Review of Instructions on Interest on overdue domestic deposits

Last updated: 03 July 2021

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The Reserve Bank of India has revised its instructions regarding interest on overdue domestic deposits. Previously, unclaimed funds from matured Term Deposits would earn interest at the savings deposit rate. Now, the interest rate applicable to unclaimed funds will be the lower of either the savings account rate or the original contracted rate of the matured Term Deposit.

RBI/2021-22/66
DoR.SPE.REC.29/13.03.00/2021-2022

July 02, 2021

All Scheduled Commercial Banks (including RRBs)
All Small Finance Banks
All Local Area Banks
All Primary (Urban) Co-operative Banks/ District Central Co-operative Banks/ State Co-operative Banks

Dear Sir / Madam,

Review of Instructions on Interest on overdue domestic deposits

Please refer to Section 9 (b) of Master Direction - Reserve Bank of India (Interest Rate on Deposits) Directions, 2016 dated March 3, 2016, and the Master Direction - Reserve Bank of India (Co-operative Banks - Interest Rate on Deposits) Directions, 2016 dated May 12, 2016 in terms of which if a Term Deposit matures and proceeds are unpaid, the amount left unclaimed with the bank shall attract rate of interest as applicable to savings deposits.

2. On a review of these instructions, it has been decided that if a Term Deposit (TD) matures and proceeds are unpaid, the amount left unclaimed with the bank shall attract rate of interest as applicable to savings account or the contracted rate of interest on the matured TD, whichever is lower.

3. The relevant section of Master Directions are amended accordingly as indicated in the Annex.

Yours faithfully,

(Thomas Mathew)
Chief General Manager

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ANNEX

Amendments to Master Directions
Sl. No.	Existing Section	Amended Section
A. Master Direction – Reserve Bank of India (Interest Rate on Deposits) Directions, 2016 dated March 03, 2016 (Updated as on February 22, 2019)
Section 9 (b)	Interest on overdue domestic deposits If a Term Deposit matures and proceeds are unpaid, the amount left unclaimed with the bank shall attract rate of interest as applicable to savings deposits.	Interest on overdue domestic deposits If a Term Deposit (TD) matures and proceeds are unpaid, the amount left unclaimed with the bank shall attract rate of interest as applicable to savings account or the contracted rate of interest on the matured TD, whichever is lower.

B. Master Direction – Reserve Bank of India (Co-operative Banks - Interest Rate on Deposits) Directions, 2016 dated May 12, 2016
Section 9 (b)	Interest on overdue domestic deposits If a term deposit matures and proceeds are unpaid, the amount left unclaimed with the co-operative bank shall attract rate of interest as applicable to savings deposits	Interest on overdue domestic deposits If a Term Deposit (TD) matures and proceeds are unpaid, the amount left unclaimed with the co-operative bank shall attract rate of interest as applicable to savings account or the contracted rate of interest on the matured TD, whichever is lower.

FAQ :

The new rule states that if a Term Deposit matures and its proceeds are not paid, the unclaimed amount will attract interest at the rate applicable to a savings account or the contracted rate of interest on the matured Term Deposit, whichever is lower.

This change affects all Scheduled Commercial Banks (including RRBs), Small Finance Banks, Local Area Banks, and all Primary (Urban) Co-operative Banks/ District Central Co-operative Banks/ State Co-operative Banks.

Previously, if a Term Deposit matured and the proceeds were unpaid, the unclaimed amount would attract interest at the rate applicable to savings deposits.

The notification specifically refers to Term Deposits (TDs) that have matured and whose proceeds have remained unpaid.

Notification No : RBI/2021-22/66 DoR.SPE.REC.29/13.03.00/2021-2022
Source : https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12125&Mode=0

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