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RBI proposes no minimum balance penalty

The RBI said that banks should consider allowing their borrowers the possibility of pre-paying floating rate term loans without any penalty.

April 02, 2014 10:14 IST | India Infoline News Service
The RBI (Reserve Bank of India) in its first bi-monthly monetary policy statement on Tuesday said instead of penal charges for non-maintenance of a minimum balance in ordinary savings bank accounts, banks should limit the services available on such accounts, to those available to basic accounts.

However, the decision on penalty removal is yet to be finalised. RBI further said banks should restore the services when the balances improve to the minimum required level.
The central bank also said that in the interest of their consumers, banks should consider allowing their borrowers the possibility of pre-paying floating rate term loans without any penalty.

The banking regulator said that banks should also limit the liability of customers in electronic banking transactions in cases where banks are not able to prove customer negligence.

The RBI on Tuesday announced its first Bi-monthly Monetary Policy 2014-15. It kept the key interest rate unchanged at 8%. Repo rate, the rate at which the RBI lends to banks, remains unchanged at 8%.

Consequently, the reverse repo—the rate which the RBI pays banks for depositing excess funds—rates remain unchanged 7%.

The cash reserve ratio—the proportion of deposits to be kept with RBI—remains unchanged at 4%. The marginal standing facility (MSF) rate and the Bank Rate at 9%.
The annual rate of inflation, based on the monthly wholesale price index, stood at 4.68% in February, while retail inflation was at a 25-month low of 8.1%, according to the government data.

Read more:
What is CRR, repo and reverse repo rate?

How CRR and repo rates help impact liquidity


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