## Deposits 1. Deposits are of two types–demand (savings bank deposits and current accounts), and term (time) (FDs, RDs) 2. Current Accounts - The regulation that no interest may be paid on current deposits continues till date. **Deposit Accounts (non-current)** 3. [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. 4. 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. 5. Both are held in Indian rupees but NRE (RA) allows only foreign currency inward remittances, and balances are maintained in rupees. 6. So barring savings and FCNR (B) rates, a complete deregulation of interest rates on deposits was effective by October 1997. 7. *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 8. *Regulated again (NRE):* 1. But, 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 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. 2. NRE savings deposits rate were delinked from domestic interest rates and a ceiling was fixed effective April 17, 2004. It was linked back to domestic savings deposits on November 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. 9. [October 25, 2011](https://www.rbi.org.in/scripts/NotificationUser.aspx?Id=6775&Mode=0) - The savings bank deposit interest rate 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. 10. [December 28, 2011](https://www.rbi.org.in/Scripts/BS_CircularIndexDisplay.aspx?Id=6904) - Interest rates on rupee denominated non-resident deposits 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 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. 11. [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]\ 12. [Master Direction](https://rbi.org.in/Scripts/BS_ViewMasDirections.aspx?id=10296) - Reserve Bank of India (Interest Rate on Deposits) Directions, 2016 ## 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) 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) | [Action taken on the recommendations](RBI_Report_20011031_Committee%20on%20Banking%20Sector%20Reforms-Action%20taken%20on%20the%20recommendations_%20Narasimham%20Committee%20II.pdf) 5. [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) 2. RBI. (Jan 21, 2014). Report of the Expert Committee to Revise and Strengthen the Monetary Policy Framework, chaired by Urjit Patel. [Link]((https://rbidocs.rbi.org.in/rdocs/PublicationReport/Pdfs/ECOMRF210114_F.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. (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).