As per the new rules announced by the Reserve Bank of India, Customers who have not renewed FD in time or left in unattended would now be at a loss of some interest. The New rules say that there would not be any automatic renewal of Fixed Deposits or Term Deposits. After the period of maturity of Fixed Deposit, the interest would be paid as is applicable during that time on saving bank account.
On 2nd July 2021, RBI issued Circular No. RBI/2021-22/66 for Review of Instructions on Interest on overdue domestic deposits.
This RBI Circular says that in respect of those Fixed Deposit or Term deposit which matures but their amount is lying unclaimed with the bank then the interest that would be payable on such unclaimed amount would be the saving account interest rate or the interest rate at which the subject Fixed Deposit or term deposit was originally booked whichever is lower.
The saving account interest is generally lower than the FD interest rate. Therefore, your FD if not renewed on time, would be earning a saving account interest rate.
The individual would be at a loss of differential interest between the interest at which FD was booked and the prevailing saving account interest rates.
The earlier bank had the practice to auto-renew the FDs on maturity and the person used to keep on earning the interest at which the FD was originally booked. Due to the recently issued circular this practice of bank would cease to exist. Now the onus is on the individual to renew the FDs in time and also keep a track of the maturing FDs to avoid loss of interest on the account.
As per the circular issued by RBI, the above new rule would be applicable for all the banks – all scheduled commercial banks, RRBs, small finance banks, co-operative banks, and all local area banks.
CA Tanu Rastogi
Noida
email id: catanurastogi@taxpyramid.in
