The Reserve Bank of India (RBI), on October 26, 2023, announced that the bulk deposit limit for Regional Rural Banks (RRBs) has been increased from Rs 15 lakh to Rs 1 crore. The decision was taken after a review of the bulk deposit limit of RRBs. The definition of "Bulk Deposit" varies among banks. The bulk deposit limit for scheduled commercial and small finance banks is Rs 2 crore and above. For RRBs, the limit has been increased from Rs 15 lakh to Rs 1 crore. The move is expected to provide a more level playing field for banks.
Banks can offer varying interest rates on bulk deposits in line with their requirements and asset-liability management (ALM) projections. Now, as the limit of bulk deposits of RRBs has been enhanced to Rs 1 crore, it will reduce the operational autonomy of the banks as it can only offer a single rate to all depositors of a particular tenure.
RRBs are government-owned Scheduled Commercial Banks, primarily focused on rural areas but also have a presence in urban regions. They provide essential banking services, including pension distribution, and offer modern banking conveniences such as debit cards and Internet banking. Deposits in RRBs are secured by the Deposit Insurance and Credit Guarantee Corporation (DICGC), ensuring protection of up to five lakh rupees for each depositor.
In a separate release on the same day, RBI also said that banks must allow premature withdrawals on all term deposits up to Rs 1 crore. It is a substantial increase from the previous limit of Rs 15 lakh for 'non-callable' fixed deposits.
RBI had earlier allowed lenders to offer higher rates on non-callable fixed deposits that could not be withdrawn before maturity. This recent change enables individuals to make premature withdrawals on domestic term deposits up to one crore rupees, providing added flexibility to depositors.
"On a review, it has been decided that (i) the minimum amount for offering non-callable TDs may be increased from Rupees fifteen lakh to Rupees one crore, i.e., all domestic term deposits accepted from individuals for amount of Rupees one crore and below shall have premature-withdrawal-facility and (ii) these instructions shall also be applicable for Non-Resident (External) Rupee (NRE) Deposit / Ordinary Non-Resident (NRO) Deposits," the RBI release said.