RBI reviews instructions relating to interest on overdue domestic deposits - (02 Jul 2021)

Banking

Reserve Bank of India (RBI) has issued the review of instructions on Interest on overdue domestic deposits. RBI’s decision to allow banks to offer the lower of either the savings deposit rate or fixed deposit rate on matured Fixed Deposits is with aim to discourage businesses from using a bank for treasury management. RBI had issued master directions in exercise of powers conferred under Sections 21 and 35 A of the Banking Regulation Act, 1949. The provisions of the Directions are applicable to every Scheduled Commercial Bank {including Regional Rural Banks (RRBs)}, Small Finance Banks, Payment Banks and Local Area Banks.

The RBI has directed Banks to refer to directions on Interest Rate on Deposits and Co-operative Banks- Interest Rate on Deposits, in terms of which if a Term Deposit matures and proceeds are unpaid, the amount left unclaimed with the bank shall attract a rate of interest as applicable to savings deposits. The rate of interest to be paid on renewal of overdue term deposits shall be subject to the stipulation contained in Section 4 of Master Directions.

As per Section 9B of Master direction dated 3rd March, 2016, if a Term Deposit matures and proceeds are unpaid, the amount left unclaimed with the bank shall attract rate of interest as applicable to savings deposits. Now with the amendment of Section 9B, if a Term Deposit (TD) matures and proceeds are unpaid, the amount left unclaimed with the bank shall attract rate of interest as applicable to savings account or the contracted rate of interest on the matured TD, whichever is lower.

Tags : INTEREST DEPOSIT INSTRUCTION