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(Precious) Words of Wisdom : "Never spend your money before you have earned it." ~ Thomas Jefferson

Non-callable Bank Fixed Deposits to make a debut

As you may recollect, in my blog post 'RBI's 6th bi-monthly monetary policy is a pleasant surprise' I had mentioned that RBI is planning to soon announce the guidelines for banks to issue a new type of Fixed Deposit.

At present, individuals and HUFs depositing up to Rs.1 crore are allowed early encashment i.e. callable deposits.

The new fixed deposits — known as non-callable deposits — would be the ones where premature withdrawal would not be permitted.

Thus, banks will henceforth have the choice to offer different interest rates for deposits that come with premature withdrawal facility and those that don't.

RBI has now notified the relevant guidelines in this regards, as listed below:

a. Fixed deposits for individuals (held singly or jointly) must provide the early encashment facility if the amount is Rs.15 lakhs or less.

b. All other kinds of term deposits can be offered without the option of premature withdrawal. However, the customers should be given both the choices at the time of opening such a fixed deposit account.

c. The interest rates applicable on different kinds of deposits should be disclosed in advance and all FD accounts should strictly conform to the published schedule of interest rates.

d. The interest rates on deposits, including those with differential rates, offered by banks should be as per the policy approved by their respective Board of Directors. This should be available for supervisory review or scrutiny as and when required.

e. Lastly, banks have to ensure that the interest rates offered by them are reasonable, consistent and transparent.

We now await the banks to start introducing the non-callable fixed deposits. These will, most likely, have a higher rate than the existing callable deposits. Naturally so, because there has to be some incentive for the depositors to lock-in their money.

This is some consolation for the Indians who, despite its obvious disadvantages, continue to pour thousands of crores into these 'tax-inefficient' and 'non-remunerative' bank deposits year after year.


IMPORTANT ADVISORY FROM RBI
Few days back RBI had issued the following warning on 'All Bank Balance Enquiry' App. 

"It has come to the notice of the Reserve Bank of India that an app (application) is doing rounds on WhatsApp purportedly to facilitate checking of balance in customers' bank accounts. The application has an RBI logo with the title 'All Bank Balance Enquiry No' and has listed several banks with either a mobile number or call centre number.

The Reserve Bank wishes to clarify that it has not developed any such application. Members of public are, therefore, advised to use the application, if at all, at their own risk."

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