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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....y 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 minimum credit balance in the composite cash credit account of a farmer 2.9 Deposit Scheme for Senior Citizens 2.10 Premature withdrawal o....
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....y 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 rate ranges 2.18 Addition or deletion of the name/s of joint account holders 2.19 Rounding off of transactions 2.20 Issue of term deposit receipt 2.21 Payment of interest on term deposit maturing on Sunday/ holiday/non-business working day 2.22.A Deposit Mobilisation Schemes 2.22.B Special Term Deposit Products with Lock-in Period 2.23 Minimum balance in savings bank acco....
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....ing, 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-Resident (External) Rupee Account NR(E)RA scheme, also known as the NRE scheme, was introduced in 1970. Any NRI can open an NRE account with funds remitted to India through a bank abroad. This is a repatriable account and transfer from another NRE account or FCNR(B) account is also permitted. An NRE rupee account may be opened as current, savings or term deposit. Local payments can be freely made from NRE accounts. Since this account is maintained in Rupees, the depositor....
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....erm 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 (External) Accounts (NRE) except in accordance with the rates specified in the Annex 1 and 2 hereto, as applicable, and on the terms and conditions specified in the ensuing paragraphs. 2.1 Definitions For the purpose of this circular: (a) "Demand liabilities" and "Time liabilities" mean 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 withdrawabl....
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....lause (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, banks were permitted to accept term deposits of Rupees fifteen lakh and above, for a minimum maturity period of seven days and, in case of term deposits of less than Rupees fifteen lakh, the minimum maturity period was fifteen days. With effect from November 1, 2004, the minimum tenor of domestic/NRO term deposits below Rupees fifteen lakh has been reduced from fifteen days to seven days. (ii) NRE deposits With effect from April 29, 2003, the minimum maturity period for NRE deposits has been raised from six months to one year, making the r....
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....o 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 term for renewal, banks may renew the same for a term equal to the original term. * No new receipt is required to be issued. However, a suitable note should be made regarding renewal in the deposit ledger. * Renewal of deposit should be advised by registered letter / speed post / courier service to the concerned Government department under advice to the depositor. In the advice to the depositor, the rate of interest at which the deposit is renewed should also be mentioned. * If overdue period does not exceed 14 days on the date of receipt of the request letter, renewal should be done from the date....
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....erest 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, members of which are 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. 2.5.2 For the purposes of sub-paragraph 2.5.1: (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. * In the case of employees taken on dep....
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....pe 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 discretion, pay additional interest not exceeding one per cent per annum over and above the rate of interest stipulated in Annex 1& 2 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 are eligible to get the benefit under paragraph 2.6 above only during the period of their tenure. 2.7 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, banks are encouraged not to pay interest on the current accounts maintained by RRBs with them. 2.8 Discretion to pay interest on the minimum credit balance in the composite cash ....
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.... 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 interest rates for premature withdrawal of term deposits. Bank should ensure that the depositors are made aware of the applicable penal rates along with the deposit rates. (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 provisions relating to premature withdrawal. (iv) Con....
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.... 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 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) 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.) 2.14 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. 2.15 Restrictions on advances against NR(E)RA and FCNR (B) Deposits - Quantum of loans With effect from April 28, 2009, banks were prohibited from granting....
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....he 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 an NRE deposit, when the claimants are residents, the deposit on maturity should be treated as a domestic rupee deposit and interest should be paid for the subsequent period at a rate applicable to a domestic deposit of similar maturity. 2.17 Notifying RBI regarding change in interest on deposits and also the break-up of deposits according to different interest rate ranges As per the instructions issued in September, 1997, as and when the deposit rate structure and PLR are revised, banks were 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 submit similar information to RBI's Monetary Policy Department, submission of the return to DBOD has been discontinued. 2.18 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 c....
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....favour of the Clearing Corporations. In this connection, it is advised that a Term Deposit Receipt (TDR)/ Fixed Deposit Receipt (FDR) is acknowledgement for a deposit received by a bank for a fixed term which is withdrawable only after the expiry of the said fixed period. A bank issues TDR indicating therein full details, such as date of issue, period of deposit, due date, applicable rate of interest etc. As such, issue of TDR/ FDR without a corresponding term deposit/ fixed deposit account in the books of the bank is not in order and will amount to violation of the extant guidelines on acceptance of deposits. The rate of interest payable on such deposits would be subject to the extant guidelines on 'Interest Rates on Rupee Deposits held in domestic, Ordinary Non-Resident (NRO) and Non-Resident (External) (NRE) Accounts'. 2.21 Payment of interest on term deposit maturing on Sunday/holiday/non-business working day In case of reinvestment deposits and recurring deposits, banks should pay interest for the intervening Sunday/holiday/non-business working day (as also Saturday in case of NRE deposits) on the maturity value. However, in the case of ordinary term deposits, the interest f....
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....rcular DBOD.No.Leg.BC.44/09.07.005/2005-06 dated November 11, 2005, banks are advised to offer a 'Basic Savings Bank Deposit Account' which will offer following minimum common facilities to all their customers : * The 'Basic Savings Bank Deposit Account' should be considered a normal banking service available to all. * This account shall not have the requirement of any minimum balance. * The services available in the account will include deposit and withdrawal of cash at bank branch as well as ATMs; receipt / credit of money through electronic payment channels or by means of deposit / collection of cheques drawn by Central / State Government agencies and departments; * While there will be no limit on the number of deposits that can be made in a month, account holders will be allowed a maximum of four withdrawals in a month, including ATM withdrawals; and * Facility of ATM card or ATM-cum-Debit Card; * The above facilities will be provided without any charges. Further, no charge will be levied for non-operation / activation of in-operative 'Basic Savings Bank Deposit Account'. * Banks would be free to evolve other requirements including pricing structure for additional....
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....scriminate 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 Rupees one crore 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 is subject to the following conditions: * The permission to offer varying rates of interest for deposits of the same maturity applies to single term deposits of Rupees one crore and above. Banks should, therefore, offer the same rate of interest or different rates of interest for deposits of Rupees one crore and above of the same maturity. For deposits below Rupees one crore of the same maturity, the same rate will apply. Rupee term deposits shall include domestic term deposits as well as term deposits under NRO and NRE accounts. These instructions have been made applicable from April 1, ....
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.... 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. It is clarified that banks should not offer any banking products, including online remittance schemes, with prizes /lottery/free trips (in India and/or abroad), etc. or any other incentives having an element of chance, except inexpensive gifts costing not more than Rupees two hundred fifty only, as such products involve non-transparency in the pricing mechanism and therefore go against the spirit of the guidelines. Such products, if offered, by banks would be considered as violation of the extant guidelines and the banks concerned would be liable for penal action. (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 off....
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....wo decimal points. *Interest rates on NRO savings deposits for the period May 3 to December 15, 2011 was 4% p.a. With effect from December 16, 2011, the interest rates are deregulated. However, interest rates offered by banks on NRO deposits cannot be higher than those offered by them on comparable domestic rupee deposits. ANNEX 2 Interest rates applicable to deposits held in Non-Resident (External) Accounts [paragraph 2.2B(i)] (i) Current Nil (ii) Savings Account With effect from December 16, 2011, the interest rates are deregulated. However, interest rates offered by banks on NRE deposits cannot be higher than those offered by them on comparable domestic rupee deposits. Since interest rate of domestic savings deposits was deregulated w.e.f October 25, 2011, the interest rate on NRE savings deposits for the period October 25 to December 15, 2011 was as prescribed in the circular DBOD.Dir.BC.89 & 90/13.03.00/2010-11 at 4% per annum. From the close of business in India on November 17, 2005 to October 24, 2011, 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 o....
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....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. ANNEX 3 List of organisations/bodies to which the prohibition contained in Clause 2.26(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 a State or a Union Territory except societies registered under the State Co-operative Societies Acts and specific state enactment creating Land Mortgage Banks. . (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 2.26(n)(i) and whose ....
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.....31/24.92.001/2001-02 28.09.2001 Permission to Participate in Call/Notice/Term Money Market and Bills Rediscountinq Scheme - Primary Dealers 12. DBOD.No.FSC.BC.41/24.91.001/2001-02 01.11.2001 Permission to Participate in Call/Notice Money Market and Bills Rediscounting Scheme - Private Sector Mutual Funds 13. DBOD.No.FSC.BC.49/24.92.001/2001-02 24.11.2001 Permission to Participate in Call/Notice/Term Money Market and Bills Rediscounting Scheme - Primary Dealers 14. DBOD.No.FSC.BC.51/24.92.001/2001-02 04.12.2001 Permission to Participate in Call/Notice/Term Money Market and Bills Rediscounting Scheme - Primary Dealers 15. DBOD.No.FSC.BC.85/24.92.001/2001-02 03.04.2002 Permission to Participate in Call/Notice/Term Money Market and Bills Rediscounting Scheme - Primary Dealers 16. DBOD.No.Dir.BC.93/13.01.09/2001-02 29.04.2002 Full Convertibility of Deposit Schemes - Non-Resident Indians - NRNR Accounts & NRSR Accounts 17. DBOD.No.Dir.BC.38/13.03.00/2002-03 05.11.2002 Mid-term Review of Monetary and Credit Policy for the year 2002-03 - Interest Rates on Deposits by Banks/RRBs/Local Area Banks 18. DBOD.No.FSC.BC.45/24.92.001/2002-03 03.12.2002 Permi....
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....6 25.01.2006 Financial Inclusion by Extension of Banking Services - Use of Business Facilitators and Correspondents 36 DBOD No. Dir. 62/13.03.00/2005-06 08.02.2006 Interest Rates on Non-Resident Deposits 37 DBOD No. Dir. 80/13.03.00/2005-06 18.04.2006 Interest Rate on Non-Resident (External) Rupee (NRE) Deposits 38 A.P.(DIR Series) Circular No.29 31.01.2007 Foreign Exchange Management (Deposit) Regulations, 2000 -Loans to Non Residents / third party against security of Non Resident (External) Rupee Accounts (NR (E) RA) / Foreign Currency Non Resident (Bank) (FCNR(B)) deposits 39 DBOD.No.Dir.BC.54 & 55/13.03.00/2006-07 31.01.2007 Interest Rates on Non-Resident (External) Rupee (NRE) Deposits and FCNR(B) deposits 40 DBOD.No.Dir.BC.70/13. 01.01/2006-07 30.03.2007 Rounding off cheques to the nearest rupee 41 DBOD.No.Dir.BC.88 & 89/13.03.00/2006-07 24.04.2007 Interest Rates on Non-Resident (External) Rupee (NRE) Deposits and FCNR(B) deposits 42 DBOD.No.Leg.BC.94/09.07.005/2006-07 07.05.2007 Annual Policy Statement for the year 2007- 08 - IT-enabled Financial Inclusion 43 DBOD No. Dir. BC. 39/13.03.00/2007-08 25.10.2007 Deposit schemes with lock-in per....