The Reserve Bank of India has changed the interest rate guidelines for late domestic fixed deposits in banks and co-operative banks. Fixed Deposit (FD) account holders in all banks and cooperative banks would get the lower of the savings deposit rate or the contracted FD interest rate on overdue deposits, according to the RBI order.
“Following a review of these instructions, it has been decided that if a Term Deposit (TD) matures with unpaid proceeds, the amount left unclaimed with the bank will earn the rate of interest applicable to savings accounts or the contracted rate of interest on the matured TD, whichever is lower,” the RBI said.
What has changed since then?
“If a Term Deposit matures and proceeds are unpaid, the amount left unclaimed with the bank shall attract rate of interest as applicable to savings accounts,” according to the prior rule for late deposits in banks. The wording has now been altered to:
Explained are the ramifications of the new rule.
Customers of all banks, including State Bank of India (SBI), HDFC Bank, ICICI Bank, and co-operative banks, will be affected by the new rule. The latest RBI decision on overdue fixed deposits would have little impact because banks already offer low interest rates on both FDs and savings account deposits. Savings deposits were already being used by banks.