DBOD Dir. BC. 6/13.03.00/2006-07 DT. 01/07/2006
Master Circular on Interest Rates on Rupee Deposits held in Domestic, Ordinary Non-Resident (NRO) and Non-Resident (External) (NRE) AccountsAs you are aware, Reserve Bank of India has issued a Master Circular on Interest Rates on Rupee Deposits held in Domestic, Ordinary Non-Resident (NRO) and Non-Resident (External) (NRE) Accounts vide DBOD No. Dir. BC. 5/13.03.00/ 2005-06 dated July 1, 2005. Certain amendments have also been made thereto from time to time. In order to enable banks to have all existing instructions on the subject at one place, a Master Circular has been prepared by incorporating the instructions issued up to June 30, 2006 and has been placed on the RBI website (http://www.rbi.org.in).
2. It may be noted that the instructions contained in the directives/circulars listed in the Appendix have been incorporated in the Master Circular.
Yours faithfully
(P. Vijaya Bhaskar )
Chief General Manager
Encls: As above
Master Circular on Interest Rates on Rupee Deposits held in Domestic, Ordinary Non-Resident (NRO) and Non-Resident (External) (NRE) AccountsCommercial banks should not pay interest on deposits of money accepted or renewed by them in Domestic, Ordinary Non-Resident (NRO) and Non-Resident (External) Accounts (NRE) except in accordance with the rates as specified in the Annexures I and II hereto, whichever is applicable, and on the terms and conditions specified in the paragraphs below:
1. Definitions
For the purpose of this circular,
(a) “Demand liabilities” and “Time liabilities” means the liabilities as shown in the return submitted by the bank under sub-section (2) of Section 42 of the Reserve Bank of India Act, 1934;
(b) “Demand deposit” means a deposit received by the bank, which is withdrawable on demand;
(c) “Savings deposit” means a form of demand deposit which is a deposit account whether designated as “Savings Account”, “Savings Bank Account”, “Savings Deposit Account” or other account by whatever name called which is subject to the restrictions as to the number of withdrawals as also the amounts of withdrawals permitted by the bank during any specified period;
(d) “Term deposit” means a deposit received by the bank for a fixed period and which is withdrawable only after the expiry of the said fixed period and shall also include deposits such as Recurring/Cumulative/Annuity/Reinvestment deposits, Cash Certificates, and so on;
(e) “Notice deposit” means term deposit for specific period but withdrawable on giving at least one complete banking day’s notice;
(f) “Current Account” means a form of demand deposit wherefrom withdrawals are allowed any number of times depending upon the balance in the account or up to a particular agreed amount and shall also be deemed to include other deposit accounts which are neither Savings Deposit nor Term Deposit;
(g) “Countervailing interest” means any benefit of interest allowed on any account in the nature of current account maintained with the bank by its borrower;
(h) “Budgetary allocation” means the allocation of funds by the Government made through the budget, wherein all the Government’s expenditure is reflected. Any institution, irrespective of the fact that it is a Government Department, Semi-Government or Quasi-Government Body, which receives grants, loans or subsidies from the Government is said to depend on budgetary allocation. Government grants to institutions are also in the nature of the budgetary allocation. Government’s subscription to the share capital of these institutions also forms part of the budgetary allocation. Local bodies like Municipal Corporations, Zilla Parishads, Taluka Panchayats and Gram Panchayats are given grants in the nature of ‘compensation and assignments’, which also form part of budgetary allocation, although taxes collected by these bodies are not covered under the definition and scope of budgetary allocation of Central and State Governments;
(i) “Public Sector Bank” means the State Bank of India constituted under the State Bank of India Act, 1955 or any subsidiary bank as defined in clause (k) of Section 2 of the State Bank of India (Subsidiary Banks) Act, 1959 or any corresponding new bank as defined in clause (b) of Section 2 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 or Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980.
Note: NRO/NRE deposits can be accepted only by banks, which are authorized by Reserve Bank to accept such deposits.
2. Rates of interest payable on Savings deposits and on term deposits of not less than 7 days (1 year in the case of NRE deposits)
(i) Banks should pay interest on savings deposits and term deposits at the rates specified in the Annexures I & II to this circular. On Domestic Term Deposits, a bank may offer floating rate clearly linked to an anchor rate. In order to ensure transparency, banks should not use internal or derived rates while offering floating rate deposit products. Only market- based rupee benchmark rates, which are directly observable and transparent to the customer, should be used by banks for pricing their floating rate deposits. A bank must obtain prior approval of its Board/Asset Liability Management Committee (if powers are delegated by the Board) for fixing interest rates of various maturities.
(ii) Such interest should be paid at quarterly or longer rests.
(iii) In the case of savings deposits, interest should be calculated on the minimum balance to the credit of the deposit account during the period from the 10th to the last day of each calendar month and credited to the account only when it is Re.1/- or more.
(iv) With effect from close of business in India on November 17, 2005, the interest rates on NRE savings deposits should be at the rate applicable to domestic savings deposits instead of the LIBOR/SWAP rate for six months maturity on US dollar deposits.
(v) Interest rates on fresh repatriable NRE deposits for one to three years contracted effective close of business in India on November 17, 2005 should not exceed the LIBOR/SWAP rates for US dollar of corresponding maturity plus 75 basis points. However, with effect from the close of business in India on April 18, 2006, the interest rate on fresh repatriable NRE term deposits of one to three years should not exceed the LIBOR / SWAP rates for US dollar of corresponding maturities plus 100 basis points. The LIBOR/SWAP rates as on the last working day of the preceding month would form the base for fixing ceiling rates for the interest rates that would be offered effective the following month. The interest rates as determined above for three year deposits would also be applicable in case the maturity period exceeds three years. The changes in interest rate would also apply to NRE deposits renewed after their present maturity period.
3. Payment of interest on fixed deposit - Method of calculation of interest
Indian Banks’ Association (IBA) Code for Banking Practice is issued by IBA for uniform adoption by the Member Banks. The Code is intended to promote good banking practices by setting out minimum standards, which Member Banks will follow in their dealings with customers. IBA, for the purpose of calculation of interest on domestic term deposit, has prescribed that on deposits repayable in less than three months or where the terminal quarter is incomplete, interest should be paid proportionately for the actual number of days reckoning the year at 365 days. It has been reported to us that some of the banks are adopting the method of reckoning the year at 366 days / 365 days in a Leap year and in other years respectively. While banks are free to adopt their methodology, they should provide information to their depositors about the manner of calculation of interest appropriately while accepting the deposits and display the same at their branches.
4. Additional interest to Army Group Insurance Directorate (AGID), Naval Group Insurance Fund (NGIF) and Air-Force Group Insurance Society (AFGIS)
A Public Sector Bank is permitted to pay additional interest of 1.28 per cent per annum over and above the normal rate of interest permissible in terms of directives on interest rates on deposits issued by Reserve Bank of India, from time to time, on term deposits for 2 years and above of Army Group Insurance Directorate (AGID), Naval Group Insurance Fund (NGIF) and Air-Force Group Insurance Society (AFGIS) only, provided such deposits are not in any way linked with payment of insurance premia by the bank.
5. Discretion to Regional Rural Banks / Local Area Banks to pay additional interest
Regional Rural Banks/Local Area Banks may, at their discretion, allow additional interest of half percent per annum on savings deposits. These banks are, however, encouraged not to pay any additional interest on saving bank accounts over and above what is payable by commercial banks.
6. Discretion to pay additional interest not exceeding one per cent on deposits of bank’s staff and their exclusive associations
A bank may, at its discretion, allow additional interest at a rate not exceeding one per cent per annum over and above the rate of interest stipulated in the Annexures I & II to this circular subject to following conditions:
(6.1) in respect of a savings or a term deposit account opened in the name of:
(a) a member or a retired member of the bank’s staff, either singly or jointly with any member or members of his/her family; or
(b) the spouse of a deceased member or a deceased retired member of the bank’s staff; and
(c) an Association or a fund, members of which are the members of the bank’s staff;
A bank should obtain a declaration from the depositor concerned, that the monies deposited or which may, from time to time, be deposited into such account belong to the depositor as stated in clauses (a) to (c) above.
(6.2) For the purposes of sub-paragraph (6.1) -
(i) “a member of the bank’s staff” means a person employed on a regular basis, whether full-time or part-time, and includes a person recruited on probation or employed on a contract of a specified duration or on deputation and an employee taken over in pursuance of any scheme of amalgamation, but does not include a person employed on casual basis.
(a) In the case of employees taken on deputation from another bank, the bank from which they are deputed may allow additional interest in respect of the savings or term deposit account opened with it during the same period of deputation.
(b) In the case of persons taken on deputation for a fixed duration, or on a contract of a fixed duration, the benefit will cease to accrue on the expiry of the term of deputation or contract, as the case may be.
(ii) “a retired member of the bank’s staff” means an employee retiring whether on superannuation or otherwise as provided in the bank’s Service/Staff Regulations, but does not include an employee retired compulsorily or in consequence of disciplinary action;
(iii) “family” means and includes the spouse of the member/retired member of the bank’s staff and the children, parents, brothers and sisters of the member/retired member of the bank’s staff, who are dependent on such member/retired member, but does not include legally separated spouse;
(6.3) Payment of additional interest will be subject to the following conditions, namely:
(i) The additional interest will be payable only so long as the person continues to be eligible for the same and in case of his ceasing to be so eligible, till the maturity of a term deposit account;
(ii) In the case of employees taken over pursuant to the scheme of amalgamation, the additional interest will be allowed only if the interest at the contractual rate together with the additional interest does not exceed the rate, which could have been allowed if such employees were originally employed by the bank.
(6.4) Bank Employees’ Federations in which bank employees are not direct members will not be eligible for additional interest.
(6.5) In case of Domestic deposits, it will be in order for banks to give their retired staff, who are senior citizens, the benefit of higher interest rates as admissible to senior citizens (60 years of age or above) over and above the additional interest of not exceeding one per cent payable to them by virtue of their being retired members of the banks' staff.
(6.6) In the case of Non-Resident (External) deposits of staff members, existing or retired, interest rate including any additional interest paid to them by virtue of their being staff members, will not exceed the ceiling stipulated by RBI.
7. Discretion to pay additional interest not exceeding one per cent on deposits of Chairman and Managing Director and Executive Directors of the bank
A bank may, at its discretion, pay additional interest not exceeding one per cent per annum over and above the rate of interest stipulated in the Annexures I & II to this circular on deposits accepted/renewed from Chairman, Chairman & Managing Director, Executive Director or such other Executive appointed for a fixed tenure. However, they will be eligible to get the benefit under paragraph 6 above only during the period of their tenure.
8. Discretion to pay interest on current accounts maintained by Regional Rural Banks with sponsor banks
Banks may pay interest on current account of a Regional Rural Bank sponsored by them. However, the banks are encouraged not to pay interest on the current accounts maintained by RRBs with them.
9. Discretion to pay interest on the minimum credit balance in the composite cash credit account of a farmer
A bank may, at its discretion, pay interest at a rate based on its perception and other relevant factors on the minimum credit balance in the composite cash credit account of a farmer during the period from the 10th to the last day of each calendar month.
10. Deposit Scheme for Senior Citizens
The banks have been permitted to formulate, with the approval of their Boards of Directors, fixed deposit schemes specifically for resident Indian senior citizens offering higher and fixed rates of interest as compared to normal deposits of any size. These schemes should also incorporate simplified procedures for automatic transfer of deposits to nominee of such depositors in the event of death.
11. Premature withdrawal of term deposit
(i) A bank, on request from the depositor, should allow withdrawal of a term deposit before completion of the period of the deposit agreed upon at the time of making the deposit. The bank will have the freedom to determine its own penal interest rate of premature withdrawal of term deposits. The bank willl ensure that the depositors are made aware of the applicable penal rate along with the deposit rate. However, the bank, at its discretion, may disallow premature withdrawal of large deposits held by entities other than individuals and Hindu Undivided Families. Bank should, however, notify such depositors of its policy of disallowing premature withdrawal in advance, i.e., at the time of accepting such deposits.
(ii) In the case of premature withdrawal of NRE term deposits for conversion into Resident Foreign Currency (RFC) Account, the bank should not levy any penalty for premature withdrawal. If such a deposit has not run for a minimum period of 1 year, the bank may, at its discretion, pay interest at a rate not exceeding the rate payable on savings deposits held in RFC accounts, provided the request for such a conversion is made by the NRE account holder immediately on return to India.
(iii) Conversion of NRE deposit into FCNR(B) deposit and vice versa before maturity should be subject to the penal provision relating to premature withdrawal.
(iv) Conversion of NRSR/NRNR deposit into NRO deposit before maturity will be subject to the penal provision relating to premature withdrawal.
(v) In view of the discontinuance of NRNR/NRSR schemes with effect from April 1, 2002, the proceeds of NRNR deposits can be credited to NRE accounts on maturity but not to FCNR(B) accounts, while proceeds of NRSR accounts can be credited on maturity to NRO accounts only. In case of premature withdrawal of NRNR/NRSR deposits, the proceeds should be credited to NRO accounts only.
12. Conversion of a term deposit, a deposit in the form of daily deposit or a recurring deposit for reinvestment in term deposit
A bank, on a request from the depositor, should allow conversion of a term deposit, a deposit in the form of daily deposit or recurring deposit, to enable the depositor to immediately reinvest the amount lying in the aforesaid deposits with the same bank in another term deposit. The bank should pay interest in respect of such a term deposit in the manner indicated in paragraph 11 above without reducing the interest by way of penalty as stated in the said paragraph provided that the deposit remains with the bank after reinvestment for a period longer than the remaining period of the original contract.
13. Renewal of Overdue deposits
All aspects concerning renewal of overdue deposits may be decided by individual banks subject to their Board laying down a transparent policy in this regard and the customers being notified of the terms and conditions of renewal including interest rates, at the time of acceptance of deposit. The policy should be non-discretionary and non-discriminatory.
14. Advance against term deposit - Manner of charging interest
(a) When an advance is granted against a term deposit and the deposit stands in the name of -
(i) the borrower, either singly or jointly;
(ii) one of the partners of a partnership firm and the advance is made to the said firm;
(iii) the proprietor of a proprietary concern and the advance is made to such a concern;
(iv) a ward whose guardian is competent to borrow on behalf of the ward and where the advance is made to the guardian of the ward in such a capacity;
the bank would be free to charge interest rate without reference to its Benchmark Prime Lending Rate (BPLR) including on advances granted against NRE term deposits and repaid in Foreign Currency or Rupees.
If the term deposit against which an advance was granted is withdrawn before completion of the prescribed minimum maturity period, such an advance should not be treated as advance against the term deposit and interest should be charged as prescribed in terms of the Reserve Bank of India’s directive on Interest Rates on Advances issued from time to time.
(b) When an advance is granted against a term deposit which is not in the nature of those at items (i) to (iv) in sub-clause (a) above, a bank would be free to charge interest rate without reference to the Benchmark Prime Lending Rate, provided the advance is up to Rs.2 lakh. However, if the advance exceeds Rs. 2 lakh, the bank should charge interest at the rate prescribed in terms of Reserve Bank of India’s directive relating to Interest Rates on Advances issued from time to time.
A bank, at its discretion, may not apply the rate of interest as stipulated at (a) above in the case of advances up to Rs.3 lakh granted to a member/retired member of the bank’s staff or the spouse of a deceased member/retired member of the bank’s staff against their term deposits specified in paragraph 6 above.
(c) The account holder of NRE savings deposits can withdraw the savings deposits at any time and therefore, banks should not mark any type of lien, direct or indirect, against these deposits. (As regards domestic saving deposits, banks may follow the guidelines issued by IBA / existing practices approved by their Board in this regard.)
15. Margin on advance against term deposit
The decision in regard to margin against term deposit has been left to the discretion of individual banks subject to their Board laying down a transparent policy in this regard.
16. Interest payable on the deposit account of deceased depositor
(a) In the case of a term deposit standing in the name/s of
(i) a deceased individual depositor, or
(ii) two or more joint depositors, where one of the depositor has died,
the criterion for payment of interest on matured deposits in the event of death of the depositor in the above cases has been left to the discretion of individual banks subject to their Board laying down a transparent policy in this regard.
(b) In the case of balances lying in current account standing in the name of a deceased individual depositor/sole proprietorship concern, interest should be paid only from 1st May, 1983, or from the date of death of the depositor, whichever is later, till the date of repayment to the claimant/s at the rate of interest applicable to savings deposit as on the date of payment.
Note: In the case of a NRE deposit, when the claimants are residents, the deposit on maturity should be treated as domestic rupee deposit and interest be paid for the subsequent period at a rate applicable to the domestic deposit of a similar maturity.
17. Notifying RBI regarding change in interest on deposits and also the break-up of deposits according to different interest rate ranges
As per the extant instructions issued in September, 1997, as and when the deposit rate structure and PLR are revised, banks are required to furnish the same to RBI, Department of Banking Operations and Development (DBOD) in the prescribed proforma (Return No. 7 of Manual of Instructions). Since banks are submitting similar information to our Monetary Policy Department, submission of the return to DBOD has been discontinued.
18. Addition or deletion of the name/s of joint account holders
A bank may, at the request of all the joint account holders, allow the addition or deletion of name/s of joint account holder/s if the circumstances so warrant or allow an individual depositor to add the name of another person as a joint account holder. However, in no case should the amount or duration of the original deposit undergo a change in any manner in case the deposit is a term deposit.
A bank may, at its discretion, and at the request of all the joint account holders of a deposit receipt, allow the splitting up of the joint deposit, in the name of each of the joint account holders only, provided that the period and the aggregate amount of the deposit do not undergo any change.
Note: NRE deposits should be held jointly with non-residents only. NRO accounts may be held by non-residents jointly with residents.
19. Rounding off of transactions
All transactions, including payment of interest on deposits/charging of interest on advances, should be rounded off to the nearest rupee; i.e., fractions of 50 paise and above shall be rounded off to the next higher rupee and fraction of less than 50 paise shall be ignored. Issue prices of cash certificates should also be rounded off in the same manner. Cheques issued by clients containing fractions of a rupee should not be rejected or dishonoured.
20. Issue of term deposit receipt
A bank should issue term deposit receipt indicating therein full details, such as, date of issue, period of deposit, due date, applicable rate of interest, etc.
21. Payment of interest on term deposit maturing on Sunday/holiday/non-business working day
In respect of a term deposit maturing for payment on a Sunday or a holiday or a non-business working day, or Saturday in case of NRE deposits, the bank should pay interest at the originally contracted rate on the deposit amount for the Sunday/holiday/non-business working day and also Saturday in case of NRE deposits, intervening between the date of the expiry of the specified term of the deposit and the date of payment of the proceeds of the deposit on the succeeding working day.
22. Deposit Mobilisation Schemes
Banks need not obtain prior concurrence of the Indian Banks’ Association or prior approval of the RBI for introduction of their new domestic deposit mobilisation schemes. However, before launching new domestic deposit mobilisation schemes with the approval of their respective Boards, banks should ensure that the provisions of RBI directives on interest rates on deposits, premature withdrawal of term deposits, sanction of loans/advances against term deposits, etc., issued from time to time, are strictly adhered to. Any violation in this regard will be viewed seriously and may attract penalty under the Banking Regulation Act, 1949.
23. Minimum balance in savings bank accounts
At the time of opening the accounts banks should inform their customers in a transparent manner the requirement of maintaining minimum balance and levying of charges etc., if the minimum balance is not maintained. Any charge levied subsequently should be transparently made known to all depositors in advance with one month's notice. The banks should inform, at least one month in advance, the existing account holders any change in the prescribed minimum balance and the charges that may be levied if the prescribed minimum balance is not maintained.
24. 'No-frills' account
With a view to achieving the objective of greater financial inclusion, all banks are advised to make available a basic banking 'no-frills' account either with 'nil' or very low minimum balances as well as charges that would make such accounts accessible to vast sections of population. The nature and number of transactions in such accounts could be restricted, but made known to the customer in advance in a transparent manner. All banks are advised to give wide publicity to the facility of such 'no-frills' account including in the local media indicating the facilities and charges in a transparent manner.
25. Exemptions
The provisions in the above paragraphs will not apply to:
(i) a deposit received by the bank:
(a) from the institutions permitted to participate in the Call/Notice/Term Money Market both as lenders and borrowers, namely, all Scheduled Commercial Banks (excluding RRBs), Co-operative Banks and Primary Dealers.
(b) for which it has issued a participation certificate;
(c) under Foreign Currency (Non-Resident) Accounts (Banks) Scheme, Resident Foreign Currency Account and Exchange Earners Foreign Currency Accounts;
(d) under the Capital Gains Accounts Scheme, 1988, framed by the Government of India in pursuance of sub-section (2) of Section 54, sub-section (2) of Section 54B, sub-section (2) of Section 54D, sub-section (4) of Section 54F and sub-section (2) of Section 54G of the Income-Tax Act, 1961; and
(e) under the Certificate of Deposit Scheme.
(ii) payment of interest on delayed collection of outstation instruments like cheques, drafts, bills, telegraphic/mail transfers, etc.
26. Prohibitions
No bank should -
(a) pay interest on Current Account save as provided in paragraphs 8 and 16(b) above;
(b) pay countervailing interest on any current accounts maintained with it by its borrowers;
(c) discriminate in the matter of interest paid on deposits, between one deposit and another, accepted on the same date and for the same maturity, whether such deposits are accepted at the same office or at different offices of the bank, except in respect of fixed deposit schemes specifically for resident Indian senior citizens offering higher and fixed rates of interest as compared to normal deposits of any size, and single term deposits of Rs.15 lakh and above on which varying rates of interest may be permitted on the basis of size of deposits. The permission to offer varying rates of interest will be subject to the following conditions:
(i) The permission to offer varying rates of interest for deposits of the same maturity will apply to single term deposits of Rs.15 lakh and above. Banks may, therefore, offer the same rate of interest or different rates of interest for deposits of Rs.15 lakh and above. For deposits below Rs.15 lakh of the same maturity the same rate will apply.
(ii) Banks should disclose in advance the schedule of interest rates payable on deposits including deposits on which differential interest will be paid. Interest rates paid by the bank should be as per the schedule and should not be subject to negotiation between the depositor and the bank.
(d) pay brokerage in the form of commission or gift or incentives on deposits in any manner or in any other form to any individual, firm, company, association, institution or any other person except -
(i) commission paid to agents employed to collect door-to-door deposits under a special scheme;
(ii) inexpensive gifts costing not more than Rs.250/-; and
(iii) incentives granted to staff members as approved by the Reserve Bank of India from time to time.
(e) employ/engage any individual, firm, company, association, institution or any other person for collection of deposit or for selling any other deposit linked products on payment of remuneration or fees or commission in any form or manner, except to the extent permitted in sub-clause (i) of clause (d) above.
(f) launch prize/lottery/free trips (in India and/or abroad), etc. oriented deposit mobilisation schemes.
(g) resort to unethical practices of raising of resources through agents/third parties to meet the credit needs of the existing/prospective borrowers or to grant loans to the intermediaries based on the consideration of deposit mobilisation.
(h) issue any advertisement/literature soliciting deposits from public highlighting only the compounded yield on term deposits without indicating the actual rate of simple interest offered by bank for the particular period. Simple rate of interest per annum for the period of deposit should be indicated invariably.
(i) pay interest on margin money held in current account.
(j) pay interest on “deposit at call” receipts issued by it to the tenderers (contractors) for submission to Government Departments/Semi-Quasi Government bodies, local bodies, etc. against the money held in current account.
(k) accept interest-free deposit other than in current account or pay compensation indirectly.
(l) accept deposits from/at the instance of private financiers or unincorporated bodies under any arrangement which provides for either issue of deposit receipt/s favouring client/s of private financiers or giving of an authority by power of attorney, nomination or other-wise, for such clients receiving such deposits on maturity.
(m) grant advances against fixed deposit receipts or other term deposits of other banks.
(n) (i) open a savings deposit account in the name of Government departments/bodies depending upon budgetary allocations for performance of their functions/Municipal Corporations or Municipal Committees/ Panchayat Samitis/State Housing Boards/Water and Sewerage/Drainage Boards/State Text Book Publishing Corporations/ Societies/Metropolitan Development Authority / State/ District Level Housing Co-operative Societies, etc. or any political party or any trading/business or professional concern, whether such concern is a proprietary or a partnership firm or a company or an association.
Explanation:
For the purposes of this clause, ‘political party’ means an association or body of individual citizens of India, which is, or is deemed to be registered with the Election Commission of India as a political party under the Election Symbols (Reservation and Allotment) Order, 1968 as in force for the time being.
(ii) The above prohibition will not apply in the case of organisations/agencies listed in Annexure III.
ANNEXURE I
Rates of Interest on Deposits held in Domestic/Ordinary Non-Resident(NRO) Accounts
[Per cent per annum]| Category of Account |
| (i) | Current | Nil |
| (ii) | Savings* | 3.5 |
| (iii) | Term Deposits (minimum period 7 days) | Free |
* With effect from the close of business in India on November 17, 2005, the rate of interest on domestic savings account will also be applicable to NRE savings account.
ANNEXURE II
Interest rates applicable to deposits held in Non-Resident (External) Accounts
[Per cent per annum]| (i) | Current | Nil |
| (ii) | Savings Account | With effect from the close of business in India on November 17, 2005, the interest rates on NRE savings deposits should be the same as applicable to domestic savings deposits instead of the LIBOR/SWAP rate for six months maturity on US dollar deposits. |
| (iii) | Term Deposits | (a) With effect from the close of business in India on November 17, 2005, interest rates on NRE deposits for one to three years should not exceed the LIBOR/SWAP rates, as on the last working day of the previous month, for US dollar of corresponding maturity plus 75 basis points. |
| | | (b) With effect from the close of business in India on April 18, 2006, interest rates on NRE deposits for one to three years should not exceed the LIBOR/SWAP rates, as on the last working day of the previous month, for US dollar of corresponding maturity plus 100 basis points. |
| | | (c) The LIBOR/SWAP rates as on the last working day of the preceding month would form the base for fixing ceiling rates for the interest rates that would be offered effective from the following month. |
| | | (d) The above changes in interest rates will also apply to repatriable NRE deposits renewed after their present maturity period. |
| | | (e) With effect from 29.04.2003, the maturity period of fresh NRE deposits will normally be one year to three years. This will also apply to NRE deposits renewed after their present maturity period. In case, a particular bank, from its Asset Liability Management point of view, wishes to accept deposits with maturity of more than 3 years, it may do so provided the interest rate on such long term deposits is not higher than that applicable to 3 years NRE deposits. |
| | | (f) For the purposes of operational convenience, the interest rates should be rounded off to the nearest two decimal point. For example, a computed interest rate of 3.676 per cent would become 3.68 per cent, and 3.644 per cent would become 3.64 per cent. |
| | | (g) FEDAI would quote/display the LIBOR/SWAP rates on the last working day of each month using a web page that can be accessed by all the subscribers to the Reuters Screen. The rates should be taken as the base rates for fixing ceiling on the interest rates that can be offered effective from the following month. |
ANNEXURE III
List of organisations/bodies to which prohibition contained in Clause 26(n)(i) of the directive will not be applicable(1) Primary Co-operative Credit Society which is being financed by the bank.
(2) Khadi and Village Industries Boards.
(3) Agriculture Produce Market Committees.
(4) Societies registered under the Societies Registration Act, 1860 or any other corresponding law in force in State or a Union Territory.
(5) Companies governed by the Companies Act, 1956 which have been licensed by the Central Government under Section 25 of the said Act, or under the corresponding provision in the Indian Companies Act, 1913 and permitted, not to add to their names the words ‘Limited’ or the words ‘Private Limited’.
(6) Institutions other than those mentioned in clause 22(n)(i) and whose entire income is exempt from payment of Income-tax under the Income-Tax Act, 1961.
(7) Government departments / bodies / agencies in respect of grants/ subsidies released for implementation of various programmes / Schemes sponsored by Central Government / State Governments subject to production of an authorization from the respective Central / State Government departments to open savings bank account.
(8) Development of Women and Children in Rural Areas (DWCRA).
(9) Self-help Groups (SHGs), registered or unregistered, which are engaged in promoting savings habits among their members.
(10) Farmers’ Clubs-Vikas Volunteer Vahini-VVV.
Appendix
List of directives/circulars instructions which have been incorporated in the Master Circular on Interest Rates on Rupee Deposits held in Domestic/NRO/NRE Accounts| 1. | DBOD No. Dir. 80/13.03.00/2005-06 | 18.04.2006 |
| 2. | DBOD No. Dir. 62/13.03.00/2005-06 | 08.02.2006 |
| 3. | DBOD. No. Leg .BC.44/09.07.005/ 2005-06 | 11.11.2005 |
| 4. | DBOD No. Dir. 48 /13.03.00/2005-06 | 17.11.2005 |
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