The Reserve Bank of India lately announced a transform in the rule for interest prices applicable to overdue domestic fixed deposits in banks and co-operative banks. As per the RBI choice, Fixed Deposit (FD) account holders in all banks and co-operative banks will get decrease of the savings deposit price or the contracted FD interest price on the overdue deposits.
“On a review of these instructions, it has been decided that if a Term Deposit (TD) matures and proceeds are unpaid, the amount left unclaimed with the bank shall attract rate of interest as applicable to savings account or the contracted rate of interest on the matured TD, whichever is lower,” the RBI mentioned.
What has changed
The earlier rule for overdue deposits in banks mentioned, “If a Term Deposit matures and proceeds are unpaid, the amount left unclaimed with the bank shall attract rate of interest as applicable to savings deposits.” However, this has now been changed to:
“If a Term Deposit (TD) matures and proceeds are unpaid, the amount left unclaimed with the bank shall attract rate of interest as applicable to savings account or the contracted rate of interest on the matured TD, whichever is lower.”
Similarly, the earlier rule on overdue deposits for co-operative banks mentioned, “If a term deposit matures and proceeds are unpaid, the amount left unclaimed with the co-operative bank shall attract rate of interest as applicable to savings deposits.” This has been changed to:
“If a Term Deposit (TD) matures and proceeds are unpaid, the amount left unclaimed with the co-operative bank shall attract rate of interest as applicable to savings account or the contracted rate of interest on the matured TD, whichever is lower.”
Implications of new rule explained
The new rule will apply to FD consumers of all banks which includes State Bank of India (SBI), HDFC Bank, ICICI Bank and so on and the co-operative banks.
With banks currently supplying low-interest prices on each FDs and savings account deposits, there would not be significantly effect of the new RBI choice on overdue fixed deposits. As the banks have been currently applying savings deposit interest prices on the overdue quantity. And savings deposit interest prices supplied by lenders are normally decrease than the FD prices.
However, in view of the falling FD prices across all lenders, the RBI choice would make sure that only the lowest interest price applies to overdue FDs.
What consumers need to do?
In view of the new RBI choice, bank consumers need to either withdraw the FD quantity on maturity or re-vest it in a new FD account.