RBI’s New Year Gift: Starting January 1, 2025, the banking sector will see changes, including new Reserve Bank of India (RBI) guidelines for fixed deposits (FDs) offered by Non-Banking Financial Companies (NBFCs) and Housing Finance Companies (HFCs).

The banking regulator released a regulatory framework for HFCs (Housing finance companies) and NBFCs (Non-banking Finance Companies) in a circular dated August 12, 2024.

“Based on a review of the extant regulations applicable to HFCs prescribed vide Master Direction – Non-Banking Financial Company – Housing Finance Company (Reserve Bank) Directions, 2021, it has been decided to issue revised regulations as detailed in the Part A of Annex. As part of the exercise, certain regulations applicable to NBFCs have also been reviewed,” the RBI circular said.

The RBI has allowed NBFCs to use public deposits for certain emergency expenses, subject to their assessment (revising Chapter V of the 2016 Master Direction).

RBI’s new fixed deposit guidelines for NBFCs and HFCs: Key changes from 1 January 2025

1)Small deposits (those worth less than ₹10,000) may be paid to depositors ahead of schedule if the depositor requests that the deposit amount be paid out, interest-free, within three months of the date of acceptance.

2)For other public deposits, individual depositors may request early payment of up to 50% of the deposit’s principal or ₹5 lakh, whichever is less, before the three-month period from the date of acceptance of such deposits has passed, without interest.

The terms of the current instructions, as they relate to public deposits, will apply to the remaining sum, which will be subject to interest at the contracted rate.

3)In cases of critical illness, individual depositors may request that 100% of the deposit’s principal be reimbursed to them early, interest-free, before three months from the date the deposit was accepted.

4)Emergent costs include medical emergencies resulting from natural disasters or calamities that the government has declared.

5)The sum specified in these clauses will also apply to current deposit contracts in which the depositor is not entitled to withdraw the deposit early before the three-month period has passed.

6)Until now, NBFCs were supposed to inform the depositor of the maturity details at least two months before the maturity date. According to the RBI’s most recent directives, this time frame should be shortened from two months to fourteen days.

Nomination updates

NBFCs are now encouraged to establish an appropriate mechanism for verifying receipt of a correctly completed nomination, cancellation, and/or amendment form. All customers should be acknowledged this way regardless of whether they ask for it.

Nominee in the passbook

It is recommended that NBFCs enter the nomination details in their passbooks or receipts. If the client consents, the phrase “Nomination Registered” and the nominee’s name should be included.

What is a fixed deposit (FD)?

A fixed deposit is an initial payment made to a bank, post office, or non-bank financial institution (NBFC) that generates returns at a set rate of interest over a certain period of time.

NBFC FD interest rates 2024

Since fixed deposits are a fantastic investment with alluring returns, many people in India invest in them. Interest rates at NBFCs are typically higher than those offered by traditional banks because of the ‘credit risk’ that comes with NBFCs.

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