by

Rajesh Goyal 

Define Bulk Deposits?  or What are “Bulk Deposits”  ? or What are Wholesale Deposits ?  What is the new threshold for “Bulk Deposits” ?

Bulk Deposit means "Rupee Term Deposits of Rs 1 crore and above".   Till 2012, the above two terms i.e. Bulk deposits and wholesale deposits  have been frequently been used and confused by bankers and regulators.   However, in January, 2013, RBI has clarified that from now onwards, only “Bulk Deposits will be used and ‘wholesale deposit’ terminology will not be used.     In the same circular RBI has defined the threshold for  Bulk Deposits.   Thus,  now “bulk deposit” means "Rupee term deposits of  Rs 1 crore and above". 

What is Differential Rate of Interest ?  Where / When is it payable?

Differential rate of interest  refers to paying different rate of interests  for the  deposits received on the same date, and with same maturity.     It has been decided that wef 1^st April, 2013, the permission to offer differential rates of interest for the deposits of the same maturity will be applicable to bulk deposits  (i.e. Rs. 1 crore and above).   For deposits below Rs 1 crore, the same rate will apply for deposits of the same maturity.

What is Differential Rate of Interest ?  Where / When is it payable?

Differential rate of interest  refers to paying different rate of interests  for the  deposits received on the same date, and with same maturity.     It has been decided that wef 1^st April, 2013, the permission to offer differential rates of interest for the deposits of the same maturity will be applicable to bulk deposits  (i.e. Rs. 1 crore and above).   For deposits below Rs 1 crore, the same rate will apply for deposits of the same maturity.

What does “Rupee Term Deposits” means now ?

WEF 1^st April, 2013, Rupee term deposits will include domestic term deposits as well as term deposits under NRO and NRE accounts.   

Can Banks Pay Interest Based on Negotiations with the Depositor ?

No, banks are now required to  disclose in advance,  the schedule of interest rates payable on deposits including deposits on which differential interest will be paid.    Interest paid by banks should be as per the schedule and not be subject to negotiation between the depositor and the bank.

Premature Wilthdrawal of Deposits -  Whether Banks Can Refuse Premature Withdrawal ? Whether Banks Can Charge Premature withdrawal penalty ?

It has been decided that wef 1^st April, 2013 

(a)    Banks will have the discretion to disallow premature withdrawal of a term deposit in respect of bulk deposits (i.e. Rs 1 crore and above)  of all depositors, including deposits of individuals and HUFs.  Bank should, however, notify such depositors of its policy of disallowing premature withdrawal in advance, i.e., at the time of accepting such deposits.

(b)   A bank on request from a depositor shall allow withdrawal of a Rupee term deposits of less than Rs 1 crore, before completion of the period of the deposit agreed upon at the time of making the deposit.

(c)    Bank will have the freedom to determine its own penal interest rates for premature withdrawal of term deposits.   Bank should ensure that the depositors are made aware of the applicable penal rates along with the deposit rates.