The Spotlight on Bulk Deposits
The primary change revolves around how banks handle 'bulk deposits'. For most commercial banks, this refers to a single fixed deposit of ₹3 crore or more. The new framework is aimed squarely at this segment, affecting high-net-worth individuals, companies,
and trusts. If your deposits fall into this category, you are the focus of these new regulations. For retail customers with FDs below this threshold, the immediate impact is minimal, as the rules for regular FDs remain largely unchanged. Existing deposits will also continue at their contracted rates until maturity.
Daily Rate Disclosure: A New Era of Transparency
The most significant change is the mandate for transparency. Starting October 1, banks must publish their interest rates for bulk deposits on their websites every working day. These rates must be posted by 10:00 AM, with a small grace period until 10:10 AM. This move empowers large depositors, allowing them to compare published rates across different banks before committing their funds. Previously, rates for large deposits could be a matter of negotiation with a branch manager; now, banks are required to honour the rate they have publicly disclosed for the day.
Uniform Pricing Across Branches
Another crucial rule is the requirement for uniform pricing. Banks can no longer offer different interest rates for similar bulk deposits just because they are booked at different branches. This ensures that for a deposit of the same amount and tenor accepted on the same day, the rate is consistent across the entire bank. However, there is an important exception. Banks are permitted to offer different rates on bulk deposits based on the depositor's classification under the Liquidity Coverage Ratio (LCR) framework, but this must be based on a clear, board-approved policy.
Your October Review Checklist
Given these changes, large depositors should undertake a thorough review of their FD portfolio this month. First, assess your total deposits with each bank to determine if any single deposit crosses the ₹3 crore bulk threshold. If you are planning to make a new bulk deposit or renew an existing one, make it a habit to check the bank's website after 10 AM for the day's official rate. This allows you to make an informed decision and ensures you receive the publicly declared interest rate. Also, discuss with your relationship manager how the bank's LCR policy might affect the rates offered to you. For those with deposits spread across multiple banks, this is an opportune time to compare the newly transparent rates and consolidate funds where returns are most favourable.
What Hasn't Changed: TDS and Insurance
It's important to note what these October rules do not change. The regulations surrounding Tax Deducted at Source (TDS) and deposit insurance remain unaffected. TDS is deducted if your annual interest income from a bank exceeds ₹50,000 for general citizens and ₹1,00,000 for senior citizens. Similarly, the Deposit Insurance and Credit Guarantee Corporation (DICGC) continues to insure all eligible bank deposits, including FDs, up to a limit of ₹5 lakh per depositor, per bank. This insurance covers both principal and interest. Therefore, while reviewing your FDs for the new rate transparency rules, it is also prudent to ensure your deposits are structured to maximise this insurance coverage.
