RBI deregulates interest on savings accounts in UCBs

The Reserve Bank today deregulated interest rate on savings accounts in Urban Co-operative Banks (UCBs), a move that will fetch better returns for depositors.

RBI had freed savings bank deposit rate for the scheduled commercial banks last month. Subsequently, it had liberalised this for the Regional Rural Banks earlier this week.

In a notification addressed to all Primary (Urban) Co-operative Banks, RBI said lenders are free to determine their savings bank deposit interest rate subject to two conditions.

Under the first condition, the notification said, "Each bank will have to offer a uniform interest rate on savings bank deposits up to Rs 1 lakh, irrespective of the amount in the account within this limit."

The other condition states that for savings bank deposits over Rs 1 lakh, a bank may provide differential rates of interest, if it so chooses.

This would, however, be subject to the condition that banks will not discriminate in the matter of interest paid on such deposits, between one deposit and another of similar amount, accepted on the same date, at any of its offices, it said.

Till now, such banks were mandated to give 4% interest rates on such deposits. The rate was increased from 3.5% in May this year.