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Mid-term Review of Monetary and Credit Policy for the year 2002-03 and
Interest Rates on Deposits by Banks/ RRBs/ Local Area Banks
DBOD
No. Dir. BC. 38 -13.03.00- dated 5th November 2002
Please
refer to paragraph 72 of the statement on �Mid-term Review of Monetary and
Credit Policy for the year 2002-03� enclosed with Governor�s letter No. MPD.
BC. 222/07.01.279/2002-03 dated October 29, 2002.
2. It may be recalled that while interest
rates on deposits stand de-regulated except on deposits in savings bank
accounts, discretion has been given to Regional Rural Banks (RRBs)/ Local Area
Banks (LABs) to pay additional interest of half per cent per annum over and
above the interest rate prescribed for Scheduled Commercial Banks. Similarly,
although interest is not payable on current accounts maintained with them,
Scheduled Commercial Banks have been given the discretion to pay interest on
current accounts maintained by RRBs sponsored by them at a mutually agreed rate.
3.
The above discretionary provisions generally add to increase in the cost
of deposits to the concerned institutions. In order to remove the above
anomalies, the following measures are suggested for implementation as early as
possible:
(i)
RRBs/ LABs are encouraged not to pay any additional interest on the
savings bank accounts over and above what is payable by commercial banks.
(ii)
Sponsor banks are encouraged not to pay interest on the current accounts
maintained by RRBs with them.
4.
Please acknowledge receipt.
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