If you are ready to park your money for a fixed term with a bank without premature withdrawal, banks may be able to pay you a higher rate of interest.
The Reserve Bank of India (RBI) has allowed banks to offer non-callable deposits, fixed-tenure deposit schemes where premature withdrawal is not allowed.
The banking regulator said this in its bi-monthly policy review on 3 February 2015. The RBI said banks can offer higher interest rates on such deposits. At present, all deposits below Rs 1 crore come with a callable or pre-mature withdrawal option.
"All deposits accepted from individuals and Hindu undivided family (HUF) up to Rs 1 crore are callable, that is, have the facility of premature withdrawal. This results in asset-liability management issues, especially under the Liquidity Coverage Ratio requirement under the Basel III framework. It is, therefore, proposed to allow non-callable deposits. Callability in a deposit will then be a distinguishing feature for offering differential rates on interest on deposits," said RBI.
It will issue detailed guidelines on such deposit schemes soon.