In an encouraging development for banking industry, the Reserve Bank of India (RBI) has permitted banks to offer non-callable deposits, fixed-tenure deposit schemes, wherein premature withdrawal is not allowed.
Presently, for retail FDs, deposits of up to Rs 1 crore, interest rates differ based on the tenor or period of maturity. But, once the callability feature is introduced, banks will be able to offer differential rates even on the basis of callability.
According to RBI, for most banks, the penalty for premature withdrawal of deposits is 0.5% to 1% below the contracted rate or the rate applicable for the period the deposit has remained with the bank.
India’s central bank, in its sixth bi-monthly monetary policy, underscored that all deposits accepted from individuals and Hindu undivided family (HUF) up to Rs 1 crore are callable, i.e., have the facility of premature withdrawal, which has resulted in asset-liability management issues, especially under the Liquidity Coverage Ratio (LCR) requirement under the Basel-III framework. Hence, RBI to stabilize this has permitted banks to offer non-callable deposits.
In another development, which could bring some cheer to investors looking to invest abroad, RBI increased the limit under the Liberalized Remittance Scheme (LRS) from the existing $125,000 to $250,000 per person per year. This means, one can now remit more money overseas