Banks asked to allow premature withdrawal on term deposits of up to Rs 1 cr

Mumbai: The Reserve Bank on Thursday said banks will have to offer premature withdrawal facility on all term deposits of up to Rs 1 crore, raising the limit from Rs 15 lakh currently.

Banks have been permitted to offer domestic term deposits (TDs) without premature withdrawal option, provided that all TDs accepted from individuals for an amount of Rs 15 lakh and below should have premature withdrawal facility.

“On a review, it has been decided that the minimum amount for offering non-callable TDs may be increased from Rs 15 lakh to Rs 1 crore” meaning all domestic term deposits accepted from individuals for amount of Rs 1 crore and below should have premature-withdrawal-facility, the Reserve Bank said in a circular.

Further, as per the extant norms, the banks have also been permitted to offer differential rate on interest on TDs based on non-callability of deposits (non-availability of premature withdrawal option) in addition to tenor and size of deposits. Differential interest rate are offered only on bulk deposits.