What changed
RBI removed the fixed savings bank deposit interest rate, allowing co-operative banks to determine their own rates for resident Indian depositors. A uniform rate is mandatory for deposits up to Rs.1 lakh, while differential rates are permitted for amounts exceeding Rs.1 lakh, provided no discrimination occurs on similar deposits accepted on the same date.
What it means for you
Co-operative banks now have pricing flexibility to compete for savings deposits, potentially offering higher rates to attract larger balances above Rs.1 lakh. However, the uniform rate requirement for smaller deposits protects retail savers. Banks must ensure non-discriminatory practices for similar deposits to avoid regulatory scrutiny.
What you must do
- Review and set your savings bank deposit interest rates for resident Indian accounts, ensuring uniform rate for deposits up to Rs.1 lakh.
- Implement systems to offer differential rates for deposits over Rs.1 lakh without discriminating between similar deposits accepted on the same date.
- Communicate the revised rate structure to all branches and update relevant product documentation and systems.
- Acknowledge receipt of this circular to your respective Regional Office.
Who it affects
State Co-operative Banks, Central Co-operative Banks, All co-operative bank depositors (resident Indians)
Can we offer different savings rates for deposits above Rs.1 lakh?
Yes, you may offer differential rates for savings deposits exceeding Rs.1 lakh, but you must not discriminate between deposits of similar amounts accepted on the same date at any of your offices.
Does this deregulation apply to NRI savings accounts?
No, these guidelines apply only to savings bank deposits of resident Indians. NRI accounts are not covered under this circular.
What is the effective date of these guidelines?
The guidelines are effective from October 25, 2011, as announced in the Second Quarter Review of Monetary Policy.