The Reserve Bank of India (RBI) has introduced significant changes to the rules governing interest rates on deposits and the disclosure of related information. These new regulations will come into effect on October 1. While these changes are unlikely to significantly alter the returns on retail fixed deposits (FDs), they will bring greater transparency to FD pricing for customers and offer banks more flexibility in setting rates for bulk deposits (large-value deposits).

Which banks will these rules apply to?
The new rules regarding bank deposits will apply to commercial banks, small finance banks, regional rural banks (RRBs), local area banks, payments banks, and urban cooperative banks.

What will change for retail FD investors?
The most significant change for retail depositors is the increased transparency and uniformity in the offering of deposit rates. Under the new rules, banks must offer the same interest rate across all branches for deposits of the same amount accepted on the same day.
In other words, customers opening similar deposits at different branches of the same bank cannot be offered different rates; instead, they will be offered a uniform interest rate.

Rules have been tightened
According to the statement issued by the RBI, interest rates offered on all types of deposits—including bulk deposits—must be uniform across all branches and for all customers. There must be no discrimination regarding interest rates for similar deposits accepted on the same date. The central bank has also tightened disclosure norms.

Banks must publish a list of deposit interest rates on their websites in advance.
The interest paid on deposits must strictly adhere to the published list.
For bulk deposits, banks are required to upload applicable interest rates to their websites by 10:00 AM on every working day, with a grace period extending until 10:10 AM.

What will change for bulk deposits? The more significant policy change concerns banks rather than retail depositors. The RBI has permitted banks to offer differential interest rates on bulk deposits, taking into account the varying run-off rates applicable under the Liquidity Coverage Ratio (LCR) framework.

This same flexibility has also been extended to rupee deposits held by non-residents (NRIs). According to the RBI, the objective is to grant banks greater freedom in pricing rupee bulk deposits while ensuring increased transparency and uniformity in the disclosure of deposit interest rates.

Will FD rates change from October 1?
Not necessarily. The RBI's new regulations do not mandate any hike or cut in fixed deposit interest rates. Banks will continue to determine their deposit rates based on factors such as liquidity requirements, cost of funding, and market conditions.

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