The rate of interest on fixed deposits by senior citizens given by nationalized banks differs from bank to bank. The Reserve Bank of India (RBI) has deregulated the interest rates on term deposits with effect from October 22, 1997. Accordingly, banks are now free to fix the interest rates on term deposits subject to the approval of their respective Boards. Further, 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. This additional interest rate is not applicable to any type of non-resident deposits.

 Following the reduction in the policy rate by 50 bps in two equal steps on January 15 and March 4, 2015, out of a total of 27 Public Sector Banks (PSBs), 14 PSBs have reduced their median term deposit rates across maturities in the range of 0.07% to 0.75% so far (up to April 15, 2015).

 The median term deposit rate for SBI was reduced from 7.50 per cent in August 2014 to 7.25 per cent in September, 2014. It remained unchanged at 7.25% thereafter.

 This was stated by Shri Jayant Sinha, Minister of State in Ministry of Finance in written reply to a question in the Lok Sabha today.

Interest rate deregulation lets banks set term deposit rates with board approval; senior citizen schemes may offer higher fixed rates. Banks may set term deposit interest rates freely subject to Board approval; they may also institute fixed deposit schemes for resident senior citizens offering higher fixed rates, which do not apply to non resident deposits. Recent policy rate cuts have led several public sector banks to reduce median term deposit rates, illustrating transmission of monetary easing into deposit pricing.