RBI Governor Stresses that Exceeding Disclosed Deposit Rates is Not Acceptable

Reserve Bank Governor Sanjay Malhotra Addresses Post-Policy Review Press Conference

On Friday, Reserve Bank Governor Sanjay Malhotra said that payment of a higher interest rate than the one already disclosed is "not acceptable" to the central bank. This statement comes as the Reserve Bank of India (RBI) has permitted differential pricing of deposits, allowing senior citizens to receive higher interest rates and the tenor of a deposit to influence the rate a bank offers.

Malhotra made this statement during the customary post-policy review press conference, where he also addressed the issue of banks resorting to differential pricing to garner deposits. HDFC Bank, the largest private sector lender, has been alleged to have paid an extra sum to garner a big deposit and showed it as a marketing spend. HDFC Bank has denied the allegation, but reports suggest that many banks engage in such practices to mobilize deposits.

Malhotra emphasized the importance of transparency in the banking sector, stating that while competition among banks for garnering deposits is good, lenders must display any differential rates they offer. "They (banks) have to display it. Any differential rate beyond that if someone is giving is certainly not acceptable," Malhotra said.

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In related news, Malhotra also addressed the issue of upper layer NBFCs, stating that the RBI will shortly come up with an updated list. The existing list will continue to be operational until a new one is released. However, Malhotra declined to comment on a part of a question regarding a core investment company's plea for de-registration.