TaxTMI 
TaxTMI 
Master Circular on Interest Rates on Rupee Deposits held in Domestic, Ordinary Non-Resident (NRO) and Non-Resident (External) (NRE) Accounts
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....cular on Interest Rates on Rupee Deposits held in Domestic, Ordinary Non-Resident (NRO) and Non-Resident (External) (NRE) Accounts CONTENTS Para. No Particulars A Purpose B Classification C Previous instructions D Application 1 Introduction 1.1 Domestic Deposits 1.2 Ordinary Non-Resident (NRO) Accounts 1.3 Non-Resident (External) (NRE) Accounts 1.4 Interest Rate Regulation on NRE and NRO Deposits 2 Guidelines 2.1 Definitions 2.2 Minimum tenor and rates of interest payable on Savings deposits and on Term deposits 2.3 Payment of interest on fixed deposit - Method of calculation of interest 2.4 Additional interest to Army Group Insurance Directorate, etc. 2.5 Discretion to pay additional interest not exceeding one percent on deposits of bank's staff and their exclusive associations 2.6 Discretion to pay additional interest not exceeding one per cent on deposits of Chairman and Managing Director and Executive Directors of the bank 2.7 Discretion to pay interest on current accounts maintained by Regional Rural Banks with sponsor banks 2.8 Discretion to pay interest on the....
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...., NGIF and AFGIS 2.5 Discretion to pay additional interest not exceeding one percent on deposits of bank's staff and their exclusive associations 2.6 Discretion to pay additional interest on deposits of Chairman and Managing Director and Executive Directors of the bank 2.7 Discretion to pay interest on current account maintained by RRBs with sponsor bank 2.8 Discretion to pay interest on the minimum credit balance in the composite cash credit account of a farmer 2.9 Deposit Scheme for Senior Citizens 2.10 Premature withdrawal of term deposit 2.11 Conversion of term deposit, deposit in the form of daily deposit or recurring deposit for reinvestment in term deposit 2.12 Renewal of Overdue deposits 2.13 Advance against term deposit - Manner of charging interest 2.14 Margin on advance against term deposit 2.15 Restrictions on advances against NR(E)RA Deposits -Quantum of Loans 2.16 Interest payable on the deposit account of a deceased depositor 2.17 Notifying RBI regarding change in interest on deposits and also the break-up of deposits according to different interest....
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....o serve the requirements of foreign nationals resident in India. AD Category-I banks may permit foreign nationals who have come to India on employment and are eligible to open/hold a resident savings bank account to re-designate their resident account maintained in India as NRO account on leaving the country after their employment to enable them to receive their legitimate dues subject to certain conditions. NRO accounts can be maintained as current, saving, recurring or term deposits. While the principal of NRO deposits is non-repatriable, current income and interest earning is repatriable. Further NRI/PIO may remit an amount, not exceeding USD one million per financial year, out of the balances held in NRO accounts/ sale proceeds of assets /the assets in India acquired by him by way of inheritance/legacy, on production of documentary evidence in support of acquisition, inheritance or legacy of assets by the remitter, and an undertaking by the remitter and certificate by a Chartered Accountant in the formats prescribed by the Central Board of Direct Taxes vide their Circular No. 10/2002 dated October 9, 2002. 1.3. Non-Resident (External) (NRE) Accounts The Non....
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....pril 17, 2004. However, with effect from the close of business in India on November 17, 2005, the interest rates on NRE saving deposits are the same as applicable to domestic savings deposits. With a view to providing greater flexibility to banks in mobilising non-resident deposits and also in view of the prevailing market conditions, it was decided to deregulate interest rates on Non-Resident (External) Rupee (NRE) Deposits and Ordinary Non-Resident (NRO) Accounts (the interest rates on term deposits under Ordinary Non-Resident (NRO) Accounts are already deregulated). Accordingly, banks are free to determine their interest rates on both savings deposits and term deposits of maturity of one year and above under Non-Resident (External) Rupee (NRE) Deposit accounts and savings deposits under Ordinary Non-Resident (NRO) Accounts with effect from December 16, 2011. However, interest rates offered by banks on NRE and NRO deposits cannot be higher than those offered by them on comparable domestic rupee deposits. 2. GUIDELINES Commercial banks should not pay interest on deposits of money accepted or renewed by them in Domestic, Ordinary Non-Resident (NRO) and Non-Resident (Extern....
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....f 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; (j) "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. 2.2 Minimum tenor and rates of interest payable on Savings Deposits and on Term Deposits 2.2.A Minimum tenor (i) Domestic/ NRO term deposits The minimum tenor of domestic/ NRO term deposits is seven days. Prior to November 1, 2004, ....
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....f powers are delegated by the Board) for fixing interest rates on deposits. (v) Such interest should be paid at quarterly or longer rests. Interest on savings bank accounts should be credited on regular basis whether the account is operative or not. 2.2.C Floating Rate Deposits 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. 2.2.D Payment of interest on accounts frozen by banks Banks are advised to follow the procedure detailed below in the case of Term Deposit Accounts of customers frozen by the orders of the enforcement authorities: • A request letter may be obtained from the customer on maturity. While obtaining the request letter from the depositor for renewal, banks should also advise him to indicate the term for which the deposit is to be renewed. In case the depositor does not exercise his option of choosing the ....
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....tional 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, only on the term deposits for two years and above of Army Group Insurance Directorate (AGID), Naval Group Insurance Fund (NGIF) and Air-Force Group Insurance Society (AFGIS), provided such deposits are not in any way linked with payment of insurance premia by the bank. 2.5 Discretion to pay additional interest not exceeding one percent 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 Annex 1 & 2 to this circular subject to following conditions: 2.5.1 In respect of a savings or a term deposit account opened in the name of: • member or a retired member of the bank's staff, either singly or jointly with any member or members of his/her family; or • the spouse of a deceased member or a deceased retired member of the bank's staff; and • an Association or a fund,&nbs....
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....irect members are not eligible for additional interest. 2.5.5 In case of Domestic deposits, it will be in order for banks to give their resident Indian retired staff, who are senior citizens, the benefit of higher interest rates as admissible to senior citizens 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. 2.5.6 Prior to July 18, 2012, 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, should not exceed the ceiling stipulated by RBI. With effect from July 18, 2012 banks should not allow the benefit of additional interest rate on any type of deposits of non-residents. Accordingly, the discretion given to banks to allow the benefit of additional interest rate of one percent per annum as available to bank's own staff on deposits under NRE/ NRO accounts stands withdrawn. 2.6 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....
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....ing a deposit, interest on the deposit for the period that it has remained with the bank will be paid at the rate applicable to the period for which the deposit remained with the bank and not at the contracted rate. No interest is payable, where premature withdrawal of deposits takes place before completion of the minimum period prescribed. Prior to April 1, 2013, the bank had discretion to disallow premature withdrawal of large deposits held by entities other than individuals and Hindu Undivided Families (HUFs). With effect from April 1, 2013, banks will have the discretion to disallow premature withdrawal of a term deposit in respect of bulk deposit of Rupees one crore and above of all depositors, including deposits of individuals and Hindu Undivided families (HUFs). The bank should, however, notify such depositors of its policy of disallowing premature withdrawal in advance, i.e., at the time of accepting such deposits. A bank on request from a depositor shall allow withdrawal of a Rupee term deposits of less than Rupees one crore, before completion of the period of the deposit agreed upon at the time of making the deposit. Bank will have the freedom to determine its own penal i....
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....ks 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. 2.13 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 - • the borrower, either singly or jointly; • one of the partners of a partnership firm and the advance is made to the said firm; • the proprietor of a proprietary concern and the advance is made to such a concern; • 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 Base Rate including 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 no....
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....ice of the deposit holder at the time of sanction of the loan. The existing loans which are not in conformity with the above instructions shall continue for their existing term and shall not be rolled over/renewed. Other conditions as regards grant of loan against NRE/FCNR deposits shall remain unchanged. 2.16 Interest payable on the deposit account of deceased depositor (a) In the case of a term deposit standing in the name/s of • a deceased individual depositor, or • 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 May 1, 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. Not....
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....m. Banks should also review the practice being followed by them in this regard and take necessary steps including through issue of internal circulars, etc, to ensure that the concerned staff are well versed with these instructions so that the general public does not suffer. Further, banks should ensure that appropriate action is taken against members of their staff who are found to have refused to accept cheques/ drafts containing fractions of a rupee. Any bank violating the aforesaid instructions would be liable to be penalised under the provisions of the Banking Regulation Act, 1949. 2.20 Issue of term deposit receipt (a) 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. (b) It has been observed that Scheduled Commercial Banks, during the course of acting as Professional Clearing Members of Stock Exchanges/ Clearing Corporations, issue own Fixed Deposit Receipts with zero percent interest as security in favour of the Clearing Corporations. In this connection, it is advised that a Term Deposit Receipt (TDR)/ Fixed Deposit Receipt (FDR) is acknowledgement fo....
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....not in tune with the rates of interest on normal deposits; • Part pre-payment is allowed by some banks, subject to certain conditions. As the special schemes, with lock-in periods and other features referred to above, which have been floated by some banks, were not in conformity with our instructions, banks that have floated such deposit schemes were advised to discontinue the schemes. 2.23 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. 2.24 Basic Savings Bank Deposit Account (BSBDA) In supersession of instructions contained in circular DBOD.No.Leg.BC.44/09.07.005/2005-06 dated November 11, 2005, banks are advised to ....
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.... The provisions in the above paragraphs will not apply to: (i) a deposit received by the bank: • 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; • for which it has issued a participation certificate; • under Foreign Currency (Non-Resident) Accounts (Banks) Scheme, Resident Foreign Currency Account and Exchange Earners Foreign Currency Accounts; • 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 • under the Certificate of Deposit Scheme. (ii) payment of interest on delayed collection of outstation instruments like cheques, drafts, bills, telegraphic/mail transfers, etc. 2.26 Prohibitions No bank should - (a) pay interest on Current Account save as provided in paragraphs 2.7 and 2.16(b) above; (b....
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....s on deposits in any manner or in any other form to any individual, firm, company, association, institution or any other person except- • commission paid to agents employed to collect door-to-door deposits under a special scheme. Banks have also been permitted to use the services of Non-Governmental Organisations(NGOs)/ Self Help Groups(SHGs)/ Micro Finance Institutions(MFIs) and other Civil Society Organisations(CSOs) as intermediaries in providing financial and banking services including collection of deposits through the use of the Business Facilitator and Business Correspondent models. Banks may pay reasonable commission/ fee to the Business facilitators/ Correspondents, the rate and quantum of which may be reviewed periodically. The agreement with the Business facilitators/ Correspondents should specifically prohibit them from charging any fee to the customers directly for services rendered by them on behalf of the bank. • inexpensive gifts costing not more than Rupees two hundred fifty ; and • incentives granted to staff members as approved by the Reserve Bank of India from time to time. (e) employ/ engage any individual, firm, compan....
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....nment 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 Annex 3. ANNEX 1 Rates of Interest on Deposits held in Domestic/Ordinary Non-Resident (NRO) Accounts [paragraph 2.2B(i)] Category of Account [Percent per annum] (i) Current Nil (ii) Savings* 4.0 (from May 3, 2011 to Octo....
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...., interest rates on NRE deposits for one to three years should not exceed the LIBOR/SWAP rates plus 175 basis points, as on the last working day of the previous month, for US dollar of corresponding maturities (as against LIBOR / SWAP rates plus 100 basis points effective from close of business on October 15, 2008). 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. The above changes in interest rates will also apply to repatriable NRE deposits renewed after their present maturity period. With effect from 29.04.2003, the maturity period of fresh NRE deposits should normally be one year to three years. 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. Consequent upon the deregulation of interest rates on NRE deposits with effect from December 16, 2011 banks are free to determine interest rates on NRE deposits of different maturity, including deposits of more than 3 year....
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.... among their members. (10) Farmers' Clubs - Vikas Volunteer Vahini - VVV. APPENDIX List of circulars consolidated in the Master Circular onInterest Rates on Rupee Deposits held in Domestic/NRO/NRE Accounts Sl Circular No. Date Subject 1. DBOD.No.Dir.BC.46 & 47/13.03.00/2000-2001 4.11.2000* Master Directive on Interest Rates on Rupee Deposits held in Domestic, Ordinary Non-Resident (NRO), Non-Resident Special Rupee (NRSR) and Non-Resident (External) (NRE) Accounts 2. DBOD.No.FSC.BC.61/24.91.001/2000 29.12.2000 Permission to Participate in Call/Notice Money Market and Bills Rediscounting Scheme - Private Sector Mutual Funds 3. DBOD.No.Dir.BC.62/13.03.00/2000-01 03.01.2001 Interest Rates on Deposits 4. DBOD.No.Dir.BC.64/13.03.00/2000-01 03.01.2001 Payment of Interest on the Term Deposit of a Deceased Depositor 5. DBOD.No.FSC.BC.80/24.103.001/2000 20.02.2001 Permission to Participate in Call/Notice Money Market and Bills Rediscounting Scheme - Insurance Companies 6. DBOD.No.FSC.BC.85/24.103.001/2001 01.03.2001 Permission to Participate in Call/Notice Money Market and Bills Redisc....
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.... 28.02.2003 Interest Rates on Deposits 22. DBOD.No.FSC.BC.85& 86/24.91.001/2002-03 26.03.2003 Permission to Participate in Call/Notice/Term Money Market and Bills Rediscounting Scheme - Primary Dealers 23. DBOD.No.FSC.BC.86/24.92.001/2002-03 26.03.2003 Permission to Participate in Call/Notice Money Market and Bills Rediscounting Scheme - Private Sector Mutual Funds 24. DBOD.No.Dir.BC.101 & 102/13.01.09/2002-03 29.04.2003 Deposit under Non-Resident (External) Rupee Accounts (NRE Accounts) 25. DBOD.No.Dir.BC.1 & 2/13.01.09/2003-04 17.07.2003 Interest Rate on Deposits under Non-Resident (External) Rupee Accounts (NRE Accounts) 26. MPD.BC.237/07.01.279/2003-04 17.07.2003 Interest Rate on Deposits under Non-resident (External) Rupee Account (NRE Accounts) 27. DBOD.No.Dir.BC.25 & 26/13.01.09/2003-04 15.09.2003 Interest Rate on Deposits under Non-Resident (External) Rupee Accounts (NRE Accounts) 28. DBOD.No.Dir.BC.35 & 36/13.01.09/2003-04 18.10.2003 Interest Rate on Deposits under Non-Resident (External) Rupee Accounts (NRE Accounts) 29 DBOD No.Dir.BC.68 & 69/13.03.00/2003-04 1....