Domestic deposits
RBI in a recent circular accentuated the review of instructions on Interest on overdue domestic deposits addressing all Scheduled Commercial Banks (including RRBs), all Small Finance Banks, all Local Area Banks and all Primary (Urban) Co-operative Banks/ District Central Co-operative Banks/ State Co-operative Banks.

In the notification issued, the Reserve Bank of India clearly drafted these pointers to bring under the banks’ notice:

• As per the previous norms it was mentioned that if the Term Deposits(TD) matures and proceeds are unpaid, the unclaimed amount of the banks shall be exposed to interest as applicable to the savings deposit.

• After the review, the amendments have been made and the decision was taken that if the Term Deposits (TD) matures and proceeds are not paid then the unclaimed amount of the banks will have interest applied over it as per the norms of savings deposit or the contracted rate of interest will be applied. This is to mention that it is of relaxation that from the two amounts mentioned, the amount of lower value has to be paid.

Referring to previous circulars the Master Direction – Reserve Bank of India (Interest Rate on Deposits) Directions, 2016 dated March 3, 2016, and the Master Direction – Reserve Bank of India (Co-operative Banks – Interest Rate on Deposits) Directions, 2016 dated May 12, 2016, the present notification mentions that in Section 9(b) of both the segments, amendments have been made.

The existing documents contains the following points on the interest on overdue domestic deposits:
• If the term deposit matures and proceeds are not paid by the banks and any amount remains to be not claimed. Interest will be applied over that amount as applicable to the savings deposits.
• If the term deposit matures and proceeds are not paid and the amount is left to be unclaimed by the cooperative bank that interest will be applied over that amount as applicable to the savings deposit.

However the current amendments renews the statements to as follows:
• If the term deposit matures and the proceeds are not paid by the banks and any amount remains to be unclaimed by the banks then interest will be applied over it as applicable to the savings account or as per the contracted rate of interest of the matured Term Deposit, whichever is lower
• If the term deposit matures and proceeds remain unpaid and the amount remains unclaimed by the cooperative bank, then interest will be applied over that amount as applicable to the savings account or as per the contracted rate of interest of the matured Term Deposit, whichever amount is lower.

The explained notification can be accessed here: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12125&Mode=0