Master Circular of instructions relating to deposits held in FCNR(B) Accounts - RBI - Reserve Bank of India
Master Circular of instructions relating
to deposits held in FCNR(B) Accounts
DBOD No. Dir. BC. 13/13.03.00/2002-03 July 31 , 2002 All Commercial Banks Dear Sirs, Master Circular of instructions relating As you are aware Reserve Bank of India has issued Master Directive on Interest Rates on Deposits held in FCNR(B) Accounts, vide DBOD No. Dir.BC. 09/13.03.00/2001-02 dated August 11, 2001. Certain amendments have also been made thereto from time to time. In order to enable the banks to have all existing instructions on the subject at one place a Master Circular has been prepared by incorporating the instructions issued upto 30 June 2002 and has been placed on the RBI website (http://www.rbi.org.in). 2. It may be noted that the instructions contained in the directives/circulars listed in Annexure VI have been incorporated in the Master Circular. Yours faithfully, ( M.R. Srinivasan) Master Circular on interest rates on deposits Contents Master Circular on interest rates on Commercial bank which is an Authorised Dealer in foreign exchange should not pay interest on deposits of money accepted by it or renewed by it under the Foreign Currency (Non-Resident) Accounts (Banks) Scheme, which came into force from 15 May 1993, except in accordance with the rates as specified in the Annexure I hereto and on the terms and conditions specified in the paragraphs below : 1. Definition of the term "Deposit" The deposits under the Scheme mean "term deposits" received by the bank for a fixed period and withdrawable only after the expiry of the said fixed period and shall also include Reinvestment Deposits and Cash Certificates or other deposits of similar nature. 2. Other important features of the Scheme
Note: Recurring Deposits shall not be accepted under FCNR (B) Scheme. 3. Manner of payment of interest
4. Discretion to pay additional interest not exceeding one per cent on deposits of bank's staff In respect of a deposit accepted in the name of -
a bank may, at its discretion, allow additional interest at a rate not exceeding one per cent per annum over and above the rate of interest prescribed by the bank subject to following conditions:
Explanation: `Family' means and include the spouse of the member/retired member of the bank's staff, his/her children, parents, brothers and sisters who are dependent on such a member/retired member but does not include a legally separated spouse. 5. Premature withdrawal of deposits i) Banks on request from the depositor should permit premature withdrawal of deposit under the FCNR(Banks) Scheme. Banks are free to levy penalty for such premature withdrawal at their discretion. Banks may also, at their discretion, levy penalty to recover the swap cost in the case of premature withdrawal of FCNR(B) deposits. Where premature withdrawal of FCNR(B) deposits take place before completion of the minimum stipulated period in which case no interest is payable, banks may at their discretion levy penalty to cover the swap cost. However, the components of penalty should be clearly brought to the notice of the depositors at the time of acceptance of the deposits. If the depositors are not informed of the penalty provisions at the time of acceptance of deposits, the exchange loss arising out of premature withdrawal will have to be borne by the banks. ii) Conversion of FCNR(B) deposits into NRE deposits or vice-versa before maturity should be subject to the penal provision relating to premature withdrawal. 6. Payment of interest on overdue FCNR(B) Deposits : Banks may, at their discretion, renew an overdue deposit or a portion thereof provided the overdue period from the date of maturity till the date of renewal (both days inclusive) does not exceed 14 days. The rate of interest payable on the amount of the deposit so renewed should be the appropriate rate of interest for the period of renewal as prevailing on the date of maturity or on the date when the depositor seeks renewal, whichever is lower. In the case of overdue deposits where the overdue period exceeds 14 days and if the depositor places the entire amount of overdue deposit or a portion thereof as a fresh FCNR (B) deposit, banks may fix their own interest rates for the overdue period on the amount so placed as a fresh term deposit. Banks will have freedom to recover the interest so paid for the overdue period if the deposit is withdrawn before completion of minimum stipulated period under the scheme, after renewal. 7. Advances against FCNR(B) deposits - Manner of charging interest (a) When a loan or an advance is granted against a FCNR(B) term deposit which stands in the name of:
a bank would be free to charge a rate of interest without reference to its own Prime Lending Rate (PLR). A bank, at its discretion, may charge a rate of interest less than what was prescribed above in the case of advances upto Rs.3 lakhs, when converted notionally in Rupees at the time of granting advance, to a member or a retired member of the bank's staff or the spouse of a deceased member/retired member of the bank's staff against his/her term deposit specified in paragraph (4) above. (b) When an advance is granted against a term deposit which is not in the nature of sub-clause (a) above
If the term deposit against which an advance was granted is withdrawn before completion of the prescribed minimum maturity period, such an advance should not be treated as advance against term deposit and interest should be charged as prescribed in terms of Reserve Bank of India's directive on interest rates on advances issued from time to time. (c) When a loan or advance is granted out of resources mobilized under the scheme, interest rate chargeable should be at the rate as prescribed in terms of Reserve Bank of India’s directive relating to Interest Rates on Advances. 8. Margin on advance against term deposit A bank may determine the margin on a case-to-case basis. 9. Interest payable on the deposit of a deceased depositor In the case of a term deposit standing in the name/s of - (a) a deceased individual depositor, or (b) two or more joint depositors, where one of the depositors has died, interest should be paid in the manner indicated below :
However, in the case of death of the depositor after the date of maturity of the deposit the bank should pay interest at a rate operative on the date of maturity in respect of savings deposits held under RFC Account Scheme, from the date of maturity till the date of payment.
Note : In the case of claimant/s being residents, the maturity proceeds may be converted into Indian rupees on the date of maturity and interest be paid for the subsequent period at a rate applicable to the deposit of similar maturity under domestic deposit scheme. 10. Addition or deletion of name/s of joint account holders A bank may, at the request of all the joint holders, allow the addition or deletion of name/s of joint account holder/s if the circumstances so warrant or allow an individual depositor to add the name of another person as a joint holder. However, in no case the amount or duration of the original deposit should undergo a change in any manner whatsoever, and all the joint account holders are non-residents of Indian nationality or origin. The bank should ascertain the reasons from the applicants for doing so and also satisfy themselves about the bonafide nature of the request. Further, opening of accounts in the names of Pakistani/Bangladeshi nationals though of Indian origin will require approval of Reserve Bank from the exchange control angle. 11. Payment of interest on FCNR(B) deposits of NRIs on return to India Banks may allow FCNR(B) deposit of persons of Indian nationality/origin who return to India for permanent settlement to continue till maturity at the contracted rate of interest, if desired. Except the provision relating to rate of interest and reserve requirements as applicable to FCNR(B) deposits, for all other purposes, such deposits should be treated as resident deposits from the date of return of account holder to India. Premature withdrawal of such FCNR(B) deposit should be subject to penal provision of the Scheme. Banks should convert the FCNR(B) deposits on maturity into Resident Rupee Deposit Account or RFC Account (if eligible) at the option of the account holder. The rate of interest on the new deposit (Rupee account or RFC account) should be the relevant rate applicable for such deposit account. 12. Conversion of FCNR(B) Accounts of the Returning Indians into RFC Account - Waiver of Penalty Penal provision in the case of premature conversion of balances held in FCNR(B) deposits into Resident Foreign Currency Accounts by Non- Resident Indians on their return to India would not be applicable. 13. Conversion of FCNR(B) Accounts of the Returning Indians into RFC Accounts/Resident Rupee Accounts - Payment of interest A bank should pay interest at its discretion at the time of conversion of FCNR(B) Account into RFC/Resident Rupee Account even if the same has not run for a minimum maturity period, subject to the condition that the rate of interest should not exceed the rate payable on savings bank deposits held under RFC Account Scheme. 14. Payment of interest on term deposit maturing on Saturday/Sunday/ holiday/non-business working day In respect of a term deposit maturing for payment on a Saturday/Sunday or a holiday or a non-business working day; banks should pay interest at the originally contracted rate on the deposit amount for the Saturday/Sunday/holiday/non-business working day intervening between the date of expiry of the specified term of the deposit and the date of payment of the proceeds of the deposit on the succeeding working day. No bank should -
Interest rates applicable to deposits accepted under Foreign Currency Non-Resident Accounts (Banks) Scheme (a) In respect of deposits of one year and above, interest should be paid within the ceiling rate of LIBOR/SWAP rates for the respective currency/corresponding maturities minus 25 basis points. On floating rate deposits, interest should be paid within the ceiling of SWAP rates for the respective currency/maturity minus 25 basis points. For floating rate deposits, the interest-reset period should be six months. (b) The LIBOR/SWAP rates as on the last working day of the preceding week would form the base for fixing ceiling rates for the interest rates that would be offered effective the following week. (c) Banks would have the option to choose the current SWAP rates quoted on any online screen based information system while offering FCNR(B) deposits. List of directives/circulars which have been
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