RBI permits banks to pay interest at shorter intervals
RBI has decided allow banks decide on the periodicity of interest payment on rupee savings and term deposits keeping in view that the banks are functioning on core banking platform.
Banks are now allowed to pay interest on rupee savings and term deposits at intervals shorter than quarterly intervals. The step may trigger intense competition among banks to attract deposits.
The central bank has also extended the period for banks to exercise freedom to offer interest rates on incremental NRE (Non-Resident External) deposits with maturity of 3 years and above without any ceiling in order to pass on the benefit of exemption provided on such deposits from CRR (Cash Reserve Ratio) and SLR (Statutory Liquidity Ratio) requirements. The banks could have this freedom till January 31, 2014.