannot place any lien, direct or indirect, on NRE savings deposits.

1. FCNR term band

Foreign-currency non-resident deposits can only be booked for one to five years, never longer.

2. FCNR 360-day year

FCNR deposit interest is calculated on a 360-day year, not the usual 365.

1. No deposit commission

Banks generally cannot pay commission or brokerage to anyone for mobilising deposits.

2. No gifts or lotteries

Banks cannot offer prizes, lotteries or free trips to attract deposit customers.

3. Misleading yield ads banned

Deposit ads showing only compounded yield, hiding the real simple interest rate, are banned.

4. Other-bank deposit loans

A bank cannot grant advances against term deposits held with another bank.

1. Older rules repealed

This document repeals every earlier RBI instruction on UCB deposit interest rates.

2. Old actions preserved

Anything already done under the old repealed rules stays governed by those old provisions.

3. June 2026 update

RBI updated these Directions again on June 17, 2026 with two specific insertions.