RBI says interest rates on deposits must be uniform, but banks get more flexibility on bulk deposits

The Reserve Bank of India (RBI) today issued amended directions on interest rates that banks pay on deposits. The central bank has stated that the interest rates have to be uniform and there can’t be any discrimination on the payments of interest.

However, banks have been allowed more flexibility when it comes to bulk deposits, where differential rates could be offered based on the run-off rate under the liquidity coverage ratio (LCR) framework.

“The interest rates offered on deposits, including bulk deposits, shall be uniform across all branches and for all customers and there shall be no discrimination in the matter of interest paid on the deposits, between one deposit and another deposit of similar amount, accepted on the same date, at any of its offices,” RBI said.

Banks do get some flexibility when it comes to bulk deposits.

According to the RBI, a bank shall have the freedom to offer “differential interest rate on bulk deposits, by considering the differential run-off rate applicable to deposits or unsecured wholesale funding under the LCR (liquidity coverage ratio) framework as specified in RBI’s asset liability management directions.”

Run-off factor essentially is the estimated percentage of deposits that depositors could withdraw in case there was a financial stress-like situation.

RBI’s LCR framework requires banks to maintain high quality liquid assets, which will be sufficient should there be cash outflows from the bank in a period of stress.

The RBI had issued draft amendments on the interest rates directions in June.

The directions issued on Thursday state that the interest rates payable on deposits, including bulk deposits, shall be strictly as per the schedule of interest rates disclosed in advance on the bank’s website. However, interest rates payable on bulk deposits shall be disclosed on the bank’s website at 10:00 am with a grace time of 10 minutes, latest by 10:10 am, on each business day.

These amendment directions come into effect from October 1, 2026.

The amendment directions by the Reserve Bank come a few days after HDFC Bank fined its three top officials, including its MD and CEO and the CFO, Rs 1 lakh each, following an internal review pertaining to the arrangement the country’s largest private sector lender had with the Maharashtra State Road Development Corp (MSRDC) for garnering deposits in 2017 and 2021.

The review by HDFC Bank had come in the wake of a news report in May where it was alleged that HDFC Bank had made payments worth Rs 45 crore to MSRDC as higher interest for their deposits and that this was disguised under marketing budgets and sponsorships for a road safety drive.

According to the lender, it was concluded that the conduct of the employees involved constituted business overreach rather than any mala fide action, personal enrichment, or improper motive.