The Reserve Bank of India (RBI) has changed a rule on bank fixed deposits (FDs) regarding their premature withdrawals. Currently, banks offer premature withdrawal facility on FDs up to Rs 15 lakh. Now, the central bank has increased this amount to Rs 1 crore, with immediate effect.
Till now, banks were allowed to offer domestic term deposits (TDs) or fixed deposits (FDs) without premature withdrawal option, provided that all TDs accepted from individuals for an amount of Rs 15 lakh and below shall have a premature withdrawal facility.
Further, the banks have also been permitted to offer differential rates on interest on TDs based on the non-callability of deposits (i.e., non-availability of premature withdrawal option) in addition to tenure and size of deposits.
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“On a review, it has been decided that the minimum amount for offering non-callable TDs may be increased from rupees fifteen lakh to rupees one crore i.e., all domestic term deposits accepted from individuals for amount of rupees one crore and below shall have premature-withdrawal-facility,” the RBI said in a circular dated October 26, 2023.
It said these instructions shall also be applicable for non-resident (external) rupee (NRE) deposits and ordinary non-resident (NRO) deposits.
This circular is applicable to all commercial banks and co-operative banks.
Banks offer two types of fixed deposits — callable and non-callable. In callable FDs, premature withdrawal is allowed; while in non-callable FDs, it is not permitted.
“Banks shall have the freedom to offer NRE / NRO term deposits without premature withdrawal option, provided that all NRE / NRO term deposits accepted from individuals (held singly or jointly) for amount of rupees one crore and below shall have premature-withdrawal-facility,” it said.
Bank FDs are offering attractive interest rates now after continuous rate hikes by the RBI since May 2022. They may raise it further after RBI Governor Shaktikanta Das earlier this month said that there is a scope for further increase in deposit and loan rates as the transmission of monetary policy has not been fully achieved.
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Currently, ICICI Bank is offering up to 7.60 per cent interest rates on FD, depending upon deposit tenure and depositor’s age. PNB is offering FD rates up to 7.75 per cent annually and SBI is giving up to 7.50 per cent a year. HDFC Bank is offering up to 7.75 per cent interest rates.
