Reserve Bank of India (Local Area Banks – Interest Rate on Deposits) Directions, 2025 (Updated as on June 17, 2026)
UR
- Applies toLocal area banks
- StatusIn force
- RBI text changedRBI updated this document on October 01, 2026. BankPulse is re-reading it. BankPulse checked 33 points against RBI's new text on 18 October 2026. 31 stand. 2 are marked below and are being re-read.
- IssuedNov 28, 2025
- Last amendedAug 25, 2026 · 3 incorporated
- Length33 points in 4 sections · 4 min read
The four dates on this rule
- PublishedNov 28, 2025The day RBI put this document out. This is the same day as the Issued date on this rule.
- Starts to applyNov 28, 2025The day this rule starts to apply, as RBI's own text states it.
- Time to get readyNoneIt starts to apply on the day it was published.
- Last date to actNot statedNo date to act by was found in this document. Other dates may sit inside single paragraphs.
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Numbers to remember
| one lakh rupees | Up to one lakh rupees every savings account gets the same rate. Above that the bank may vary it. RBI Para 8(1) |
| seven days | No term deposit may run for less than seven days. RBI Para 9(1) |
| one crore | Every term deposit of one crore or less held by an individual must allow early withdrawal. RBI Para 9(3) |
| one per cent | The bank may pay its own staff one per cent above the card rate. RBI Para 11 |
| sixty days | Interest on a foreign currency deposit is worked out on a year of three hundred and sixty days. RBI Para 32 |
What it says
How firm is each point
Stated by RBI — RBI’s own paragraph says this. We have only made it plainer.
Our reading — BankPulse read RBI’s paragraph and shortened it. The paragraph is the authority, not this line.
Needs judgement — RBI leaves this to the bank to settle, so nobody can give you a fixed number here.
Can be read two ways
A point marked this way sits on an RBI paragraph that can honestly be read two ways. Our own sentence takes one of the two. BankPulse does not choose for you: read RBI’s own paragraph, at the number printed on the point, before you act on it.
Two ways — both, or either one. RBI’s paragraph joins two things in the and-or form. One reading: Both of them apply, together. The other: Either one of them, on its own, is enough.
Chapter I. Preliminary
1. Starts on the website date
The rules start on the day RBI puts them on its own website.
2. Who must follow this
These rules apply to every local area bank.
3. What a bulk deposit is
A bulk deposit is a single rupee term deposit of one crore or more.
Chapter II. General Guidelines (Interest Rate Framework)
1. Same rate everywhere
The rate offered must be the same at every branch and for every customer on the same day.
2. One board policy covers it
The board must approve one policy covering deposit rates and every premature withdrawal penalty.
Chapter III. Domestic Rupee Deposits
Must know
1. No interest on current accounts
A current account earns no interest.
2. One exception, on death
A dead depositor's current account earns the savings rate from the date of death until it is paid out.
3. Uniform rate to a lakh
Up to one lakh rupees every savings account gets the same rate. Above that the bank may vary it.
BankPulse example. Two savings accounts at the same branch close the day, one holding ₹80,000 and the other ₹5 lakh. On the first ₹1 lakh of each balance the bank pays the same rate, because up to ₹1 lakh the rate must be uniform. On the ₹4 lakh that the second account holds above ₹1 lakh, the bank is free to pay a different rate.
4. Seven days is the floor
No term deposit may run for less than seven days.
5. Different rates only in bulk
A bank may offer a different rate only on bulk deposits.
6. A crore and under breaks
Every term deposit of one crore or less held by an individual must allow early withdrawal.
7. Broken early, paid pro rata
On early withdrawal the depositor gets the rate for the period the money actually stayed, not the booked rate.
8. Nothing before the floor
Break it before the minimum period and no interest is paid at all.
9. One per cent for staff
The bank may pay its own staff one per cent above the card rate.
10. Senior citizen schemes allowed
The bank may run term deposit schemes for resident senior citizens at higher fixed rates.
11. Not in a family name
The senior citizen rate is not available on a deposit standing in the name of a Hindu undivided family.
12. Retired staff can get both
A retired staff member who is a senior citizen may get the senior citizen rate on top of the staff rate.
13. Unclaimed on maturity
Money left after a term deposit matures earns the savings rate or the booked rate, whichever is lower.
14. Floating rates need a benchmark
A floating rate term deposit must follow a market benchmark anyone can observe.
15. No penalty on clean split
Splitting a dead depositor's deposit among claimants draws no penalty if the period and the total do not change.
Do it
16. Credit savings interest quarterly
Savings interest must be credited every quarter or more often.
17. Frozen accounts still get credited
A savings account frozen by the authorities must still be credited on the usual cycle.
18. A board policy for penalties
The board must approve the policy on premature withdrawal penalties, including partial ones.
19. Tell the depositor the penalty
The penalty must be explained when the deposit is taken. If it was not, no penalty may be charged.
Chapter IV. Rupee Deposits of Non-Residents
1. Non-resident rupee deposits
Only a bank authorised under the foreign exchange law may take these deposits.
2. No lien on NRE savings
The bank may not mark any lien, direct or indirect, on an NRE savings deposit.
3. Resident claimant, domestic rate
Where the claimant of a dead depositor's NRE deposit lives in India, the deposit becomes a domestic one on maturity.
Chapter V. Foreign Currency Deposits
1. A 360 day year
Interest on a foreign currency deposit is worked out on a year of three hundred and sixty days.
2. Paid every 180 days
Interest on a foreign currency deposit is paid every one hundred and eighty days, then for the days left.
3. Nothing before the foreign floor
Break a foreign currency deposit before its minimum period and no interest is paid.
Chapter VI. Prohibitions and Exemptions
1. No commission for deposits
The bank may pay no fee, commission or brokerage for bringing in deposits, apart from the named exceptions.
2. No prizes for deposits
No prize, lottery or free trip may be used to bring in deposits.
Chapter VII. Repeal and Other Provisions
1. The old instructions are gone
Every earlier instruction to local area banks on deposit rates stands repealed.
How this rule has changed
The points above are the rule as it stands today, after every change listed here.
Issued on Nov 28, 2025. This is the date RBI put the rule out.
Changed on Jun 17, 2026.
- When directions start. These amendment directions apply from the date they are issued.
- NRE NRO rupee rates. Banks must not give higher NRE or NRO rupee term deposit rates than on similar domestic rupee term deposits.
- No NRO to NRE shift. If money is moved from NRO to NRE, it cannot get the temporary NRE rate exemption.
Changed on Jul 30, 2026.
- start date. These new amendment rules apply from October 01, 2026.
- follow disclosed rates. Pay interest on all deposits only as per the interest rate schedule shown in advance on the bank website.
Changed on Aug 25, 2026.
- End date revised. The temporary rate relax time now ends on August 31, 2026, not September 30, 2026.
- Effective immediately. These amendment rules start working at once, from the date of issue.
- Change in para 26(4). In paragraph 26(4)(1), the end date is now August 31, 2026 instead of September 30, 2026.
- Change in para 31(7). In paragraph 31(7)(2), the end date is now August 31, 2026 instead of September 30, 2026.
The same subject for other kinds of institution
The same subject for other kinds of institution.
RBI deposit interest rate rules for rural co-operative banks
RBI deposit interest rate rules for urban co-operative banks
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RBI customer service and fair conduct rules for local area banks 2025
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