This note details the history of deregulation of Interest Rates on Rupee Deposits in India (both, by persons resident in India and persons resident outside India)
1. Savings Deposits are of two types–demand (savings bank deposits and current accounts), and term (time) (FDs, RDs, CDs)
2. Current Accounts - The regulation that no interest may be paid on current deposits continues till date.
### Term Rupee Deposits (Non-Resident)
1. **NRO** - October 22, 1997 - The term deposit interest rates under Ordinary Non-Resident [(NRO)](https://www.rbi.org.in/commonman/english/scripts/Notification.aspx?Id=1066#7:~:text=1.2.%20Ordinary%20Non%2DResident%20(NRO)%20Accounts) accounts and for residents were deregulated with effect from October 22, 1997.
2. **NRE** - [Sep 13, 1997](https://www.rbi.org.in/commonman/english/scripts/Notification.aspx?Id=1066#7) - Interest rates under *Non-Resident (External) Rupee Accounts-NR(E)RA/[NRE](Non-Resident (External) (NRE) Accounts)* for all term maturities were deregulated effective September 13, 1997. The savings rate remain linked to the domestic deposit rates.
1. Both NRE and NRO accounts are held in Indian rupees but NRE (RA) allows only foreign currency inward remittances, and balances are maintained in rupees. So barring savings and FCNR (B) rates, a complete deregulation of interest rates on deposits was effective by October 1997.
3. *Regulated again (NRE) -* Effective July 17, 2003, in response to changing conditions in the financial markets, interest rates on NRE term deposits were downward adjusted to discourage "capital inflows" and linked to the international rates by way of a ceiling of 250 basis points over and above the US Dollar LIBOR/Swap rates of corresponding maturities.
1. It was done as domestic rates were very high compared to global rates, and a change in them could cause sudden outflows.
4. [October 26, 2004](https://www.rbi.org.in/scripts/NotificationUser.aspx?Id=1986) - Ceiling on NRE interest rates to LIBOR/SWAP rates of US dollar of corresponding maturities plus 50 basis points from the existing level of US dollar LIBOR/SWAP rates.
5. April 24, 2007 - The ceiling rates were progressively reduced and brought down to LIBOR/SWAP rates for corresponding maturities with effect from close of business as on April 24, 2007.
6. November 15, 2008 - The year 2008-09, however, saw a progressive increase in the ceiling rates to 175 basis points over and above LIBOR/Swap rates for corresponding maturities with effect from the close of business as on November 15, 2008.
7. [November 24, 2011](https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=6842&Mode=0#F) - With effect from November 23, 2011, interest rates on Non- Resident (External) Rupee (NRE) Term Deposits for 1-3 years, and above, was capped at the LIBOR/SWAP rates plus 275 basis points, as on the last working day of the previous month, for US dollar of corresponding maturities *(as against LIBOR/SWAP rates plus 175 basis points effective from close of business on November 15, 2008).*
8. [December 28, 2011](https://www.rbi.org.in/Scripts/BS_CircularIndexDisplay.aspx?Id=6904) - Interest rates on rupee denominated deposits (non-resident) were deregulated.
9. [July 18, 2012](https://www.rbi.org.in/scripts/NotificationUser.aspx?Id=7458&Mode=0) - RBI decided banks should not allow the benefit of additional interest rate of 1% for their own staff on any type of deposits of non-residents (NRE/NRO)
10. [Jan 24, 2013](https://www.rbi.org.in/scripts/NotificationUser.aspx?Id=7825) - Minimum amount for differential rate of interest increased *(applicable to Term Rupee Deposits - Resident, NRE, NRO)*
1. RBI clarified the expression “bulk deposit” would be used for single Rupee term deposits of Rs 1 crore and above.
2. Banks were permitted to offer differential deposit rates for bulk deposits (1 crore and above).
3. For deposits below Rs 1 crore, the same rate will apply for deposits of the same maturity.
4. Since April 29, 1998 banks were permitted to offer, at their discretion, differential rates of interest on single term deposits of same maturity
11. [August 14, 2013](https://www.rbi.org.in/scripts/NotificationUser.aspx?Id=8311) - In order to pass on the benefit of exemption provided on incremental NRE deposits with maturity of 3 years and above from CRR/ SLR requirements, it was decided to give banks the freedom to offer interest rates on such deposits without any ceiling till November 30, 2013. The extant ceiling on NRO Accounts shall continue.
12. [Nov 29, 2013](https://www.rbi.org.in/scripts/NotificationUser.aspx?Id=8601&Mode=0) - guidelines issued on Aug 14, 2013, were extended till January 31, 2014
13. [Jan 31, 2014](https://www.rbi.org.in/scripts/NotificationUser.aspx?Id=8725&Mode=0) - With effect from March 1, 2014, the interest rate ceiling will revert to the position prior to August 14, 2013, i.e. interest rates offered by banks on NRE deposits cannot be higher than those offered by them on comparable domestic rupee deposits.
### Savings Rupee Deposits (Non-Resident)
1. April 17, 2004 - NRE savings deposits rate were delinked from domestic interest rates and a ceiling NRE savings deposits rate was fixed at 6-month US Dollar LIBOR/Swap rate
2. November 17, 2005 - It was linked back to domestic savings deposits, effective from Nov 17, 2005.
3. [Apr 28, 2011](https://www.rbi.org.in/Scripts/bs_viewcontent.aspx?Id=2344) - Discussion Paper on 'Deregulation of Savings Bank Deposit Interest Rate' was released
1. [November 2, 2010](https://rbi.org.in/scripts/NotificationUser.aspx?Id=6071) - In the Second Quarter Review of Monetary Policy 2010-11 on November 2, 2010, RBI announced the preparation of a Discussion Paper on 'Deregulation of Savings Bank Deposit Interest Rate', to delineate the pros and cons of deregulating the savings bank deposits interest rate.
2. It was placed on the Reserve Bank’s website for feedback from general public.
4. [December 28, 2011](https://www.rbi.org.in/Scripts/BS_CircularIndexDisplay.aspx?Id=6904) - Interest rates on rupee denominated deposits (non-resident) were deregulated.
1. Banks were allowed to set their interest rates on both saving deposits and term deposits of maturity of >=1 year for NRE, savings deposits under NRO accounts (while those on term deposits under NRO accounts were already deregulated since October 22, 1997).
2. However, interest rates offered on NRE and NRO (savings & term) deposits cannot be higher than those offered by them on comparable domestic rupee deposits.
3. The move helped banks mobilise up to $2-3 billion in these deposits.
4. After the deregulation almost all banks [increased](https://www.pib.gov.in/newsite/PrintRelease.aspx?relid=83651) their NRE term deposit rates in the range of 349-628 basis points across various maturities to align with domestic term deposits.
5. In the post deregulation period up to April 20, 2012, Non-Resident Indians (NRI) deposit increased by 12.1 per cent (Rs.33,874 crore); and NRO deposits grew marginally by 1.9 per cent (Rs.1,199 crore).
6. However, Foreign Currency Non Resident [FCNR(B)] deposits had contracted by 3.8 per cent during the period.
5. [Master Direction](https://rbi.org.in/Scripts/BS_ViewMasDirections.aspx?id=10296) - Reserve Bank of India (Interest Rate on Deposits) Directions, 2016
### Savings Resident/Domestic
1. [Nov 1, 2004](https://www.rbi.org.in/scripts/NotificationUser.aspx?Id=2000) - Minimum Tenor of Domestic/NRO Term Deposits Accepted by SCBs Reduced
1. At present, since 2001, the banks can accept term deposits of Rs.15 lakh and above for a minimum maturity period of 7 days and in the case of term deposits of less than Rs.15 lakh, the minimum maturity period has to be 15 days.
2. In the [Mid-term Review of the Annual Policy Statement for the year 2004-05](https://www.rbi.org.in/scripts/NotificationUser.aspx?Id=1986) dated Oct 26, 2004, RBI announced minimum maturity period for NRO/Domestic deposits can be reduced to 7 days for deposits of any amount.
2. May 3, 2011 - 4.0%
3. [October 25, 2011](https://www.rbi.org.in/scripts/NotificationUser.aspx?Id=6775&Mode=0) - In the Second Quarter Review of Monetary Policy 2011-2012, the savings bank deposit interest rates (resident) was finally [deregulated](https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=6844&Mode=0) with immediate effect. It had remain unchanged at 3.5% since March 1, 2003.
4. [November 25, 2011](https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=6844&Mode=0) - RBI issued two conditions on savings bank deposit interest rates (resident)
5. August 23, 2012 - [Box III.2-Deregulation of Savings Bank Deposit Interest Rate – Rationale and Impact](RBI_Annual%20Report_2012.pdf#page=97&selection=8,0,9,72) in RBI's Annual Report-2012
## Savings instruments
This is *about Savings instruments (and not deposits) - It is unrelated, but just added for some reading*
1. [Nov 12, 2001](MyFiles/RBI_Group-Committee_20011112_Report%20of%20the%20Expert%20Committee%20to%20Review%20the%20System%20of%20Administered%20Interest%20Rates%20and%20Other%20Related%20Issues_Chairman-Y.%20V.%20Reddy.pdf) - Expert Committee to Review the System of Administered Interest Rates and Other Related Issues (Chairman: Dr. Y. V.Reddy) in 2001
2. [May 31, 2004](RBI_Group-Committee_200405_Report%20of%20the%20Advisory%20Committee%20to%20Advise%20on%20the%20Administered%20Interest%20Rates%20and%20Rationalisation%20of%20Saving%20Instruments_Chairman-Dr.%20Rakesh%20Mohan.pdf) - The Advisory Committee to Advise on the Administered Interest Rates and Rationalisation of Saving Instruments (Chairman: Dr. Rakesh Mohan) submitted its report
3. [Box VIII.4-Advisory Committee to Advise on the Administered Interest Rates and Rationalisation of Saving Instruments](RBI_Annual%20Report_2004.pdf#page=136&selection=49,0,50,37) in RBI's Annual Report 2004
## Google Sheets
1. This is [link](https://docs.google.com/spreadsheets/d/1Uhys199sS9HXA3OjbPmz8M5dKMGSOtFmZH1LVP_9ujw/edit?gid=163005792#gid=163005792&range=A2) to Google Sheets version of Deregulation of Savings Rate.
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## Act/Regulations/Directions
1. [Link](Deposits%20and%20Accounts.md#Act/Regulations/Directions)
## Groups & Committees
These are some of the groups that studied the savings deposit interest rates in India
1. [Jan, 1983](https://rbidocs.rbi.org.in/rdocs//PublicationReport/Pdfs/CR377_1983176E850A602740A9943B3554E253DD8D.PDF) - Report of the Working Group on Bank Deposits 1983.
2. [April 10, 1985](RBI_Group-Committee_19850410_Report%20of%20the%20Committee%20to%20Review%20the%20Working%20of%20the%20Monetary%20System_Chairman-Sukhamoy%20Chakravarty.pdf) – Committee to Review the Working of the Monetary System (Chairman: Prof. Sukhamoy Chakravarty)
3. [Nov, 1991](RBI_Report_199111_Committee%20on%20the%20Financial%20System_Narasimham%20Committee%20I.pdf) – Committee on the Financial System (Chairman: M. Narasimham)
1. [Action Taken on the Recommendations of the Committee on Financial System](https://drive.google.com/file/d/1_gfKPCvgmI_qggw3ubwkLbpAyAI68THw/view?usp=sharing)
4. [April 22, 1998](RBI_Group-Committee_19980422_Report%20of%20the%20Committee%20on%20Banking%20Sector%20Reforms-Narasimham%20Committee%20–%20II%20(1998).pdf) – Committee on Banking Sector Reforms (Narasimham Committee – II (1998) (Chairman: M. Narasimham)
5. Oct 31, 2001 - [Action taken on the recommendations](RBI_Report_20011031_Committee%20on%20Banking%20Sector%20Reforms-Action%20taken%20on%20the%20recommendations_%20Narasimham%20Committee%20II.pdf) of the Committee on Banking Sector Reforms (Narasimham Committee – II (1998)
6. [May, 2004](RBI_Group-Committee_200405_Report%20of%20the%20Advisory%20Committee%20to%20Advise%20on%20the%20Administered%20Interest%20Rates%20and%20Rationalisation%20of%20Saving%20Instruments.pdf) – Advisory Committee on Administered Interest Rates and Rationalisation of Savings Instruments (Chairman: Dr. Rakesh Mohan)
## Related Notes
1. [Deposits and Accounts](Deposits%20and%20Accounts.md)
2. [Lending Rates](Lending%20Rates.md)
## References
### [[Publications (Data Releases) & Research#Research|Research]]
[Groups/Committees](Groups%20and%20Committees.md)
1. RBI. (Nov 12, 2001). ==Report of the Expert Committee to Review the System of Administered Interest Rates and Other Related Issues==. [Link](https://rbidocs.rbi.org.in/rdocs/Bulletin/PDFs/24595.pdf) | [pdf](RBI_Group-Committee_20011112_Report%20of%20the%20Expert%20Committee%20to%20Review%20the%20System%20of%20Administered%20Interest%20Rates%20and%20Other%20Related%20Issues_Chairman-Y.%20V.%20Reddy.pdf)
Discussion Papers
1. RBI. Apr 28, 2011. ==Discussion Paper on 'Deregulation of Savings Bank Deposit Interest Rate'. [Link](https://www.rbi.org.in/Scripts/bs_viewcontent.aspx?Id=2344)
### [[Publications (Data Releases) & Research#Publications|Publications]]
1. RBI. Annual Reports.
2. RBI. (Jan 21, 2014). <span style="background-color:#ffffe5;">Table III.3 Deregulation of Interest Rates in India </span>. [Report](RBI_Group-Committee_2014_The%20Expert%20Committee%20to%20Revise%20and%20Strengthen%20the%20Monetary%20Policy%20Framework-2014_Chairman-Urijit%20R.%20Patel.pdf#page=114&selection=123,22,123,34) of the of the Expert Committee to Revise and Strengthen the Monetary Policy Framework, chaired by Urjit Patel (2014).