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Updated: November 30, 2013 22:49 IST

Banks can pay interest at shorter intervals

Special Correspondent
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Since banks are functioning on core banking platform, the RBI has decided to let banks decide on the periodicity of interest payment on rupee savings and term deposits.
AP
Since banks are functioning on core banking platform, the RBI has decided to let banks decide on the periodicity of interest payment on rupee savings and term deposits.

RBI move may set off intense competition among banks to woo deposits

The Reserve Bank of India (RBI) has allowed banks to pay interest on rupee savings and term deposits at intervals shorter than quarterly intervals.

Since banks are functioning on core banking platform, the RBI has decided to let banks decide on the periodicity of interest payment on rupee savings and term deposits.

The RBI move, it is suggested, may set off intense competition among banks to woo deposits.

A circular dated November 4, 2000 advised banks to pay interest on savings and term deposits at quarterly or longer rests. “As banks are functioning on core banking platform, it has been decided to review the above instructions. Accordingly, banks will now have the option to pay interest on rupee savings and term deposits at intervals shorter than quarterly intervals,’’ the RBI said.

Freedom extended

The Reserve Bank has also extended the period for banks to exercise freedom to offer interest rates on incremental NRE (non-resident external) deposits with maturity of three years and above without any ceiling in order to pass on the benefit of exemption provided on such deposits from CRR (cash reserve ratio) and SLR (statutory liquidity ratio) requirements.

The RBI has now said that the banks could have this freedom till January 31, 2014. Initially, banks have been given this freedom up to November 30.

More In: Industry | Business

Most of the banks are giving half yearly intervals with daily
calculation. This would defiantly a good move as few paise would add to
the savings in the accounts

from:  Satyam Repala
Posted on: Dec 1, 2013 at 04:27 IST
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