Offer of additional Interest on domestic bank deposits

(Depositors, like Senior Citizen Karta of HUF, NRE/NRO account of own staff of the bank, employees who are retired on compulsory retirement from the bank or in consequence of disciplinary action, Casual employees of the bank, employees’ federations etc. are not eligible for additional interest meant for staff. However, senior citizens, spouse of deceased staff/deceased retired staff, persons taken on deputation from other organizations or staff gone on deputation are eligible for additional interest offered by Banks’ management. This article distinguishes who are entitled and who are not for additional interest.)

The ‘Boards’ of scheduled commercial banks in India  have the  freedom to formulate term deposit schemes for their staff, retired staff and the spouse of a deceased staff member or a deceased retired staff member in the gratification of appropriate, fair and caring treatment to their workforce. As a part of social responsibility, banks under their discretion offer the benefit of additional interest rates on their term deposits to the senior citizens as compared to normal deposits rates. These schemes of attracting additional interest to deposits which are formulated by the banks are bound by the regulatory guidelines of RBI. The frequently asked questions on the regulatory framework of RBI on the basis of which additional interests are offered are answered hereunder.

Q: What is the maximum additional interest a bank can offer to Senior Citizens?

A: Banks at their discretion may offer additional interest of maximum one per cent per annum, to the senior citizens (of age 60 years and above) over and above the rate of interest, as admissible to general public. The decision to pay or not to pay additional interest to senior citizens, over and above the interest admissible to the general public, is purely under the discretion of the ‘Boards’ of the bank. The Board can also decide the quantum of additional interest (viz. plus 0.25% p.a., or plus 0.50% p.a. or plus 1.00% etc.) or the deposit amount up to certain limit (say up to term deposits of Rs.20 lakh) or deposits of any size for which additional interest is admissible.

Q: If the Karta of HUF is a senior citizen, whether he is eligible for higher rate of interest admissible for Senior Citizen?

A: In HUF accounts, Karta is not the owner of the deposit in his individual capacity.  Therefore, deposit standing in the name of an HUF, where Karta of the HUF is a senior citizen cannot be offered  the higher rate of interest.

Q: What is the maximum additional interest a bank can offer to its staff members, retired staff members?

A: Banks at their discretion may offer additional interest of maximum one per cent per annum, to their staff, retired staff, and spouse of deceased staff/deceased retired staff over and above the rate of interest mentioned in the schedule of interest rates on savings or  the domestic term deposits, as compared to normal deposits admissible to general public.

Q:  Who are all considered as “a member of the bank’s staff” and retired staff for the benefits of additional interest?

A: (a) person employed on a regular basis, whether full-time or part-time including a person recruited on probation or employed on a contract of a specified duration/ on deputation and  employees being part of the staff  in pursuance of any scheme of amalgamation are treated as bank staff.

(b) “A retired staff means an employee retired on superannuation or otherwise as provided in the bank’s Service/Staff Regulations, but does not include an employee retired under the compulsory  retirement or in consequence of disciplinary action.

Q: Whether NRE/NRO account of own staff is eligible for additional interest?

Reserve Bank has withdrawn the benefit of the additional interest rate on any type of deposits of non-residents with effect from July 18, 2012. For that reason, the discretion given to banks to allow the benefit of the additional interest rate of one percent per annum as available to bank’s own staff on deposits under NRE/ NRO accounts stands withdrawn.

Q: Whether a person employed in the bank on the casual basis is treated as ‘Staff’?

A: No. a person employed in the bank on the casual basis is NOT treated as ‘Staff.

Q: Whether the deposits of Chairman, Chairman & Managing Director, Executive Director or such other Executives appointed for a fixed tenure are eligible for additional interest?

A:  The Board at discretion may allow additional interest for deposits of Chairman, Chairman & Managing Director, Executive Director or such other Executives appointed for a fixed tenure.

Q: Whether the retired staff members of a Scheduled Commercial Bank who are senior citizens are eligible for the benefits of additional interest rates as admissible to senior citizens over and above the additional interest payable to them by virtue of their being retired staff?

A: All scheduled commercial Banks at their discretion may offer additional interest rates to their retired staff of 60 years of age and above, as admissible to other senior citizens. The above benefit will be over and above the additional interest payable to them by virtue of their being retired staff of the bank.

Q: Whether the joint account of a staff member/retired staff member is eligible for additional interest rate over and above the rate of interest admissible to the general public?

All scheduled commercial banks may, at their discretion, allow additional interest at a rate not exceeding one per cent per annum to staff member or retired staff member either singly or jointly with any member or members of his/her family, over and above the rate of interest in respect of a savings or a term deposit account held by them. However concerned staff member or retired staff member should give a declaration form stating that the monies deposited or which may, from time to time, be deposited into such accounts.

Q: Whether an employee of the bank is eligible for additional interest for his deputation period from his parent bank if he/she is on deputation to another organization?

A: In the case of employees on deputation to another organization, the bank from which they are deputed may allow additional interest in respect of the savings or term deposit account opened with it during the period of member’s deputation.

Q: Whether an employee of another organization taken on deputation for a fixed duration or on a contract for fixed duration is eligible for additional interest?

In the case of persons taken on deputation for a fixed duration, or on a contract of a fixed duration, he/she is eligible for  the benefit of additional interest admissible for staff members. The benefit will cease to accrue on the expiry of the term of deputation or contract, as the case may be.

Q: Whether the funds and Association of bank employees are eligible for additional interest as applicable for bank employees?

A: An Association or a fund, in which bank staff is direct members are eligible for additional interest applicable to staff members.

Q: Whether Bank Employees’ Federations are eligible for additional interest as applicable for bank employees?

A:  No. An Employees Union/Association in which the employees of the bank are direct members, such association or union is only eligible for additional interest applicable to staff members.  The Federation of bank employees in which bank employees are not direct members is not eligible for additional interest.