MUMBAI: The Reserve Bank of India has proposed stricter disclosure norms for deposit interest rates while allowing banks to price large deposits based on withdrawal risk, which will be the fourth factor for differential rates.
Until now, banks were allowed to offer differential interest rates based on duration, size and early withdrawal conditions. These determine whether deposits qualify as pooled deposits and whether early withdrawal is permitted, which in turn affects pricing.The draft rules stipulate that banks must publish their deposit interest rate schedules in advance on their websites and adhere to them strictly during the day. “The interest rates payable on deposits must be fully consistent with the interest rate schedule previously announced on the bank’s website, before the start of the business day.”According to the proposal, this would require banks to disclose rates in advance each morning and prevent changes during the day without customers’ prior visibility. The move seeks to standardize access to information for depositors and reduce pricing uncertainty. Customers will be able to view the rates applied at the beginning of the day and make decisions based on a specific schedule.The draft amendment introduces a fourth factor for pricing wholesale deposits, which is the flow rate under the framework of the liquidity coverage ratio. “The bank should be free to offer a differential interest rate on large deposits, by considering the differential run-off rate applicable to deposits or unsecured wholesale financing from retail or non-retail customers, respectively under the Liquidity Coverage Ratio framework…” According to the draft, this expands the pricing framework to reflect the stability of different types of deposits.