The Reserve Bank of India (RBI) has issued the “Commercial Banks – Interest Rate on Deposits” Directions, 2025, establishing a framework for how commercial banks must set and manage interest rates on deposit products. Effective upon placement on the RBI website, these Directions apply to commercial banks (excluding small finance banks, payment banks, regional rural banks and local area banks) and aim to strengthen transparency, fairness and governance in deposit pricing.
Banks must adopt a board-approved policy detailing interest rate schedules, premature withdrawal penalties and specific rules for NRE, NRO and FCNR(B) deposits. Interest rates must be uniform across branches and customers for comparable deposits accepted on the same date; negotiation of rates is prohibited. Banks are required to maintain bulk deposit interest rate cards in their core banking systems.
Domestic deposit rules clarify that current accounts remain non-interest bearing except limited cases for deceased account holders. Savings deposits are to be credited on a daily product basis with a uniform rate for balances up to ₹1 lakh and differential rates permitted above that threshold. Term deposits may vary by tenor, size (bulk deposits) and whether premature withdrawal is allowed; minimum tenor rules are prescribed and deposits of ₹1 crore and below from individuals must permit premature withdrawal. Interest on premature withdrawal will be for the period the deposit remained with the bank and no interest is payable if withdrawal occurs before completing the minimum stipulated period.
Banks may, at their discretion, award additional interest up to one percentage point to staff, certain executives and related associations. Special schemes for senior citizens are permitted offering higher fixed rates.
For non-resident and foreign currency deposits, the Directions mandate minimum tenors and require that interest on NRE/NRO deposits not exceed comparable domestic rates. FCNR(B) deposits attract ceilings linked to Overnight Alternative Reference Rates (ARR) or swap rates plus specified basis points, with prescribed reset periods and calculation conventions. Banks authorised under FEMA must observe these ceilings and calculation norms while offering foreign currency deposits.
The Directions require clear disclosure of penalty components for premature withdrawals at account opening; absence of disclosure precludes levy of penalties. Protections are provided for branch transfers, deceased depositors and other special situations. Prohibitions include paying commissions or incentives for deposit mobilisation except limited exceptions, and misleading advertisements that show only compounded yield without stating the simple interest rate. Exemptions apply to certain institutional or scheme-based deposits.
By consolidating prior guidance, mandating board oversight, and strengthening disclosure and supervisory access, the 2025 Directions seek to protect depositors, promote fair market conduct and enhance integrity in deposit pricing across India’s banking system and market discipline broadly.
