This FD amount will soon be considered as retail FD; RBI to review bulk FD limits (2024)

The Reserve Bank of India (RBI) announced the proposal to revise the definition of bulk fixed deposits. As per the proposal announced, the bank's fixed deposits of Rs 3 crore and above will be considered bulk deposits. A bank FD of Rs 2 crore and above is considered a bulk FD currently.

This would mean that an individual making bank FD between Rs 2 crore and upto Rs 3 crore will soon be considered as retail FD instead of bulk FD. Generally, the bank offers lower FD rates on bulk FDs as compared to retail FDs. Hence, this is likely good news for FD investors to earn higher interest rates making FD investments of these amounts. Sometimes banks offer higher interest rate on bulk FD on specific tenures depending on liquidity conditions in the debt market.

The new proposal will apply to scheduled commercial banks and small finance banks excluding regional rural banks.

As per the Statement on Development and Regulatory Policies, "Banks have discretion to offer differential rate of interest on the bulk deposits as per their requirements and Asset-Liability Management (ALM) projections. The bulk deposits limit was enhanced in the year 2019 for Scheduled Commercial Banks (SCBs) (excluding Regional Rural Banks) and Small Finance Banks (SFBs) as ‘Single Rupee term deposits of Rs 2 crore and above’. On a review, it is proposed to revise the definition of bulk deposits as ‘Single Rupee term deposits of Rs 3 crore and above’ for SCBs (excluding RRBs) and SFBs. Further, it is also proposed to define the bulk deposit limit for Local Area Banks as ‘Single Rupee term deposits of Rs 1 crore and above’ as applicable in case of RRBs. Necessary guidelines will be issued shortly. "

As per the Governor's statement, "On a review of the bulk deposit limit, it is proposed to revise the definition of bulk deposits as ‘Single Rupee term deposit of Rs 3 crore and above’ for SCBs (excluding RRBs) and SFBs. Further, it is also proposed to define the bulk deposit limit for Local Area Banks as ‘Single Rupee term deposits of Rs 1 crore and above’, as applicable in case of RRBs. "

Once the necessary guidelines are issued by the RBI, a single FD of Rs 3 crore and above will be considered as a bulk FD. FD amount of up to Rs 3 crore will be considered as retail FD. Single rupee term deposit means that a FD investor having Rs 6 crore making three FDs of Rs 2 crore each will mean that each FD is considered as retail deposit. Had he made a single FD deposit of Rs 6 crore, then it would have been considered as bulk deposit.

As per RBI master direction on interest rate on deposits, "Differential interest rate shall be offered only on bulk deposits."