The Reserve Bank of India (RBI) recently tweaked the norms for interest on the amount left unclaimed with the bank after a fixed deposit (FD) matures.
According to the new rules, if a fixed deposit is matured, but the proceeds are unpaid and remains unclaimed with the bank, then the amount which is not claimed will attract the rate of interest that is applicable to a savings account or the contracted rate of interest on the matured FD, depending on which one is lower.
Hence, depositors should note due dates and get the receipt renewed on the due date to avoid this loss of interest.
The new rules will be applicable for deposits on all commercial banks, small finance banks, local area banks and cooperative banks.
Until now, unclaimed deposits attracted the rate of interest applicable to savings deposits in case a fixed deposit matured and the proceeds were left unpaid.
With the new announcement, banks have two benchmarks to choose from while paying interest on unpaid deposits: the saving interest rate and the rate at which the term deposit was opened.
In some cases, according to Adhil Shetty, CEO, Bankbazaar, the FD rates for short-term deposits, typically those less than 90 days, have an interest rate lower than the savings rates.
“With this directive, such fixed deposits may continue to earn only the lower rate and not the SB interest rates,” Shetty explained.
Fixed deposits (FDs), also known as term deposits (TDs), are fixed-income instruments that yield guaranteed returns over a pre-defined period of lock-in.
These are one of the most popular savings schemes as the return is fixed across predetermined, specific periods of time.
Financial planners, however, suggest that a person should take a look at the interest rates on offers before choosing an FD.
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