In terms of extant RBI instructions, banks have been permitted to offer domestic term deposits (TDs) without a premature withdrawal option, provided that all TDs accepted from individuals for an amount of Rupees fifteen lakh and below shall have premature-withdrawal-facility. Moreover, commercial and cooperative banks were permitted to offer differential rates on interest on Term Deposits based on the non-callability of deposits (i.e., non-availability of premature withdrawal option) in addition to tenor and size of deposits.
Today, on a review, RBI issued a circular notifying that (i) 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 the amount of Rupees one crore, and below shall have premature-withdrawal-facility and (ii) these instructions shall also be applicable for Non-Resident (External) Rupee (NRE) Deposit / Ordinary Non-Resident (NRO) Deposits.
The above instructions of the banking regulator shall come into force with immediate effect.
These changes are applicable to both commercial banks and cooperative banks. The relevant sections of the Master Direction have been amended accordingly.
