INTEREST ON SAVINGS DEREGULATED:.
The Reserve Bank of India has deregulated interest rate on savings accounts in Regional Rural Banks (RRBs), a move that will fetch better returns for its depositors. RBI had freed savings bank deposit rates for the scheduled commercial banks last month.
In a notification addressed to all Regional Rural Banks, RBI said, RRBs are free to determine their savings bank deposit interest rate subject to two conditions. Under the first condition, the notification said, "each bank will have to offer a uniform interest rate on savings bank deposits up to Rs 1 lakh, irrespective of the amount in the account within this limit".
The other condition states that for savings bank deposits over Rs 1 lakh, a bank may provide differential rates of interest, if it so chooses. This would, however, be subject to the condition that banks will not discriminate in the matter of interest paid on such deposits, between one deposit and another of similar amount, accepted on the same date, at any of its offices, it said.
Till now, RRBs were mandated to give 4 per cent interest rates on such deposits. The rate was increased from 3.5 per cent in May this year. The RRBs were established in 1975 with the objective of creating an alternative channel to cooperative credit structure to ensure sufficient institutional credit for rural and agriculture sector. RRBs are jointly owned by Government of India, the State Government concerned and the Sponsor Banks.