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

Earlier, 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; and
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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