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RBI Hikes Limit of Non-Callable FDs: Premature Withdrawal Allowed on Bank FDs Up to Rs 1 Crore
RBI Increases Minimum Amount for Non-Callable Term Deposits to Rs 1 Crore
RBI Increases Minimum Amount for Non-Callable Term Deposits to Rs 1 Crore
The Reserve Bank of India (RBI) has raised the minimum amount for offering non-callable term deposits to Rs 1 crore from the existing Rs 15 lakh. This change allows customers to prematurely withdraw money from their fixed deposits (FDs) of up to Rs 1 crore. The new rule is applicable to all commercial banks and co-operative banks with immediate effect.
Key Takeaways:
1. Customers can now prematurely withdraw funds from their fixed deposits of up to Rs 1 crore.
2. Non-callable fixed deposits, which previously offered no premature withdrawal option, will now allow for early withdrawal up to the specified limit.
3. Banks usually offer slightly higher interest rates on non-callable FDs compared to regular fixed deposits.
4. The new rule applies to all commercial banks and co-operative banks, as well as Non-Resident (External) Rupee (NRE) Deposit and Ordinary Non-Resident (NRO) Deposits.
5. The bulk deposit limit for regional rural banks has been increased to Rs 1 crore from Rs 15 lakh.
The recent decision by the Reserve Bank of India (RBI) to increase the minimum amount for offering non-callable term deposits to Rs 1 crore from the existing Rs 15 lakh has significant implications for customers and banks. Here’s a detailed breakdown of the key points:
Changes in Non-Callable Fixed Deposits (FDs):
The RBI’s decision allows customers to prematurely withdraw money from their fixed deposits (FDs) of up to Rs 1 crore. This change in the non-callable FD limit is applicable to all commercial banks and co-operative banks with immediate effect.
Non-callable fixed deposits refer to a category of term deposits that offer no premature withdrawal option before the completion of the tenure. Previously, these deposits locked in the invested amount for the entire tenure, with no option for premature withdrawal.
Implications for Customers:
Customers now have the flexibility to prematurely withdraw funds from their fixed deposits of up to Rs 1 crore, providing them with greater liquidity and control over their investments.
Banks usually offer slightly higher interest rates on non-callable FDs compared to regular fixed deposits, as the funds are locked in for a specific period. For instance, State Bank of India (SBI) offers higher interest rates on non-callable FDs compared to regular FDs.
Impact on Banks:
The change in the non-callable FD limit may influence banks’ interest rate offerings and deposit strategies. Banks typically offer higher interest rates on non-callable FDs to compensate for the lack of premature withdrawal options.
Regulatory Changes:
The RBI’s notification released on October 26, 2023, specifies that banks have been permitted to offer domestic term deposits without a premature withdrawal option, provided that all term deposits accepted from individuals for an amount of Rs 15 lakh and below shall have premature withdrawal facility.
The central bank’s decision also extends to Non-Resident (External) Rupee (NRE) Deposit and Ordinary Non-Resident (NRO) Deposits, ensuring that the new rules apply to a broader range of deposit categories.
Bulk Deposit Limit for Regional Rural Banks:
In addition to the changes in non-callable FDs, the RBI has also enhanced the bulk deposit limit for regional rural banks to Rs 1 crore from Rs 15 lakh. This adjustment expands the definition of “bulk deposit” for regional rural banks to single rupee term deposits of Rs 1 crore and above.
The RBI’s decision to increase the limit for non-callable term deposits and bulk deposits for regional rural banks reflects a significant shift in deposit regulations, providing customers with greater flexibility and influencing banks’ interest rate offerings.
FAQ:
Q1: What is the impact of the RBI’s decision on customers?
A1: Customers now have the flexibility to prematurely withdraw funds from their fixed deposits of up to Rs 1 crore, providing them with greater liquidity and control over their investments.
Q2: How will the new rule affect banks’ interest rate offerings?
A2: Banks usually offer slightly higher interest rates on non-callable FDs compared to regular fixed deposits, as the funds are locked in for a specific period. The change in the non-callable FD limit may influence banks’ interest rate offerings and deposit strategies.
Q3: Does the new rule apply to Non-Resident (External) Rupee (NRE) Deposit and Ordinary Non-Resident (NRO) Deposits?
A3: Yes, the new rule extends to these deposit categories, ensuring that the increased limit for non-callable term deposits applies to a broader range of deposit types.
