The Reserve Bank of India (RBI) has introduced a landmark set of guidelines titled Reserve Bank of India (Commercial Banks – Interest Rate on Deposits) Directions, 2025. Effective from November 28, 2025, these RBI directions aim to redefine how banks handle deposit interest rates, ensuring transparency, fairness, and customer-centric practices.
If you’re a depositor, a banker, or simply someone who wants to understand how these changes impact India’s financial ecosystem, this detailed guide is for you.
Why Did RBI Issue These Directions?
The banking sector thrives on trust. Depositors expect clarity on how their money grows, while banks need flexibility to manage liquidity. RBI’s new directions strike a balance by:
- Standardizing interest rate practices across commercial banks.
- Eliminating ambiguity in premature withdrawal penalties.
- Protecting depositor interests through uniform policies.
In short, these directions are designed to make banking simpler, fairer, and more transparent.
Who Do These Directions Apply To?
The directions cover all commercial banks in India, including:
- Banking companies
- Corresponding new banks
- State Bank of India
However, they exclude Small Finance Banks, Payment Banks, Regional Rural Banks, Local Area Banks, and foreign branches of Indian banks.
Key Highlights:
1. Interest Rate Framework
- Banks must adopt a Board-approved policy for:
- Interest rates on deposits
- Penalties for premature withdrawals
- Uniformity is mandatory: No discrimination between deposits of similar amount and tenure.
- Transparency: Rates must be disclosed upfront and maintained in the Core Banking System for supervisory review.
2. Domestic Rupee Deposits
- Current Accounts: No interest payable, except on balances of deceased depositors.
- Savings Accounts:
- Interest calculated on a daily product basis.
- Uniform rate up to ₹1 lakh; differential rates allowed above ₹1 lakh.
- Term Deposits:
- Minimum tenor: 7 days.
- Differential rates only for bulk deposits (₹3 crore and above).
- Banks can offer deposits without premature withdrawal option but deposits up to ₹1 crore must allow premature withdrawal.
3. Special Benefits
- Additional Interest:
- Banks may offer 1% extra interest to:
- Bank staff and their associations
- Senior citizens (including retired staff)
- Banks may offer 1% extra interest to:
- Senior Citizen Schemes:
- Higher fixed rates allowed, but HUF accounts are excluded.
4. Non-Resident Deposits (NRE/NRO)
- Minimum tenor:
- NRE deposits: 1 year
- NRO deposits: 7 days
- Interest rates on NRE/NRO deposits cannot exceed domestic deposit rates.
- No additional interest benefits for staff or senior citizens on NRE/NRO deposits.
5. Foreign Currency Deposits (FCNR(B))
- Tenor: 1 to 5 years.
- Interest ceilings linked to Overnight Alternative Reference Rate (ARR) plus:
- 250 basis points for 1–3 years
- 350 basis points for 3–5 years
- Interest calculated on a 360-day year basis.
6. Prohibitions
Banks cannot:
- Offer lotteries, prizes, or incentives for deposits.
- Pay commissions beyond permitted norms.
- Advertise only compounded yields without disclosing simple interest rates.
Impact on Depositors
For customers, these directions mean:
- Greater clarity on interest rates and penalties.
- Fair treatment across all branches.
- Enhanced benefits for senior citizens and bank staff.
For NRIs, the rules ensure parity with domestic deposit rates and clear norms for conversion upon returning to India.
Why These Directions Matter
The RBI’s move strengthens consumer protection and promotes financial stability. By standardizing interest rate practices, it reduces ambiguity and ensures that depositors make informed decisions.
Final Thoughts
The Reserve Bank of India (Commercial Banks – Interest Rate on Deposits) Directions, 2025 mark a significant step toward transparency and fairness in banking operations. Whether you are a domestic depositor, an NRI, or a senior citizen, these guidelines aim to safeguard your interests while maintaining the integrity of India’s banking system.