SBI, HDFC Bank, ICICI or any bank’s Fixed Deposit account holder? New FD rule may Lower your returns

SBI, HDFC Bank, ICICI or any bank’s Fixed Deposit account holder?

Recently, The Reserve Bank of India announced a variation in the rule for the rate of interest applicable to overdue domestic fixed deposits in banks and cooperative banks. Fixed Deposit (FD) account holders in all banks and co-operative banks will get lower the savings deposit rate or the shrunk FD interest rate on the behindhand deposits as per the RBI. SBI, HDFC Bank, ICICI or any bank's Fixed Deposit account holder? New FD rule may Lower your returns

On an assessment of these instructions, it has been determined that if a Term Deposit (TD) matures and proceeds are not paid, the RBI said, the amount which will be left unclaimed with the bank hereby draw interest rate as applicable to a savings account or the diminished interest rate on the matured TD, no matter which is minimal.

What has been replaced!

The previous rule for overdue deposits in banks said that if a Term Deposit matures and proceeds are not paid, the amount which will be left unclaimed with the bank hereby draw interest rate as applicable to savings deposits. 

Although, this has now been changed as:

“If a Term Deposit (TD) matures and proceeds are not paid, the amount left unclaimed with the bank thereto attract a rate of interest as applicable to a savings account or the contracted interest rate on the matured TD, no matter which is minimal.”

Likewise, the preceding rule on overdue deposits for co-operative banks quoted, ‘If a term deposit matures and proceeds are not paid, the left amount unclaimed with co-operative banks shall attract the rate of interest as applicable to savings deposits.’ This has been changed to:

“The amount left unclaimed with the co-operative bank shall attract interest rate as applicable to a savings account or the contracted interest rate on the matured TD, no matter which is minimal if a Term deposit (TD) matures and proceeds are not paid.”

Inference of new rules

The new rule will be applicable to FD customers of all banks such as State Bank of India (SBI), HDFC Bank, ICICI Bank, etc. and the co-operative banks.

There would not be much influence of the new decision of RBI on tardy fixed deposits as banks are already offering low-interest rates on both FDs and savings account deposits.

Savings deposit interest rates offered by lenders are normally lower than the FD rates as banks were formerly applying savings deposit interest rates on the overdue amount.

In the perspective of decreasing FD rates across all lenders, the decision of the RBI would assure that only the lowest rate of interest applies to overdue FDs.

What do customers need to do?

As per the RBI decision, customers of the various banks should firstly, withdraw the FD amount on maturity and secondly, re-vest it in a new account.

 

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