Term deposits up to Rs 1 crore can be canceled before maturity: RBI

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MUMBAI: Banks will have to allow depositors to withdraw money before maturity in every term deposit up to Rs 1 crore, said a notification by the Reserve Bank of India (RBI). The Reserve Bank has decided to increase the minimum limit of non-callable fixed deposits from Rs 15 lakh to Rs 1 crore. Thus, the facility of early withdrawal will be provided on all term deposits accepted from individuals of Rs one crore or below.

The Reserve Bank had earlier allowed higher interest rates on deposits that could not be withdrawn before maturity. In case of rising interest rates, banks are encouraged to offer higher interest rates on non-breakable deposits before maturity.

Non-callable deposits cannot be split in half by the depositor when the interest rate rises. The depositor gets moderately high interest on illiquid or non-callable deposits.

Banks believe that Reserve Bank has increased the minimum size of non-callable deposits keeping in mind the interests of small investors. This new standard is effective immediately for commercial and co-operative banks.

According to another notification, the Reserve Bank has increased the bulk deposit limit for rural banks from Rs 1 lakh to Rs 1 crore.


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