RBI master-direction RBI/DOR/2025-26/228 · 28 Nov 2025
Official title
Reserve Bank of India (Local Area Banks – Interest Rate on Deposits) Directions, 2025 (Updated as on June 17, 2026)
Summary
Check the official recordThese Directions establish a framework for Local Area Banks to manage interest rates on domestic, Non-Resident, and foreign currency deposits. Banks must maintain a board-approved policy for interest rates and premature withdrawal penalties. Interest rates must be uniform across branches for similar deposits. The Directions prohibit interest on current accounts, except for deceased individual or sole proprietorship accounts. Banks must calculate savings interest on a daily product basis and credit it at least quarterly. Term deposits must have a minimum tenor of seven days. Banks may offer additional interest to staff and senior citizens. The Directions also specify interest rate ceilings for Foreign Currency (Non-Resident) Accounts (Banks) and prohibit specific unethical practices like offering prizes for deposit mobilization.
What you must do
Key dates
Who is affected
Thresholds
Exceptions
If you do not comply
RBI/DOR/2025-26/228 DOR.SOG(SPE).REC.147/13.03.00/2025-26 November 28, 2025
Previous Versions
Reserve Bank of India (Local Area Banks – Interest Rate on Deposits) Directions, 2025 (Updated as on June 17, 2026)
In exercise of the powers conferred by Sections 21 and 35A of the Banking Regulation Act, 1949 and all other provisions / laws enabling the Reserve Bank of India (‘RBI’) in this regard, RBI being satisfied that it is necessary and expedient in the public interest so to do, hereby, issues the Directions hereinafter specified.
(1) ‘Alternative Reference Rate (ARR)’ means any widely accepted ARR for the respective currency as prescribed in RBI circular on Roadmap for LIBOR Transition issued vide CO.FMRD.DIRD.S39/14.02.001/2021-22 dated July 08, 2021.
(2) ‘Bulk Deposit’ means Single Rupee term deposits of ₹1 crore and above.
(3) ‘Composite Cash Credit’ means a type of loan product having a cash credit limit with a fully savings module designed to take care of farmer’s interest.
(4) ‘Current Account’ means a form of non-interest bearing demand deposit where from 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.
(5) ‘Daily Product’ means the interest applied on the end of day balance.
(6) ‘Demand Deposit’ means a deposit received by a bank, which is withdrawable on demand.
(7) ‘Domestic Rupee Deposits’ mean rupee deposits maintained in India in the form of current account, savings deposit or term deposit.
(8) ‘Family’ includes members as mentioned in a bank’s Service / Staff Regulations.
(9) ‘FCNR(B) Account’ means a Foreign Currency Non-Resident (Bank) account referred to in Foreign Exchange Management (Deposit) Regulations, 2016, as amended from time to time.
(10) ‘Hindu Undivided Family’ (HUF) means HUF as defined under Income-tax Act, 1961.
(11) ‘Individual’ means a natural person.
(12) ‘Member of the bank’s Staff’ means a person employed on a regular basis, whether full-time or part-time, and includes a person recruited on probation or employed on a contract for a specified duration or on deputation and an employee taken over in pursuance of any scheme of amalgamation but does not include a person employed on casual basis.
(13) ‘Notice Deposit’ means term deposit for specific period but withdrawable on giving at least one complete banking day’s notice.
(14) ‘NRE Account’ means a Non-Resident External deposit account referred to in Foreign Exchange Management (Deposit) Regulations, 2016, as amended from time to time.
(15) ‘NRO Account’ means a Non-Resident Ordinary deposit account referred to in Foreign Exchange Management (Deposit) Regulations, 2016, as amended from time to time.
(16) ‘Reinvestment deposits’ refers to those deposits where interest (as and when due) is reinvested at the same contracted rate till maturity which is withdrawable with the principal amount on maturity date.
(17) ‘Retired Member of the bank’s Staff’ means an employee retiring whether on superannuation or otherwise as provided in the bank’s Service / Staff Regulations.
(18) ‘RFC Account’ means a Resident Foreign Currency account referred to in Foreign Exchange Management (Foreign currency accounts by a person resident in India) Regulations, 2016, as amended from time to time.
(19) ‘Savings Deposit’ means a form of interest bearing demand deposit which is a deposit account whether designated as ‘Savings Account’, ‘Savings Bank Account’, ‘Savings Deposit Account’, ‘Basic Savings Bank Deposit Account (BSBDA)’ or other account by whatever name called which is subject to the restrictions as to the number of withdrawals as also the amounts of withdrawals permitted by a bank during any specified period.
(20) ‘Term Deposit’ means an interest-bearing deposit received by a bank for a fixed period and shall also include deposits such as Recurring / Cumulative / Annuity / Reinvestment deposits and Cash Certificates.
(21) All other expressions, unless defined herein, shall have the same meaning as have been assigned to them under the Banking Regulation Act,1949 or the Reserve Bank of India Act, 1934 or any statutory modification or re-enactment thereto or as used in commercial parlance, as the case may be.
(1) There shall be a comprehensive policy duly approved by the Board of Directors or any Committee of the Board to which powers have been delegated in respect of:
