IFSCA (Deposits) Directions,2020 (last updated on February 19, 2021)

International Financial Services Centres Authority F.No.110/IFSCA/Banking Regulation/2020-21/3 December 4, 2020 International Financial Services Centres Authority (Deposits) Directions, 2020 In exercise of the powers conferred by Sections 21 and 35A of the Banking Regulation Act, 1949 read with Section 13(1) of the International Financial Services Centres Authority Act, 2019 , the International Financial Services Centres Authority (IFSCA) being satisfied that it is necessary and expedient in the public interest so to do, hereby, issues the Directions hereinafter specified. CHAPTER – I PRELIMINARY 1. Short Title and Commencement (a) These Directions shall be called International Financial Services Centres Authority (Deposits) Directions, 2020. (b) These directions shall come into effect on the day it is placed on the website of IFSCA. 2. Applicability The provisions of these Directions shall apply to Banking Units (BU) licensed to operate in International Financial Services Centres (IFSCs) by IFSCA. These directions shall not be applicable to “Representative offices” permitted to be set up in IFSCs. 3. Definitions (a) In these Directions, unless the context otherwise requires, the terms herein shall mean as follows : (i) “Banking Unit” shall have the same meaning as defined in section 2(1)(c) of the International Financial Services Centres Authority (Banking) Regulations, 2020. (ii) “Current Account” means a form of non-interest-bearing demand deposit wherefrom withdrawals are allowed any number of times depending upon the balance in the account or up to a particular agreed amount and shall also be deemed to include other deposit accounts which are neither Savings Deposit nor Term Deposit. (iii) “Daily product” means the interest applied on the end of day balance. (iv) “Demand deposit” means a deposit received by the BU ,which is withdrawable on demand. (v) “Floating rate deposit” means a term deposit whose return is directly linked to an interest rate benchmark. (vi) “Individual” means a natural person. (vii) “Notice deposit” means term deposit for specific period but withdrawable on giving at least one complete banking days’ notice. (viii) “Qualified Individual” and “Qualified Resident individual” shall have the same meaning as defined in sections 2(1)(k) and 2(1)(l) of the International Financial Services Centres Authority (Banking) Regulations, 2020. (ix) “Savings account” means a form of interest-bearing demand deposit which is subject to the restrictions as to the number of withdrawals as also the amounts of withdrawals permitted by the BU during any specified period. (x) “Structured deposit” means a term deposit, repayable at full on maturity, interest payable on which is dependent on the performance of reference assets, indices or other economic values factors such as : (a) an index or combination of indices; (b) a financial instrument or combination of financial instruments; (c) a commodity or combination of commodities or other physical assets. (d) a foreign exchange rate or combination of foreign exchange rates (xi) “Term deposit” means an interest-bearing deposit received by the bank for a fixed period (b) All other expressions unless defined herein shall have the same meaning as have been assigned to them under the Banking Regulation Act, the Reserve Bank of India Act and the International Financial Services Centres Authority (Banking) Regulations, 2020 and any statutory modification or re-enactment thereto or as used in commercial parlance, as the case may be. CHAPTER – II PERMISSIBLE DEPOSITS 4. Permissible deposit accounts a) BUs shall permit opening of Current account, Savings account and Term Deposit account by a Qualified Individual or a Qualified Resident Individual in any freely convertible foreign currency. b) BUs shall permit opening of Current account and Term Deposit account by persons other than a Qualified Individual or a Qualified Resident Individual in any freely convertible foreign currency. c) BUs shall permit opening of Current account by persons resident in India, being individuals, for the purpose investment in securities by remitting foreign currency under the Liberalised Remittance Scheme of the Reserve Bank of India.1 CHAPTER – III GENERAL GUIDELINES 5. Interest Rate framework BUs shall pay interest on deposits (other than current account) accepted by them or renewed by them on the terms and conditions specified in these directions: (a) There shall be a comprehensive policy on interest rates on deposits duly approved by the Board of Directors or any committee of the Board to which powers have been delegated.2 (b) The rates shall be uniform across for all customers and there shall be no discrimination in the matter of interest paid on the deposits, between one deposit and another of similar amount, accepted on the same date. This provision shall not apply in the case of Structured Deposits. (c) Interest rates payable on deposits shall be strictly as per the schedule of interest rates disclosed in advance. The banks shall maintain the bulk deposit3 interest rate card in their Core banking system to facilitate supervisory review. (d) The rates shall not be subject to negotiation between the depositors and the bank. (e) The interest rates offered shall be reasonable, consistent, transparent and available for supervisory review/scrutiny as and when required. 1 Inserted vide circular no. F.No.110/IFSCA/Banking Regulation/2020-21/13 dated February 19,2021 2 See para 23 of Annex to circular no.F.No.110/IFSCA/Banking Regulation/2020-21/7 dated December 24, 2020 3 See para 6(a) of Annex to circular no.F.No.110/IFSCA/Banking Regulation/2020-21/7 dated December 24, 2020 (f) Deposits maturing on non-business working day (i) If a term deposit is maturing for payment on a non-business working day, BUs shall pay interest at the originally contracted rate on the original principal deposit amount for the non-business working day, intervening between the date of the maturity of the specified term of the deposit and the date of payment of the proceeds of the deposit on the succeeding working day. (ii) In case of reinvestment deposits and recurring deposits, BUs shall pay interest for the intervening non-business working day on the maturity value. (g) BUs may grant advances only against term deposits maintained with itself4. Interest rate on such advances shall be part of the Interest Rate framework. CHAPTER – IV INTEREST RATES ON DEPOSITS 6. Interest rate on Current Account No interest shall be paid on deposits held in current accounts. provided that balances lying in current account standing in the name of a deceased individual depositor concern shall attract interest from the date of death of the depositor till the date of repayment to the claimant/s at the rate of interest applicable to savings deposit as on the date of payment. 7. Interest Rate on Saving accounts (a) BUs may determine the interest on Savings accounts, subject to the conditions laid down in para 5 of these directions (b) Interest on savings accounts shall be calculated on a daily product basis (c) Interest on savings deposit shall be credited at quarterly or shorter intervals as decided by the BU. (d) Interest on savings bank accounts, including those frozen by the enforcement authorities, shall be credited on regular basis irrespective of the operational status of the account. 4 See para 13 of Annex to circular no. F.No.110/IFSCA/Banking Regulation/2020-21/7 dated December 24, 2020 8. Interest Rates on Term Deposit accounts (other than Structured deposits) (a) Subject to the conditions laid down in para 5 of these Directions, interest rates on Term deposit accounts (other than structured deposits) shall vary only on account of one or more of the following factors: (i) Tenor of Deposits: