In a significant development, the Reserve Bank of India (RBI) has implemented changes to the rules governing fixed deposits (FDs), now allowing premature withdrawal on deposits of up to Rs 1 crore. The updated guidelines, which came into effect under the Non-callable Fixed Deposit Rule Change 2023, have far-reaching implications for banking customers in India.
Fixed deposits are typically classified into two categories: callable and non-callable. Callable deposits allow for premature withdrawal, while non-callable deposits do not. Previously, the RBI permitted banks to offer domestic term deposits (TDs) without a premature withdrawal option for deposits of Rs 15 lakh and below.
Under the revised rule, the RBI has increased the minimum amount for offering non-callable fixed deposits to Rs 1 crore. This means that all domestic term deposits accepted from individuals for an amount of Rs 1 crore and below shall have the premature withdrawal facility.
The RBI notification, dated October 26, 2023, specified, “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 an amount of Rupees one crore and below shall have premature-withdrawal-facility.”
The updated rules will also apply to Non-Resident (External) Rupee (NRE) Deposits and Ordinary Non-Resident (NRO) Deposits, ensuring that NRE/NRO account holders can also avail of the premature withdrawal option on deposits up to Rs 1 crore.
This change offers greater flexibility to customers and aligns with the RBI’s objective to provide more accessible and responsive banking services.
The previous rule stated, “Banks shall have the freedom to offer term deposits without premature withdrawal option, provided that all term deposits accepted from individuals (held singly or jointly) for an amount of Rupees fifteen lakh and below shall have premature-withdrawal-facility.”
The updated guideline now reads, “Banks shall have the freedom to offer term deposits without premature withdrawal option, provided that all term deposits accepted from individuals (held singly or jointly) for an amount of Rupees one crore and below shall have premature-withdrawal-facility.”
This regulatory change aims to enhance customer convenience and accessibility while ensuring that individuals can manage their investments more flexibly.
