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RBI Enhances Bulk Deposit Limits


The Reserve Bank of India (‘RBI’), through its recent Circular[i] dated 07.06.2024, made an amendment to the Master Direction - Reserve Bank of India (Interest Rate on Deposits) Directions, 2016[ii] (‘Master Direction’). The amendment specifically pertains to the definition and threshold of ‘Bulk Deposits’ for all Scheduled Commercial Banks (‘SCBs’), Small Finance Banks (‘SFBs’) and Local Area Banks (‘LABs).

Key Highlights

a. Revised Definition of Bulk Deposits:

  • The definition of ‘Bulk Deposits’ (defined in paragraph 3(a)(i) of the Master Direction) has been revised for all SCBs (excluding Regional Rural Banks (RRBs)), SFBs, and LABs.

  • ‘Bulk Deposit’ now means:

  1. For SCBs (excluding RRBs) and SFBs: Single Rupee term deposits of Rupees three crore and above.

  2. For LABs: Single Rupee term deposits of Rupees one crore and above, applicable in the same manner as for RRBs.

  • These instructions have been issued under the powers conferred by s. 35A of the Banking Regulation Act, 1949.

b.  Applicability

The revised instructions are applicable to all SCBs (excluding RRBs), SFBs and LABs.

c.  Commencement

The revised definition, along with instructions, comes into force with immediate effect.

Our Analysis

The revised bulk deposit thresholds substantially elevate banks’ capacity to handle large deposits, enhancing asset liability management and fostering greater financial stability. For SCBs (excluding RRBs) and SFBs, the limit has been raised from Rs. 2 crores to Rs. 3 crores, accommodating larger transaction volumes and promoting efficient capital allocation. For LABs, the alignment with RRBs at a Rs. 1 crore threshold simplifies regulatory compliance and operational processes, supporting administrative ease and uniformity across banking sectors. Reflecting and responding to market growth, these updated limits facilitate improved liquidity management and adapt to the evolving scale of economic transactions, crucial for a dynamic economy.

End Notes

[i] CIRCULAR NO. DOR.SPE.REC.NO.24/13.03.00/2024-25

[ii] Master Direction DBR.Dir.No.84/13.03.00/2015-16

Authored by Pratima Ajmera, Advocate at Metalegal Advocates. The views expressed are personal and do not constitute legal opinion.



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