RBI Raises Premature Withdrawal Limit for Term Deposits to Rs 1 Crore

RBI Raises Premature Withdrawal Limit for Term Deposits to Rs 1 Crore

VoM News Desk | October 27, 2023 | 09:01 AM IST | Breaking News | Follow on Google News

RBI Raises Premature Withdrawal Limit for Term Deposits to Rs 1 Crore

RBI Raises Premature Withdrawal Limit for Term Deposits to Rs 1 Crore

The Reserve Bank of India (RBI) has announced that banks are now required to offer premature withdrawal facilities on all term deposits of up to Rs 1 crore, marking a significant increase from the previous limit of Rs 15 lakh.

New Regulations for Term Deposits

Previously, banks were allowed to offer domestic term deposits without the option for premature withdrawal, as long as all term deposits accepted from individuals for an amount of Rs 15 lakh and below provided this facility. In a recent circular, the RBI has decided to raise the minimum amount for offering non-callable term deposits from Rs 15 lakh to Rs 1 crore. This means that all domestic term deposits accepted from individuals for amounts of Rs 1 crore and below must now include the option for premature withdrawal.

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Differential Interest Rates on Term Deposits

Additionally, banks have been permitted to offer differential interest rates on term deposits based on non-callability (non-availability of a premature withdrawal option), tenor, and size of the deposits. Differential interest rates are typically offered on bulk deposits. The RBI’s latest instructions also apply to Non-Resident (External) Rupee (NRE) Deposits and Ordinary Non-Resident (NRO) Deposits. Banks have the flexibility to offer NRE/NRO term deposits without the premature withdrawal option, provided that all NRE/NRO term deposits accepted from individuals for amounts of Rs 1 crore and below include this facility.

Applicability and Immediate Effect

These instructions apply to all commercial banks and cooperative banks and have come into effect immediately. In another circular, the RBI has raised the ‘bulk deposit’ limit for Regional Rural Banks (RRBs) to Rs 1 crore and above, up from the previous limit of Rs 15 lakh and above. In the context of commercial banks and small savings banks, deposits of Rs 2 crore and above are classified as ‘bulk deposits.’

These changes in regulations aim to provide greater flexibility and options for individuals and banks regarding term deposits, offering enhanced access to their funds when needed.

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