overdue domestic deposits

RBI has decided vide its circular dated 2nd July, 2021 that term deposits with banks, which has matured and which has been unclaimed in the sense that it has not been redeemed or extended, then the proceeds will attract interest at the savings bank rate or the contracted rate of interest on the matured TD, whichever is lower.

The key point here is “whichever is lower”, which means invariably it will revert to the savings rate, which is about 3% or so in India. TDs are always higher than savings bank rate in India at around 5.50% to 6.00% per cent so what really is clarified by this circular is not clear. In the case of reinvestment deposits or recurring deposits, obviously this will not apply.

There is no definition of what is overdue term deposits in the Mater Directions referred to in the circular.

This is a retrograde step from the RBI, retrograde to the bank customer.

Anyways, nowadays bank deposits have lost their lure completely, what with the piddly amounts being paid as interest on the bank fixed deposits, its not attractive anymore to keep money in the banks as fixed deposits.

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