The Reserve Bank of India allowed commercial banks to offer differential interest rates on bulk deposits based on liquidity coverage ratio run-off rates
The new guidelines apply to both domestic rupee deposits and those held by non-resident Indians to provide greater liquidity management flexibility
Banks must uniformly display their bulk deposit interest rates across all branches by 10:10 am every day without discrimination
After HDFC Bank Rate Row, RBI Allows Differential Bulk Deposit Rates
the core rules for bulk deposits remain unchanged. The RBI stated that lenders must offer identical interest rates across all branches and clients to prevent discrimination
RBI's Concessional Swap Facility to Boost Financial Institutions' Overseas Borrowing: S&P
Summary
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The Reserve Bank of India (RBI) permitted flexibility based on individual run-off rates under the liquidity coverage ratio (LCR) framework. The new rule covers both domestic rupee and non-resident Indian accounts, the central bank stated in a July 30 notification.
However, the core rules for bulk deposits remain unchanged. The RBI stated that lenders must offer identical interest rates across all branches and clients to prevent discrimination.
Lenders must publish these rates daily by 10 am, with a 10-minute grace period allowed for updates.
HDFC Bank Controversy
The policy shift follows a controversy involving HDFC Bank. The private lender faced intense scrutiny over allegations that it transferred ₹45 crore to the Maharashtra State Road and Development Corporation (MSRDC) to obtain bulk deposits disguised as "marketing spends".
MSRDC received a 6.01% interest rate, far above the standard 3.5% savings rate. This created a yield gap of nearly 2.5%.
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An internal probe triggered swift penalties. The bank sent warning letters and fined its top executives ₹1 lakh each. The penalised officials included Managing Director Sashidhar Jagdishan, Chief Financial Officer Srinivasan Vaidyanathan and group head of retail assets Arvind Vohra.
Rupee Gains Remain Muted
The rupee has recovered just around 3% from its record low in May, and even that modest gain has been slipping as tensions in West Asia put renewed pressure on the currency. Traders say the RBI has been intervening by selling dollars in recent sessions to prop up the rupee.
Barclays Plc strategists, including Lemon Zhang, noted that the rupee remains highly exposed to oil price movements, and that the recent push to boost deposits does little to help since it has no direct bearing on the forex market. Barclays anticipates further weakness in the rupee and continues to hold a long yuan-rupee position.