Even as the RBI prepares details on non-callable deposits, a senior public sector bank official pointed out that such deposits can to some extent address the asset-liability mismatch — deposits have no set timeframe for redemption while loans can be recovered only at the end of maturity.

All existing form of deposits, up to ₹1 crore are callable, having the facility of premature withdrawal. According to the RBI, “this results in asset-liability management issues, especially under the Liquidity Coverage Ratio (LCR) requirement under the Basel III framework. It is, therefore, proposed to allow non-callable deposits,” the RBI said.

Callability will also be the distinguishing feature for offering differential rates of interest on deposits, the RBI said in its sixth bi-monthly monetary policy statement.

LCR is aimed at ensuring that banks have an adequate stock of unencumbered high-quality liquid assets that can be converted easily and immediately in private markets into cash to meet the liquidity needs for a 30-calendar-day liquidity stress scenario.

A better LCR improves the banking sector’s ability to absorb shocks arising from financial and economic stress, thus reducing the risk of spillover from the financial sector to the economy.

Currently, banks are allowed to offer differential rates of interest on the basis of tenor for deposits less than ₹1 crore and on the basis of quantum for deposits of ₹1 crore and above. Banks are, however, not permitted to differentiate on the basis of any other parameter of the deposit contract.

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