The Reserve Bank of India (RBI) has allowed banks to offer differential interest rates based on whether the term deposits are with or without the premature withdrawal facility.
In the sixth bi-monthly monetary policy review held in February, the central bank had decided to introduce the feature of early withdrawal in a term deposit as a distinguishing feature for offering differential rates of interest.
RBI said that all term deposits of individuals held singly or jointly of Rs 15 lakh and below should have premature withdrawal facility. Besides that banks have been allowed to offer deposits without the option of premature withdrawal as well.
The regulator, however, said that banks which offer such term deposits should ensure that the customers are given the option to choose between term deposits with or without premature withdrawal facility.
Banks have been asked to disclose in advance the schedule of interest rates payable on deposits. They should also have a board approved policy with regard to interest rates on deposits including deposits with differential rates of interest and ensure that the interest rates offered are reasonable and available for supervisory review/scrutiny as and when required, the RBI said.
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