**Executive Summary:**
This circular modifies the Master Directions on Interest Rate on Deposits, specifically addressing reference rates for Foreign Currency Non-Resident (FCNR) B deposits and eligibility criteria for opening savings accounts. It updates the reference rate source from FEDAI to Financial Benchmarks India Pvt. Ltd. (FBIL) effective January 31, 2022, and provides more explicit instructions regarding savings account eligibility. The changes are effective as of the date of the circular, September 16, 2022.
**Key Points / Main Content:**
* **Reference Rates for FCNR B Deposits:**
* The Overnight Alternative Reference Rate quoted/displayed by Financial Benchmarks India Pvt. Ltd. (FBIL) shall be used as the reference for arriving at the interest rates on FCNR B deposits.
* The previous reference was Foreign Exchange Dealers Association of India (FEDAI).
* **Eligibility for Savings Account Opening (Scheduled Commercial Banks):**
* Scheduled commercial banks shall not open savings deposit accounts in the name of entities other than individuals, Karta of HUF, and organisations/agencies listed in Schedule I.
* This clarifies that Government departments/bodies dependent on budgetary allocations (excluding Municipal entities), political parties, trading/business/professional concerns are not eligible.
* An explanation of political party is included.
* **Eligibility for Savings Account Opening (Cooperative Banks):**
* Cooperative banks shall not open savings deposit accounts in the name of entities other than individuals, Karta of HUF, and organisations/agencies listed in Schedule I.
* This clarifies that Government departments/bodies dependent on budgetary allocations (excluding Municipal entities), political parties, trading/business/professional concerns are not eligible.
* An explanation of political party is included.
* **Institutions Exempt from Income Tax:**
* Institutions other than those mentioned in Section 28h/27h and whose entire income is exempt from payment of Income Tax under the Income-tax Act, 1961 are included in Schedule I.
**Impact Analysis**
* **Scheduled Commercial Banks, Regional Rural Banks, Small Finance Banks, Payment Banks, Local Area Banks, Primary Urban Cooperative Banks, DCCBs, State Cooperative Banks:**
* *Impact:* Banks need to update their systems and procedures to reflect the change in reference rate provider (from FEDAI to FBIL) for FCNR B deposits. They also need to adhere to the revised eligibility criteria for opening savings accounts.
* *Action Required:* Update systems to reflect FBIL as the reference rate provider. Review and modify savings account opening procedures to comply with the clarified eligibility criteria.
* **Financial Benchmarks India Pvt. Ltd. (FBIL):**
* *Impact:* FBIL is now the designated provider of reference rates for FCNR B deposits.
* *Action Required:* Ensure continued and accurate publication of the Overnight Alternative Reference Rate for respective currencies.
* **Foreign Exchange Dealers Association of India (FEDAI):**
* *Impact:* FEDAI is no longer the designated provider of reference rates for FCNR B deposits.
* *Action Required:* Discontinue quoting/displaying reference rates for FCNR B deposits for the purpose of these directions.
* **Entities Seeking to Open Savings Accounts:**
* *Impact:* Certain entities, such as government departments dependent on budgetary allocations, political parties, and trading/business concerns, are explicitly ineligible to open savings accounts with scheduled commercial and cooperative banks.
* *Action Required:* Review eligibility in light of the clarified criteria.
Key Entities Referenced
Reserve Bank of India (RBI): The central bank of India, responsible for regulating the banking sector and monetary policy.
Foreign Currency Nonresident Accounts Banks Scheme (FCNR B): A scheme related to deposits in foreign currency by non-resident Indians.
Master Direction Reserve Bank of India Interest Rate on Deposits Directions, 2016: A set of comprehensive guidelines issued by the RBI regarding interest rates on deposits.
Foreign Exchange Dealers Association of India (FEDAI): An association of foreign exchange dealers in India.
Financial Benchmarks India Pvt. Ltd. (FBIL): An entity that quotes and displays reference rates, previously handled by FEDAI.
Election Commission of India: Constitutional authority responsible for administering elections in India.
Income-tax Act, 1961: The primary legislation governing income tax in India.
All Scheduled Commercial Banks including Regional Rural Banks All Small Finance Banks All Payment Banks All Local Area Banks All Primary Urban Cooperative Banks DCCBs State Cooperative Banks: List of banks to whom this notification applies
RBI/2022-2023/117
DOR.SOG (SPE).REC.No 68/13.03.00/2022-23 September 16, 2022
All Scheduled Commercial Banks (including Regional Rural Banks)
All Small Finance Banks
All Payment Banks
All Local Area Banks
All Primary (Urban) Co-operative Banks/ DCCBs /State Cooperative Banks
Sir / Madam,
Master Directions on Interest Rate on Deposits
Please refer to the instructions on the Foreign Currency (Non-resident) Accounts (Banks)
Scheme contained in Section 19 (h) of the Master Direction - Reserve Bank of India (Interest
Rate on Deposits) Directions, 2016 dated March 03, 2016 and Section 18 (h) of the Master
Direction – Reserve Bank of India (Co-operative Banks – Interest Rate on Deposits)
Directions, 2016 dated May 12, 2016 in terms of which, reference rates for arriving at the
interest rates on FCNR (B) deposits shall be quoted / displayed by Foreign Exchange Dealers
Association of India (FEDAI).
2. In terms of the guidance provided by RBI, the reference rates mentioned above are being
quoted / displayed by Financial Benchmarks India Pvt. Ltd. (FBIL) with effect from
January 31, 2022. In this regard, the relevant sections of both the Master Directions on
Interest Rate on Deposits have been suitably modified.
3. Further, the instructions regarding eligibility for opening of savings account contained in
Section 28 (h) and Section 27 (h) of the above-mentioned Master Directions (MDs) dated
March 03, 2016 and May 12, 2016, respectively, and item No. 6 in Schedule I of the two MDs
have been modified to make them more explicit.
4. The relevant sections of the Master Directions as amended are indicated in the Annex.
5. All other instructions in this regard shall remain unchanged.
Yours faithfully,
(Santosh Kumar Panigrahy)
Chief General Manager
Encl: As aboveANNEX
[Encl. to circular DOR.SOG(SPE).REC.No 68/13.03.00/2021-22 dated Sep 16, 2022]
Master Direction - Reserve Bank of India (Interest Rate on Deposits) Directions, 2016
Section Existing Provisions Amended Provisions
of MD
19(h) The Overnight Alternative The Overnight Alternative Reference Rate2 for the
Reference Rate2 for the respective currency / Swap rates quoted / displayed by
respective currency / Swap Financial Benchmarks India Pvt. Ltd. (FBIL) shall be
rates quoted / displayed by used as the reference for arriving at the interest rates on
Foreign Exchange Dealers FCNR(B) deposits.
Association of India
(FEDAI) shall be used as
the reference for arriving at
the interest rates on
FCNR(B) deposits.
28 Scheduled commercial Scheduled commercial banks shall not:
banks shall not: (h) Open a savings deposit account in the name of
(h) Open a savings deposit Government departments / bodies depending upon
account in the name of budgetary allocations for performance of their functions
entities other than / Municipal Corporations or Municipal Committees /
individuals, Karta of HUF Panchayat Samitis / State Housing Boards / Water and
and organisations / Sewerage / Drainage Boards / State Text Book
agencies listed Publishing Corporations / Societies / Metropolitan
in Schedule-I. Development Authority / State / District Level Housing
Co-operative Societies, etc. or any political party or any
trading/business or professional concern, whether such
concern is a proprietary or a partnership firm or a
company or an association and entities other than
individuals, Karta of HUF, and organisations / agencies
listed in Schedule – I.
Explanation
For the purposes of this clause, ‘political party’ means an
association or body of individual citizens of India, which
is, or is deemed to be registered with the Election
Commission of India as a political party under the
Election Symbols (Reservation and Allotment) Order,
1968 as in force for the time being.
Item No. Institutions other than Institutions other than those mentioned in Section 28(h)
6 those mentioned in section and whose entire income is exempt from payment of
Schedule 26(h) and whose entire Income-tax under the Income-Tax Act, 1961.
I income is exempt from
payment of Income-tax
under the Income-Tax Act,
1961.
2ANNEX
Master Direction – Reserve Bank of India (Co-operative Banks – Interest Rate on
Deposits) Directions, 2016
Section Existing Provisions Amended Provisions
of MD
18(h) The Overnight Alternative The Overnight Alternative Reference Rate1 for the
Reference Rate1 for the respective currency / Swap rates quoted / displayed
respective currency / Swap by Financial Benchmarks India Pvt. Ltd. (FBIL) shall
rates quoted / displayed by be used as the reference for arriving at the interest
Foreign Exchange Dealers rates on FCNR(B) deposits.
Association of India
(FEDAI) shall be used as
the reference for arriving at
the interest rates on
FCNR(B) deposits.
27 Co-operative banks shall Co-operative banks shall not:
not:
(h) Open a savings deposit account in the name of
Government departments / bodies depending upon
(h) Open a savings deposit
budgetary allocations for performance of their
account in the name of
functions / Municipal Corporations or Municipal
entities other than
Committees / Panchayat Samitis / State Housing
individuals, Karta of HUF
Boards / Water and Sewerage / Drainage Boards /
and organisations /
State Text Book Publishing Corporations / Societies /
agencies listed
Metropolitan Development Authority / State / District
in Schedule - I.
Level Housing Co-operative Societies, etc. or any
political party or any trading/business or professional
concern, whether such concern is a proprietary or a
partnership firm or a company or an association and
entities other than individuals, Karta of HUF, and
organisations / agencies listed in Schedule – I.
Explanation
For the purposes of this clause, ‘political party’ means
an association or body of individual citizens of India,
which is, or is deemed to be registered with the
Election Commission of India as a political party under
the Election Symbols (Reservation and Allotment)
Order, 1968 as in force for the time being.
Item No. Institutions other than Institutions other than those mentioned in Section
6 those mentioned in section 27(h) and whose entire income is exempt from
Schedule 26(h) and whose entire payment of Income-tax under the Income-Tax Act,
I income is exempt from 1961.
payment of Income-tax
under the Income-Tax Act,
1961
3