RBI allows differential rates for deposits without lock in

Hyderabad: Banks can now offer differential interest rates on term deposits, which come with or without premature withdrawal facility, said RBI in a notification. While all term deposits of individuals of Rs 15 lakh and below should “necessarily” have premature withdrawal, the central bank said that banks can offer term deposits over Rs 15 lakh  without the option of premature withdrawal.

Interest rate on term deposits without a lock-in is generally lesser than the ones which are locked-in. In February, RBI had said that it will introduce early withdrawal facility in a term deposit as a distinguishing feature for offering differential rates of interest.

“Accordingly, banks will have the discretion to offer differential interest rates based on whether the term deposits are with or without-premature-withdrawal-facility,” the RBI said.

However, banks that offer such term deposits should ensure that at the customer interface point, the customers are given the option to choose between term deposits either with or without premature withdrawal facility, RBI said.