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RBI permits co-op banks to frame norms for conversion of FDs

At present, a customer can make pre-mature withdrawal of FD to invest the amount into other schemes of the same bank without payment of penalty

May 29, 2012 3:34 IST | India Infoline News Service
The Reserve Bank of India (RBI) has allowed cooperative banks to frame policies to check the practice of premature conversion of fixed deposits (FDs) into other deposit schemes by customers to obtain higher interest rates.
“To facilitate better asset liability management (ALM), it has been decided to permit banks to formulate their own policies towards conversion of deposit with immediate effect,” the central bank said in a notification on 28th May.
At present, a customer can make pre-mature withdrawal of FD to invest the amount into other schemes of the same bank without payment of penalty. Several customers convert their long-term FDs into other deposit schemes to take advantage of higher interest rates.

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