Banks can pay interest at shorter intervals

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

November 30, 2013 10:44 pm | Updated 10:49 pm IST - CHENNAI

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.

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 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.

0 / 0
Sign in to unlock member-only benefits!
  • Access 10 free stories every month
  • Save stories to read later
  • Access to comment on every story
  • Sign-up/manage your newsletter subscriptions with a single click
  • Get notified by email for early access to discounts & offers on our products
Sign in

Comments

Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.

We have migrated to a new commenting platform. If you are already a registered user of The Hindu and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.