The Reserve Bank of India (RBI) has released draft directions proposing a revised framework for interest rates on deposits, aimed at enhancing transparency, strengthening governance, and aligning deposit pricing with liquidity management requirements.
The draft guidelines have been placed in the public domain for stakeholder comments until July 7, 2026.
Key Proposals in the Draft Framework
Under the proposed framework, banks will be allowed to offer differential interest rates on bulk term deposits based on factors such as:
- Deposit size
- Deposit tenor (maturity period)
- Liquidity characteristics under the Liquidity Coverage Ratio (LCR) framework
According to the RBI, the move is intended to ensure that deposit pricing better reflects the liquidity risk associated with different categories of deposits.
Board-Approved Deposit Rate Policy
The central bank has proposed that all banks must:
- Formulate a Board-approved policy on deposit interest rates.
- Maintain detailed records of bulk deposit rate cards within their core banking systems.
- Make such records available for regulatory and supervisory review whenever required.
Enhanced Disclosure Requirements
To improve transparency, banks will also be required to publicly disclose the interest rates offered across various deposit categories. The RBI believes that clearer disclosures will help depositors make informed decisions while promoting fair market practices.
Consolidation of Existing Guidelines
The draft directions seek to consolidate existing instructions relating to deposit interest rates into a single framework. They also incorporate changes arising from recent regulatory developments, including the revised Liquidity Coverage Ratio (LCR) norms.
RBI’s Stand on Differential Interest Rates
The proposal comes amid increased scrutiny of certain banking practices. Recently, media reports highlighted an internal review at HDFC Bank regarding payments made under the classification of “differential interest.”
Addressing the issue, RBI Governor Sanjay Malhotra clarified that banks cannot offer differential interest rates beyond categories specifically permitted by the regulator, such as:
- Deposit tenure
- Senior citizen deposits
- Other approved customer categories