RBI Circular No: UBD. CO.BPD. (PCB) MC.No. 11 /12.05.001/2011-2012 (01-Jul-11) Master Circular Interest Rates on Rupee Deposits - Primary (Urban) Co-operative Banks
Chief Executive Officers of
All Primary (Urban) Co-operative Banks
Dear Sir,
Please refer to our Master Circular UBD.BPD.MC.No.11/ 13.01.00/2010-11 dated July 1, 2010 on the captioned subject (available at RBI website www.rbi.org.in). The enclosed Master Circular consolidates and updates all the instructions/guidelines on the subject issued up to June 30, 2011 and mentioned in the Appendix.
Yours faithfully,
Uma Shankar
Chief General Manager
Master Circular
Interest Rates on Rupee Deposits
| Contents | |
| 1 | Introduction |
| 2 | Definitions |
| 3 | Rate of interest payable on Current Accounts |
| 4 | Rate of Interest Payable on Savings Deposits |
| 5 | Interest Payable on Term Deposits |
| 6 | Additional Interest Payable |
| 7 | Payment of Interest on Term Deposit Maturing on Sunday/ Holiday/ Non-Business Working Day |
| 8 | Premature withdrawal of Term Deposit |
| 9 | Conversion of a Term Deposit, a Deposit in the form of Daily Deposit, or Recurring Deposit for Reinvestment in Term Deposit |
| 10 | Unclaimed Deposits and Inoperative/ Dormant Accounts |
| 11 | Interest Payable on a Deposit Account of Deceased Depositor |
| 12 | Rounding off of transactions |
| 13 | Margin on Advances against Term Deposits |
| 14 | Addition or Deletion of the Name (s) or Split into Joint Account Holders |
| 15 | Transfer/Split up of the Deposit on the Death of an Account Holder |
| 16 | Payment of interest on accounts frozen |
| 17 | Exemptions |
| 18 | Prohibitions |
| Annex 1 | Rate of Interest on Deposits (Domestic and NRO Deposits) |
| Annex 2 | Rate of Interest on Deposits (NRE Deposits) |
| Appendix | List of Circulars consolidated in the Master Circular |
Master Circular
Interest Rates on Rupee Deposits
1. INTRODUCTION
In exercise of the powers conferred by Sections 21 and 35A read with Section 56 of the Banking Regulation Act, 1949, the Reserve Bank of India, being satisfied that it is necessary and expedient in the public interest so to do, has issued directives that no primary (urban) cooperative bank shall pay interest on rupee deposits of money accepted by it or renewed by it, except in accordance with rates as specified in the Annex 1 & 2, subject to the conditions specified in the paragraphs below.
2. DEFINITIONS
(i) "Demand Liabilities" and "Time Liabilities" shall have the same meaning as defined in Section 18 read with Section 56 of the Banking Regulation Act, 1949;
(ii) "Demand Deposit" shall mean a deposit received by the bank which is withdrawable on demand;
(iii) "Saving Deposit" shall mean a form of demand deposit which is a deposit account whether designated as "Saving Account", "Saving Bank Account", "Saving Deposit Account" or other account by whatever name called, which is subject to the restrictions as to the number of withdrawals as also the amount of withdrawals permitted by the bank during any specified period;
(iv) "Term Deposit" shall mean a deposit received by the bank for a fixed period and which is withdrawable only after the expiry of the said fixed period and shall also include deposits such as Recurring/Cumulative/ Annuity/Reinvestment deposits, Cash Certificates, and so on;
(v) "Notice Deposit" shall mean term deposit for specific period but withdrawable on giving at least one complete banking day's notice;
(vi) "Current Account" shall mean a form of demand deposit wherefrom withdrawals are allowed any number of times depending upon the balance in the account or upto a particular agreed amount and shall also be deemed to include other deposit accounts which are neither Savings Deposit nor Term Deposit;
(vii) "Budgetary Allocation" shall mean the allocation of funds by the Government made through the budget, wherein all the Government''s expenditure is reflected. Any institution, irrespective of the fact whether it is a Government Department, Semi-Government or Quasi-Government Body, which receives grants, loans or subsidies from the Government is said to depend on budgetary allocation. Government grants to institutions are also in the nature of budgetary allocation. Government's subscription to the share capital of these institutions also forms part of the budgetary allocation. Local bodies like Municipal Corporations, Zilla Parishads, Taluka Panchayats and Gram Panchayats are given grants in the nature of 'compensation and assignments', which also form part of budgetary allocation, although taxes collected by these bodies are not covered under the definition and scope of budgetary allocation of Central and State Governments;
(viii) "a member of the bank''s staff" means a person employed on a regular basis, whether full-time or part-time, and includes a person recruited on probation or employed on a contract of a specified duration or on deputation and an employee taken over in pursuance of any scheme of amalgamation, but does not include a person employed on casual basis;
(ix) "a retired member of the bank's staff" means an employee retiring whether on superannuation or otherwise, but does not include an employee retired compulsorily or in consequence of disciplinary action;
(x) "family" in the context of the members of staff means and includes the spouse of the member/retired member of the bank's staff and the children, parents, brothers and sisters of the member/retired member of the bank's staff who are dependent on such member/retired member, but shall not include legally separated spouse;
(xi) "political party" means an association or body of individual citizens of India, which is, or is deemed to be registered with the Election Commission of India as a political party under the Election Symbols (Reservation and Allotment) Order, 1968 as in force for the time being.
Note: Non-Resident Ordinary(Rupee) [NRO]/Non-Resident (External) [NRE] deposits may be accepted only by such banks as have been specifically authorised by Reserve Bank of India in this regard.
3. RATE OF INTEREST PAYABLE ON CURRENT ACCOUNTS
Primary (urban) co-operative banks may, at their discretion, pay interest at a rate not exceeding half per cent per annum on current accounts. As the discretionary provisions generally lead to increase in cost of such deposits, banks are encouraged not to pay interest on current accounts. Interest on current account balances, wherever paid, shall be calculated on a daily product basis and paid on quarterly or longer rests.
4. RATE OF INTEREST PAYABLE ON SAVINGS DEPOSITS
4.1 Banks should pay interest on domestic & NRE savings deposits at the rates specified in the Annex 1 & 2 to this Circular.
4.2 Interest on balances in savings bank accounts should be calculated on a daily product basis with effect from April 01, 2010.
4.3 Such interest should be paid at quarterly or longer rests.
4.4 Interest on savings bank accounts should be credited on regular basis whether the account is operative or not. With regard to the savings bank accounts frozen by the enforcement authorities, banks may continue to credit the interest to the account on a regular basis.
5. INTEREST PAYABLE ON TERM DEPOSITS
5 (A) INTEREST RATES ON TERM DEPOSITS OF NOT LESS THAN 15 DAYS (7 DAYS IN THE CASE OF A TERM DEPOSIT OF RS.15 LAKH & ABOVE AND 1 YEAR IN CASE OF NR DEPOSIT)
Banks should pay interest at the rates specified in Annex 1 & 2 of this Circular. Banks are free to offer floating rate of interest at their discretion, clearly linked to an anchor rate for domestic term deposits and with an upper cap as indicated in Annex 2 of this Master Circular for NRE deposits. Prior approval of the Board of Directors should be obtained for fixing interest rates of various maturities.
5.1 Banks are free to fix interest rates on domestic term deposits.
5.2 The banks may, effective from November 1, 2004, at their discretion, reduce the minimum tenor of domestic/NRO term deposits even below Rs 15 lakh from 15 days to 7 days.
5.3 The banks are required to offer uniform rates on deposits below Rs.15 lakh for the same maturity.
5.4 In case of deposits of Rs 15 lakh and above banks may discriminate in the matter of rate of interest between one deposit and another, accepted on the same date and for the same maturity, on the basis of the size of deposit.
5.5 Banks are required to disclose in advance the schedule of interest rates payable on deposits including deposits on which differential rate of interest will be paid by the banks. Interest rates paid by a bank should be as per the schedule and the same shall not be subject to negotiation between the bank and the depositor for domestic deposits.
5.6 Banks are required to review their interest rate structure on domestic term deposits of different maturities and take appropriate action to make them comparable with the rates offered by the commercial banks.
(B) METHOD OF CALCULATION OF INTEREST ON TERM DEPOSITS
Indian Banks'' Association (IBA) code for banking practice is issued by IBA for uniform adoption by the Member Banks. Code is intended to promote good banking practices by setting out minimum standards which member banks will follow in their dealings with customers. IBA, for the purpose of calculation of interest on domestic term deposit, have prescribed that on deposits repayable in less than three months or where the terminal quarter is incomplete, interest should be paid proportionately for the actual number of days reckoning the year at 365 days. It has been reported to us that some of the banks are adopting the model of reckoning the year at 366 days/ 365 days in Leap Year and in other years respectively. While banks are free to adopt their methodology, they should provide information to their depositors about the manner of calculation of interest appropriately while accepting the...
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