Now banks can issue FDs exceeding 15 lakhs without option of pre-mature withdrawal at differential interest rates

banks were allowed to offer differential rates of interest on term deposits on
the basis of tenor of deposits less than Rs. 1 crore and on the basis of
quantum and tenor of term deposits of Rs. 1 crore and above. In the sixth
bi-monthly monetary policy review held on February 3,2015 the RBI had decided
to introduce the feature of early withdrawal in case of term deposits as a
distinguishing feature for offering differential rates of interest.

Accordingly, RBI has given discretion to
banks to offer differential interest rates based on whether the term deposit
are with or without the premature withdrawal facility, subject to riders that:
I. Bank shall provide premature withdrawal
facility for Fixed deposits made by Individuals (whether held jointly or
singly) for an amount uptoRs. 15 lakh;
II. For
fixed deposits above Rs. 15 Lakh, banks can offer deposits without the option
of premature withdrawal as well (However, it would be obligatory on part of
such banks to provide an option to customers to choose between term deposits
either with or without premature withdrawal facility);
III. Banks
should disclose in advance the schedule of interest rates payable on deposits;
IV. The banks should have a Board approved
policy relating to interest rates on deposits, including deposits with
differential rates of interest and ensure that the interest rates offered are
reasonable, consistent, transparent and available for supervisory
review/scrutiny as and when required.

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