The Reserve Bank of India has introduced reforms in the interest rate-related regulations, which would be effective starting October 1, 2026. The updated regulations aim for uniformity across banks, transparency, and flexibility in determining interest rates in the case of bulk deposits.
What is changing from October 1
Publishing interest rates on websites: Banks are required to publish the interest rates on deposits on their websites every business day by 10 a.m., with a grace period of 10 minutes. It means the latest a bank can publish the rates is 10:10 a.m.
The rate displayed on the website has to be offered by the bank throughout the duration. It provides a window for customers to know the rate they would receive on their deposits.
Same rates for the same amount deposited on the same date: The second rule requires banks to offer a uniform rate of interest on different deposits of the same amount made on the same day. If two depositors put the same amount in the bank on the same day, the rates of interest offered must be the same.
Banks can offer differential rates on different bulk deposits: This change is made to provide greater flexibility to banks in retaining bulk deposits, depending on how they affect the bank’s liquidity position. Different bulk deposits have different run-off rates; therefore, a bank is allowed to offer higher interest on such deposits under the Liquidity Coverage Ratio (LCR).
A bulk deposit is a single fixed deposit of Rs 3 crore or more. Such deposits are usually made by large businesses, companies, or high-net-worth individuals.
A run-off rate is an estimate of the amount of money a bank might lose through withdrawals during times of stress. A deposit with a higher run-off rate translates into a higher amount of potential withdrawals from a bank.
LCR regulations ensure that the bank has enough liquid assets to survive a period of financial stress for up to 30 days.
So, even if two different bulk deposits of the same amount are made on the same day, the bank can offer higher interest on the deposit with a higher run-off rate.
This reform is intended to ensure greater stability for banks by holding enough liquid assets.
These changes would not significantly impact customers making deposits of less than Rs 3 crore. However, they would provide a uniform rate of interest for equal deposits made under the same circumstances. The regulations also provide transparency by requiring banks to display interest rates on their websites every day.
