Bulk deposit pricing to be more transparent, flexible

MUMBAI: RBI has proposed tighter disclosure norms for deposit interest rates while allowing banks to price large deposits based on withdrawal risk, which will be a fourth factor for differential rates.

Until now banks were allowed to offer differential rates based on tenor, size, and premature withdrawal conditions. These determine whether deposits qualify as bulk deposits and whether early withdrawal is permitted, which in turn influences pricing.The draft rules mandate that banks publish their deposit interest rate schedules in advance on their websites and adhere strictly to them during the day. "Interest rates payable on deposits shall be strictly as per the schedule of interest rates disclosed in advance on the bank's website, before the commencement of the business day."According to the proposal, this requires banks to disclose rates upfront each morning and prevents intra-day changes without prior visibility to customers. The move seeks to standardise access to information for depositors and reduce uncertainty in pricing. Customers will be able to view the applicable rates at the start of the day and take decisions based on a fixed schedule.The draft amendment introduces a fourth factor for pricing bulk deposits, which is the run-off rate under the liquidity coverage ratio framework. "A bank shall have the freedom to offer differential interest rate on bulk deposits, by considering the differential run-off rate applicable to deposits or unsecured wholesale funding from retail or non-retail customers, respectively under the LCR framework..." According to the draft, this expands the pricing framework to reflect the stability of different types of deposits.