If a term deposit matures on a non-business day, banks will pay interest at the original rate until the next working day. To have all instructions related to Interest Rate on Deposits applicable to banks in one place, the Reserve Bank of India (RBI) has issued the Master Direction – Interest Rate on Deposits, 2025 under the Banking Regulation Act, 1949.

The RBI has laid out a structured framework for banks regarding interest rates on deposits, ensuring transparency and uniformity. As per the latest directives, banks must pay interest on deposits, including domestic, Ordinary Non-Resident (NRO), Non-Resident (External) Accounts (NRE), and Foreign Currency (Non-Resident) Accounts {FCNR(B)}, in line with specified terms.

To maintain consistency, banks are required to have a board-approved policy on deposit interest rates. The rates must be uniform across all branches, without discrimination between deposits of similar amounts accepted on the same date. Banks are also mandated to disclose interest rates in advance, ensuring that depositors have clear information about their earnings.

Additionally, commercial banks must maintain a bulk deposit interest rate card within their Core Banking System for supervisory review. The RBI has emphasized that interest rates should not be subject to negotiation between depositors and banks. The framework further ensures that all transactions involving interest payments are rounded off appropriately—the nearest rupee for rupee deposits and up to two decimal places for FCNR(B) deposits. These measures aim to promote fairness, transparency, and regulatory oversight in deposit-related transactions.

Interest on deposits maturing on non-business days

The RBI has also clarified the treatment of deposits maturing on non-business days. "If a term deposit is maturing for payment on a non-business working day, banks 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," per the master circular.

Similarly, cooperative banks must follow the same rule when a term deposit matures on a Sunday, holiday, or non-business working day. Interest at the originally contracted rate must be paid on the principal deposit amount for the intervening period until the next business day when the payment is processed. These measures ensure that depositors do not lose interest earnings due to banking holidays.