RBI/2009-10/409
DBOD. No. Dir. BC. 91/13.03.00/2009-2010
April 20, 2010
All Scheduled Commercial Banks
(excluding RRBs)
Dear Sir
Conversion of term deposits, daily deposits or
recurring deposits for reinvestment in term deposits
Please refer to paragraph 104 of the Monetary Policy Statement 2010-11 announced
by Governor on April 20, 2010 (extract enclosed).
- In terms of extant guidelines, as stipulated at paragraph 2.12 of the Master
Circular dated July 1, 2009 on 'Interest Rates on Rupee Deposits held in
Domestic, Ordinary Non-Resident (NRO) and Non-Resident (External) (NRE)
Accounts', banks should allow conversion of term deposits, daily deposits or
recurring deposits to enable depositors to immediately reinvest the amount lying
in the aforesaid deposits with the same bank in another term deposit. Banks are
required to pay interest in respect of such term deposits without reducing the
interest by way of penalty, provided that the deposit remains with the bank
after reinvestment for a period longer than the remaining period of the original
contract.
- On a review of the extant regulatory norms, and in order to facilitate better
asset-liability management (ALM), it has been decided to permit banks to
formulate their own policies towards conversion of deposits with immediate
effect.
Yours faithfully
(P Vijaya Bhaskar)
Chief General Manager-in-Charge
Encl: as above
EXTRACT
Reserve Bank of India
Monetary Policy Statement 2010-11
Conversion of Term Deposits,
Daily Deposits or Recurring Deposits for Reinvestment in Term Deposits
104. As per extant guidelines, banks should allow conversion of term deposits,
daily deposits or recurring deposits to enable depositors to immediately
reinvest the amount lying in the aforesaid deposits with the same bank in
another term deposit. Banks are required to pay interest in respect of such term
deposits without reducing the interest by way of penalty, provided that the
deposit remains with the bank after reinvestment for a period longer than the
remaining period of the original contract. On a review of the extant regulatory
norms and in order to facilitate better asset-liability management (ALM), it is
proposed to permit banks to formulate their own policies towards conversion of
deposits.