RBI asks banks to keep interest rates variations on FDs to minimum
MDT/PTI 16 August 2012

RBI said that banks should put in place a Board approved transparent policy on pricing of liabilities


Mumbai: The Reserve Bank of India (RBI) has asked banks to ensure the variation in interest rates on single-term deposits of Rs15 lakh and above and other deposits is minimal for corresponding maturities, reports PTI.
 
Stating that there was wide variations in the interest rates on single term deposits of corresponding maturities, RBI said in a notification that banks should put in place a Board approved transparent policy on pricing of liabilities.
 
It said that such practice of banks suggested "inadequate liquidity management system" and "inadequate pricing methodologies".
 
Banks are allowed to offer differential rates of interest on term deposits at their own discretion, on condition that they should disclose to the depositor in advance the schedule of interest rates payable on deposits, including deposits on which differential interest is paid.
 
"The Board/ALCO should ensure that the variation in interest rates on single term deposits of Rs15 lakh and above and other term deposits (i.e. deposits less than Rs15 lakh) is minimal for corresponding maturities," RBI said.
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