Banks will soon be able to take non-callable deposits to overcome asset-liability mismatches.
What this means is that once a depositor agrees to deposit a sum of money in a non-callable deposit, he will not be able to withdraw it till the end of the contracted tenure.
Depositors could earn higher returns by placing a non-callable deposit.
According to the RBI, “All deposits accepted from individuals and Hindu undivided family (HUF) up to Rs 1 crore are callable — have the facility of premature withdrawal.
“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 will be issuing detailed guidelines on non-callable deposits shortly.
Currently, banks are allowed to offer differential rates of interest on deposits on the basis of tenor for deposits less than Rs 1 crore and on the basis of quantum for deposits of Rs 1 crore and above. Banks are, however, not permitted to differentiate on the basis of any other parameter of the deposit contract.