The RBI's Push for Fairness
The Reserve Bank of India (RBI) has issued new guidelines aimed at promoting transparency and fairness in how Small Finance Banks (SFBs) handle fixed deposits. Effective October 1, 2026, these banks can no longer offer different interest rates to different customers
for fixed deposits of the same tenure and amount booked on the same day. This directive, part of the 'Reserve Bank of India (Small Finance Banks – Interest Rate on Deposits) Second Amendment Directions, 2026', mandates that the interest rate offered must be uniform across all of a bank's branches for such comparable deposits. The rules are designed to ensure that every depositor is treated equally, preventing banks from creating special, higher rates for some while leaving loyal, existing customers with a lower return on identical products.
Ending the 'New vs. Old' Customer Divide
For years, a key strategy for many banks, particularly those aggressive about growth, has been to attract new funds by offering special, higher interest rates on FDs. These rates were often marketed to new customers or for fresh funds, while existing customers renewing their deposits were not always offered the same lucrative deal. This created a disparity where two individuals with the same FD amount for the same duration at the same bank could be earning different returns. The RBI's new rule directly targets this inconsistency. The goal is to ensure that a rate published by the bank on its website for a specific FD product is the rate every eligible customer gets, no matter if they are new, old, or transacting at a different branch.
Why SFBs Offer Higher Rates
Small Finance Banks have a specific mandate from the RBI to improve financial inclusion by lending to underserved segments like small businesses, micro-entrepreneurs, and farmers. This lending portfolio typically carries higher interest yields. To fund these loans, SFBs need to aggressively attract deposits from the public. Lacking the vast branch networks and brand recognition of larger, established banks, their primary tool for competition is offering higher interest rates on fixed deposits. It's not uncommon for SFBs to offer FD rates that are 1% to 2% higher than those at major public sector or private banks, making them an attractive option for savers seeking better returns.
Impact on Banks and Savers
For savers, this is a clear win for transparency and fairness. You no longer need to worry that someone else is getting a better rate on the exact same product from your bank on the same day. It protects loyal customers from being disadvantaged. For Small Finance Banks, this will require a strategic shift. They can no longer rely on short-term, high-rate offers to selectively boost deposits. Their pricing must now be consistent and publicly declared. While the new rules apply across various bank types, they are particularly significant for SFBs due to their reliance on FDs for funding. Banks will still set their own rates based on market conditions, but they must apply them uniformly for like-for-like non-bulk deposits.
What About Bulk Deposits?
The RBI's directive for uniformity primarily applies to retail deposits. For bulk deposits—defined as a single term deposit of ₹3 crore or more—the rules offer more flexibility. Banks are permitted to offer different interest rates on these large deposits, but even this process is now subject to greater transparency. SFBs must publish the rates for bulk deposits on their websites every morning, ensuring that even large corporate clients have clear visibility. This flexibility acknowledges that bulk deposits have different liquidity characteristics, which can influence pricing.
