Industry Odisha Bureau, Jul 31: The Reserve Bank of India (RBI) has reportedly nodded banks to offer different interest rates for bulk deposits worth Rs 3 crore and above on their run-off rates.
Media reports, citing the RBI’s notification in this regard, stated that, “A bank shall have the freedom to offer differential interest rates on bulk deposits, by considering the differential run-off rate applicable to deposits or unsecured wholesale funding under the LCR (Liquidity Coverage Ratio) framework.”
Media reports, citing the RBI’s notification in this regard, also stated that, “The norms will be with effect from October 1, while the differential interest rates on bulk deposits must be uniform across all bank branches and for all customers, with no discrimination among deposits of a similar amount accepted on the same date at any of the bank’s offices.”
Media reports, citing the RBI’s notification in this regard, further stated that, “Banks will need to disclose interest rates payable on deposits, including bulk deposits, on their website in advance. Rates for bulk deposits will need to be disclosed at 10 am, with a 10-minute grace period, on each business day. Banks will also be free to continue to disclose interest rates additionally through other modes of communication, such as SMS and e-mail.”
Notably, “A run-off rate in banking is the percentage of a category of deposits or liabilities that is expected to be withdrawn or repaid within a short-term stress period, used in liquidity calculations such as the Liquidity Coverage Ratio (LCR). A runoff rate quantifies how quickly funds are likely to leave a bank’s liabilities under stressed conditions. For example, if a deposit category has a 10% run-off rate, the bank assumes that 10% of that deposit balance could be withdrawn within the next 30 days in a stress scenario. This concept is central to LCR under Basel III, where banks must hold enough High Quality Liquid Assets (HQLA) to cover expected net cash outflows over 30 days.”
