The Reserve Bank of India (RBI) has issued a new framework allowing banks to offer differential interest rates on bulk deposits based on their liquidity risk profile, giving lenders greater flexibility to manage funding costs while aligning deposit pricing with the Liquidity Coverage Ratio (LCR) framework. Under the revised directions, banks can now differentiate interest rates for large deposits depending on the applicable run-off rates assigned to various depositor categories. However, the RBI has emphasized that banks cannot discriminate between deposits of the same size and with similar characteristics, ensuring fairness and transparency in deposit pricing.
The revised framework is part of the RBI’s broader effort to strengthen liquidity management amid intense competition for deposits. Banks have been facing pressure as credit growth has consistently outpaced deposit mobilisation, prompting lenders to seek greater flexibility in attracting stable, long-term funds. Following requests from banks, the RBI has also extended the implementation deadline for the new norms to October 1, 2026, providing additional time to update systems and pricing policies.
RBI Revises Bulk Deposit Interest Rate Framework
The new directions permit banks to:
- Offer different interest rates on bulk deposits based on liquidity risk.
- Factor in the applicable LCR run-off rates while pricing deposits.
- Continue differentiating rates based on deposit size and tenure.
- Maintain transparency through publicly disclosed interest rate schedules.
At the same time, banks are prohibited from offering different rates to customers whose deposits are identical in terms of amount, tenure, and liquidity characteristics.
Policy Snapshot
| Item | Details |
|---|---|
| Regulator | Reserve Bank of India (RBI) |
| Applies To | Bulk deposits |
| Key Change | Differential interest rates based on liquidity risk |
| Objective | Better liquidity management and risk-based pricing |
| Implementation Date | October 1, 2026 |
Why the RBI Made the Change
The RBI’s decision is linked to the Liquidity Coverage Ratio (LCR) framework, which requires banks to maintain sufficient high-quality liquid assets to withstand periods of financial stress.
Different categories of deposits carry different run-off rates, reflecting the likelihood that depositors may withdraw funds during a liquidity crisis.
Under the revised framework:
- Stable deposits may receive more competitive pricing.
- Deposits considered more likely to be withdrawn quickly may attract different rates.
- Banks can better align funding costs with liquidity requirements.
What Is Changing?
| Earlier Framework | New Framework |
|---|---|
| Differential rates based mainly on size and tenure | Liquidity risk under LCR can also influence pricing |
| Limited flexibility | Greater risk-based pricing flexibility |
| Basic disclosure requirements | Stronger transparency and publication norms |
Greater Transparency Required
Alongside the pricing flexibility, the RBI has strengthened disclosure requirements.
Banks must now:
- Publish deposit interest rate schedules before the start of each business day.
- Maintain transparent, board-approved deposit pricing policies.
- Ensure customers can clearly view applicable interest rates.
- Avoid arbitrary pricing for similar deposits.
These measures are intended to improve customer transparency while allowing banks to manage liquidity more efficiently.
Why It Matters for Banks
The revised framework comes at a time when Indian banks are competing aggressively for deposits.
Benefits for banks include:
- Better asset-liability management.
- More efficient liquidity planning.
- Flexibility to attract stable funding.
- Improved alignment with regulatory liquidity requirements.
The changes also help banks reflect the true funding cost of different depositor categories while complying with LCR norms.
What It Means for Depositors
For most retail customers, there is unlikely to be a significant change.
However, large institutional and corporate depositors may see:
- More customized interest rate offers.
- Pricing that reflects the stability of their deposits.
- Greater transparency regarding applicable rates.
Importantly, the RBI has made it clear that banks cannot offer preferential rates to one customer over another if both deposits have identical characteristics.
Looking Ahead
The RBI’s revised bulk deposit framework gives banks greater flexibility to manage liquidity while introducing a more risk-sensitive approach to deposit pricing. By linking interest rates to Liquidity Coverage Ratio run-off rates, the central bank aims to help lenders attract more stable funding without compromising fairness or transparency. The additional implementation time until October 1, 2026 is expected to help banks update internal systems and pricing policies before the new rules take effect.
Looking ahead, the new framework could reshape competition for large deposits as banks increasingly differentiate pricing based on liquidity characteristics rather than relying solely on deposit size and tenure. While institutional depositors may benefit from more tailored pricing, the RBI’s safeguards are designed to ensure that similar customers continue to receive equal treatment, reinforcing transparency and confidence in India’s banking system.
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