In a move that could give lenders more operational flexibility, the Reserve Bank of India has expanded the definition of bulk deposits with banks, and doubled it to a minimum of a single rupee deposit of ₹2 crore.
Additionally, the RBI has said banks will maintain their bulk deposit interest rate cards in the core banking system for supervisory review.
“Banks have been given discretion to offer differential rate of interest on bulk deposits as per their requirements and asset-liability management (ALM) projections,” said the RBI in its Statement on Developmental and Regulatory Policies after the sixth bi-monthly monetary policy meeting on Thursday, adding that this will enhance the operational freedom of banks in raising deposits.
At present, single rupee deposits of ₹1 crore and above are considered bulk deposits. The guidelines were last revised in January 2013. The RBI said it will issue detailed guidelines on the issue by the end of the month.
Bankers said this will help them manage their ALM better and lower the cost of funds, but there are also concerns that it could potentially impact deposit mobilisation.
“The RBI has revised the definition of bulk deposits to ₹2 crore and above to aid banks to manage the ALM with less dependency on bulk deposit,” said Dinabandhu Mohapatra, Managing Director and CEO, Bank of India.
Zarin Daruwala, CEO, India, Standard Chartered Bank, also welcomed the decision and said it would help in better management of ALM.
However, Anil Gupta, V-P and Sector Head, Financial Sector Ratings, ICRA, noted that the revision will reduce the ability to banks to offer differentiated rates on deposits higher than ₹1 crore but lower than ₹2 crore. “This can affect their deposit mobilisation; however, it will be positive as it will lower their cost of funds,” he said.