Tag: depositors

PMC Bank depositors to weigh legal options if scheme of amalgamation not modified

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Depositors of the scam-tainted Punjab and Maharashtra Co-operative (PMC) Bank will weigh legal options if the scheme of amalgamation of their bank with Unity Small Finance Bank (Unity SFB) does not incorporate a favourable deposit withdrawal schedule and interest payment on their deposits.

The ‘draft scheme of amalgamation’, prepared by the Reserve Bank of India (RBI), has proposed a long-drawn out deposit withdrawal schedule extending over a 10-year period for PMC Bank depositors (with over ₹5 lakh balance).

No further interest will be payable on the interest-bearing deposits of transferor (PMC) bank for a period of five years from the appointed date (the date when PMC Bank will stand transferred to, and vest in Unity SFB/ transferee bank).

Interest at the rate of 2.75 per cent per annum will be paid on the retail deposits of PMC Bank which remain outstanding after the aforementioned five year period.

Depositors with balances up to ₹5 lakh will be paid by Unity SFB from the support it will receive from the Deposit Insurance and Credit Guarantee Corporation (DICGC) as part of the amalgamation process.

Chander Purswani, President, PMC Depositors Forum, observed that depositors may be left with no option but to move the Court if the final scheme of amalgamation does not incorporate clauses relating to reduction in time period (to, say, five years) for withdrawal of money and payment of interest (at least savings bank deposit rate) on their deposits with Unity SFB.

Highlighting the plight of some of the senior citizens among PMC Bank depositors, he said they have been reduced to hand-to-mouth existence during the last two years or so despite having money in the bank to lead a comfortable life.

RBI capped deposit-withdrawal from PMC Bank to ₹1 lakh per depositor for the entire period that it is under Directions. What this means is that depositors had to make do with just about ₹3,846 a month for the last 26 months. The bank was placed under Directions in September 2019.

Purswani opined that RBI should allow individual depositors to withdraw 20-25 per cent of the balance in their deposits each year.

Scheme not in depositors interest: Association

Meanwhile, the PMC Bank Depositors Association, in a letter to the RBI, said the scheme of amalgamation, in the current form, is not in the interest of the depositors and is akin to shooting them not in the foot but point blank through the head.

The Association emphasised that depositors should get immediate access to their money at least to the extent of liquid assets with PMC Bank.

The balance money could be released within a reasonable period of 6 to 9 months extending to a maximum of 24 months in a regular phase-wise payout as all the money is currently available with PMC Bank.

Referring to PMC Bank’s current balance sheet, the assets available and the support from DICGC for the amalgamation process, the Association underscored that this makes it possible to pay all the retail depositors in full without even touching a rupee brought in by the new Unity SFB dispensation.

PMC Bank depositors insist they be treated on par with the new depositors of Unity SFB – receive prevailing rate of interest from day 1 – and get access to all their money immediately.

If the aforementioned conditions are satisfied, the Association said PMC depositors will ensure that Unity SFB flourishes.

As at March-end 2021, PMC Bank had deposits aggregating ₹10,535 crore. Of this, about 70 per cent are retail deposits and the rest are institutional deposits, including other urban co-operative banks (216) and co-operative societies (1,750). Reserves and surplus position was negative at ₹3,542 crore.

The bank had investments and advances aggregating ₹2,350 crore and ₹4,123 crore, respectively. The overdue interest recoverable (non-performing assets) stood at ₹5,502 crore.

PMC Bank got into trouble in 2019 as its high exposure to real estate company HDIL turned non-performing. The central bank has red-flagged the fraud/ financial irregularities in the bank and manipulation of its books of accounts.

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PMC Bank depositors dismayed by move to deny them interest

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Distraught depositors of the scam-hit Punjab and Maharashtra Co-operative (PMC) Bank have a simple question for the Reserve Bank of India (RBI): “How can a bank take a deposit and not pay interest on it?”

They are irked by a clause in the draft scheme of the bank’s amalgamation with Unity Small Finance Bank (transferee bank) that says, “no further interest will be payable on the interest-bearing deposits of transferor (PMC) bank for a period of five years from the appointed date”.

The clause appears at odds with the Reserve Bank of India (Interest Rate on Deposits) Directions, 2016.

PMC’s 1,100 employees can heave a sigh of relief

The master direction says that scheduled commercial banks (SCBs) cannot “accept interest-free deposit other than in current account or pay compensation indirectly”.

Co-operative banking experts opine that the treatment of bank depositors should be evenhanded, irrespective of whether it is an SCB or a scheduled urban co-operative bank.

‘Sweetener for transferee’

S Ravi, Founder and Managing Partner of the chartered accountants firm Ravi Rajan & Co. LLP, said: “It is a sweetener for the transferee bank, giving it access to interest-free cash flow for five years.

“In the case of Yes Bank and Lakshmi Vilas Bank, the bondholders lost their money. Similarly here, the depositors are losing interest. Probably, this is also a way to discourage people from coming into co-operative banks.”

The RBI may have to revisit the “no further interest” clause in the scheme of amalgamation due to its master direction.

According to the RBI’s interest rate framework, SCBs shall pay interest on deposits of money (other than current account deposits) accepted by them or renewed by them.

PMC depositors with over ₹5 lakh disappointed with draft scheme

Further, the interest rates shall be reasonable, consistent, transparent and available for supervisory review or scrutiny.

Chander Purswani, President, PMC Depositors Forum, said depositors felt shortchanged and would submit their objections to the RBI.

He observed that the 10-year period prescribed for withdrawal of large retail deposits from Unity SFB was too long and suggested halving it.

Red flag and after

As at March-end 2021, PMC Bank had deposits aggregating ₹10,535 crore. Of this, about 70 per cent are retail deposits and the rest are institutional deposits, including other urban co-operative banks (216) and co-operative societies (1,750).

PMC Bank came to grief in 2019 as its high exposure to real estate company HDIL turned non-performing.

The central bank red-flagged the fraud and/or financial irregularities in the bank and the manipulation of its books of accounts.

In October 2021, the RBI granted a banking licence to Unity SFB, established jointly by Centrum Financial Services Ltd (CFSL) and Resilient Innovations Private Limited (BharatPe), to carry out SFB business in India.

The RBI had on June 18, 2021, given an “in-principle” approval to CFSL, a wholly-owned subsidiary of Centrum Capital Ltd, to set up an SFB.

The “in-principle” approval was specific to CFSL’s February 2021 offer in response to PMC Bank’s November 2020 expression of interest (EoI) notification.

Unity SFB commenced operations on November 1, 2021.

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PMC Bank: Proposed scheme of amalgamation could be a test case for RBI

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The proposed amalgamation of the scam-hit Punjab and Maharashtra Co-operative (PMC) Bank with the newly floated Unity Small Finance Bank could be a test case for the Reserve Bank of India (RBI) regarding its approach towards how individual depositors with deposits up to ₹2 crore and those with deposits of ₹2 crore and above can be dealt with when it comes to withdrawal of money.

The Scheme being put together by the central bank is expected to be placed in public domain in a week or so for suggestions and objections from members, depositors and other creditors of transferor bank (PMC Bank) and transferee bank (Unity SFB).

As per Reserve Bank of India (Interest Rate on Deposits) Directions, 2016, a “Bulk Deposit” means a single Rupee term deposit of ₹2 crore and above for Scheduled Commercial Banks (excluding Regional Rural banks) and Small Finance Banks.

So, a deposit of up to ₹2 crore is considered as a “Retail Deposit”.

The question uppermost on individual depositors’ (under the bulk deposit category) mind is whether the central bank will treat retail deposit and individual bulk deposit on an equal footing vis-a-vis withdrawal.

Phased withdrawal

Chander Purswani, President, PMC Depositors’ Forum, said the Scheme should clearly specify the threshold up to which individual deposits can be freely withdrawn and how deposits beyond this threshold can be withdrawn in a phased manner over, say, 3-5 years.

City Co-op Bank wants to emulate PMC Bank for reconstruction

Further, interest accrued on individual depositors’ deposits, be it retail or bulk, should be allowed to be withdrawn in toto.

He underscored that PMC Bank depositors have suffered over the last 26 months amid the Covid-19 pandemic as deposit withdrawal has been capped at ₹1 lakh of the total balance in their account(s) during the entire period that their Bank is under RBI’s Directions.

What this means is that depositors, especially senior citizens (who usually depend on interest earnings to meet monthly expenses), had to make do with only ₹3,846 a month over the last 26 months.

PMC Bank’s resolution could become a template for rescuing other weak UCBs

Purswani assessed that after taking into account deposit withdrawals of up to ₹1 lakh, PMC Bank has about 1.42 lakh depositors with deposits of over ₹1 lakh. Of this, there are about 43,000 depositors, including individuals, trusts, cooperative societies, etc, with deposits of over ₹5 lakh.

DICGC, a wholly-owned subsidiary of RBI, had upped the limit of insurance cover for depositors in the insured banks fivefold to ₹5 lakh per depositor with effect from February 4, 2020.

Individual depositors, including those with large deposits, need an assurance that they can systematically withdraw their money from Unity SFB, the Forum’s chief said.

Limited period incentive

He opined that the Scheme could also incorporate a limited period incentive, whereby PMC Bank depositors can earn higher interest rate over the card rate so that they are encouraged to keep the deposits with Unity SFB.

PMC Bank came to grief as its high exposure to real estate company HDIL turned non-performing.

The central bank red-flagged the fraud/financial irregularities in the bank and manipulation of its books of accounts.

Last month, RBI granted banking licence to Unity SFB, which has been established jointly by the Centrum Financial Services Ltd (CFSL) and Resilient Innovations Private Limited (BharatPe), to carry on SFB business in India.

RBI had accorded “in-principle” approval to CFSL, which is a wholly-owned subsidiary of Centrum Capital Ltd, on June 18, 2021, to set up an SFB.

The “in-principle” approval was in specific pursuance to CFSL’s February 2021 offer in response to PMC Bank’s November 2020 Expression of Interest (EoI) notification.

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HC judge appoints retired judge to settle claims made by depositors, BFSI News, ET BFSI

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The Madras High Court has appointed Justice N Kirubakaran, a retired judge of the High Court, as Commissioner to take over the entire affairs relating to settlement of claims made by the depositors, who were allegedly cheated by the Ambattur Nadargal Dharma Paripalana Sangam here.

The Commissioner shall cause public notice within a week in two vernacular dailies calling upon persons, who had invested amounts in the petitioners fund to file necessary formal applications along with proof of such deposit and after verification of the said claims, shall settle the amounts due to the depositors.

Justice M Dhandapani made the appointment while granting anticipatory bail to two admins of the Sangam, who apprehended arrest following complaints from the investors.

“Considering the facts and circumstances of the case and also taking into consideration the affidavit filed by the petitioners stating that they would settle the amount due to the victims and abide by any condition that may be imposed by this Court, to give a quietus to the entire issue and also to have the matter settled so that all the depositors, who have invested money in the fund are not deprived of their hard earned money, in the interest of justice, is inclined to appoint a retired judge of this Court as Commissioner to settle the deposits between the depositors and the petitioners,” the judge said.

The entire exercise of receiving the claims, scrutinising and settling the same shall be completed within three months.



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DICGC to announce revised date for submission of claims by PMC Bank depositors

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The Deposit Insurance and Credit Guarantee Corporation (DICGC) has clarified that it will separately communicate the revised date for submission of claims and the procedure to be followed in respect of payment of deposits in the case of the scam-hit Punjab and Maharashtra Co-operative (PMC) Bank.

This clarification comes even as big depositors of PMC Bank were on tenterhooks about submitting a form that requires them to declare the “willingness of depositors to receive insurance claim amount (up to ₹5 lakh) from DICGC.”

The “willingness” clause was interpreted by some of the depositors to mean that they may not receive deposits above ₹5 lakh. Hence, PMC Bank depositors, with deposits above Rs 5 lakh, were reluctant to submit the form.

Now, the Corporation has stated that in the case of PMC Bank, there may be a need to invoke the provisions of Section 18 A (7) (a) of the DICGC (Amendment) Act, 2021.

Also read: Banking venture of Centrum Financial Services christened Unity SFB

As per the aforementioned section, “the Reserve Bank finds it expedient in the interest of finalising a scheme of amalgamation of the insured bank with other banking institution or a scheme of compromise or arrangement or of reconstruction in respect of such insured bank, and communicates to the Corporation accordingly, the date on which the Corporation shall become liable to pay every depositor of such insured bank may further be extended by a period not exceeding ninety days.”

Chander Purswani, President, PMC Depositors Forum, said: ”Our fight was never for ₹5 lakh but for the entire money. We stand by that. We are confident that the RBI and the Centrum-BharatPe combine will not let us down.”

Need for a roadmap

Purswani emphasised that RBI should give a roadmap as to how and when PMC Bank depositors with deposits above ₹5 lakh will get their money back along with accrued interest.

He said PMC Bank has about one lakh depositors with deposits up to ₹5 lakh and about 43,000 depositors with deposits above ₹5 lakh.

RBI had accorded “in-principle” approval to Centrum Financial Services Ltd (CFSL), which is a wholly owned subsidiary of Centrum Capital Ltd, on June 18, 2021, to set up a small finance bank (SFB). This approval was in specific pursuance to CFSL’s February 2021 offer in response to PMC Bank’s November 2020 Expression of Interest (EoI) notification.

Unity Small Finance Bank

CFSL has christened its proposed banking venture as Unity Small Finance Bank.

Under the “in-principle” approval, CFSL will first operationalise Unity SFB in 120 days. Thereafter, RBI will place in public domain a draft scheme of amalgamation of PMC Bank with the SFB. The last step will be government’s sanction for the scheme.

DICGC had, on September 21, 2021, asked the depositors of 21 urban co-operative banks (UCBs), including PMC Bank, Sri Gururaghavendra Sahakara Bank, Rupee Co-operative Bank and Kapol Co-Operative Bank, which are currently under the Reserve Bank of India’s All-Inclusive Directions (AID), to contact their banks and submit the declaration of willingness to enable DICGC to make payments.

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DICGC asks depositors of 21 UCBs to submit relevant documents to enable it process claims

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The Deposit Insurance and Credit Guarantee Corporation (DICGC) has asked depositors of 21 urban co-operative banks (UCBs) currently under the Reserve Bank of India’s All Inclusive Directions (AID), to contact their banks and submit the declaration of willingness to enable DICGC to make payments and also update any other documents/ information, including KYC, if needed by the bank.

This is to ensure that depositors’ claims can be included in the list being prepared by UCBs for submission to DICGC by October 15, 2021.

The 21 UCBs include 11 from Maharashtra, 5 from Karnataka, one each from Kerala, Punjab, Uttar Pradesh, Rajasthan and Madhya Pradesh.

 

With the DICGC (Amendment) Act, 2021, coming into force with effect from September 1, 2021, the Corporation will pay the depositors of the insured banks placed under AID (with restrictions on withdrawal of deposits), an amount equivalent to the deposits outstanding (up to a maximum of Rs 5 lakh) within a period not exceeding 90 days.

“Necessary instructions have been issued to these banks to submit the claims within 45 days after obtaining the willingness of depositors to claim deposit insurance,” DICGC said in a statement.

The verification and settlement of the claims on submission by the banks in the aforesaid list should be done within the next 45 days by DICGC (November 29, 2021).

“These banks shall submit a claim list by October 15, 2021, and update the position as on November 29, 2021 (with principal and interest), in a final updated (second) list, to enable DICGC to settle the claim and discharge its insurance liability in full as per norms,” the statement said.

Unpaid (updated willingness list) / difference in amount of deposits up to eligible amount (as per final updated list submitted by November 29, 2021) will be paid within 30 days of receipt (that is by December 29, 2021).

 

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DICGC moves to engage CA firms to complete depositor verification at 55-odd UCBs

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The Deposit Insurance and Credit Guarantee Corporation (DICGC) has set in motion the process of engaging Chartered Accountant (CA) firms to complete the Herculean task of verification/ certification of claims list and books of records of about 55 insured urban co-operative banks (UCBs), which are currently under the Reserve Bank of India’s All Inclusive Direction (AID).

This is aimed at ensuring that the first list of depositors get paid by the corporation within the stipulated time frame of 90 days from the date (September 1, 2021) when the provisions of the Deposit Insurance and Credit Guarantee Corporation (Amendment) Act, 2021 came into force.

The DICGC Act was amended last month with a provision in Section 18A allowing depositors access to up to ₹5 lakh within 90 days of a bank being placed under moratorium/ AID.

So, depositors of UCBs such as Punjab & Maharashtra Co-operative (PMC) Bank (Mumbai), Sri Guru Raghavendra Sahakara Bank (Bengaluru), Rupee Co-operative Bank (Pune) and Kapol Co-operative Bank (Mumbai) can hope to receive payments up to the insured deposit amount of ₹5 lakh on or before November 29, 2021.

Before the amendment to the DICGC Act, the Corporation would pay depositors the deposit insurance amount, subject to a maximum of Rs 5 lakh, only in the event of the winding up or liquidation of an insured bank. This process would take a few years.

Finance Minister Nirmala Sitharaman, in her Union Budget 2021-22 speech, had said amendments to the DICGC Act will streamline its provisions so that if a bank is temporarily unable to fulfil its obligations, its depositors can get easy and time-bound access to their deposits to the extent of the deposit insurance cover. This would help depositors of banks that are currently under stress.

Claim verification: Racing against time

Claim verification/ certification of depositors, including KYC (know-your-customer) verification, by the CA firm is to ascertain their traceability for payment of claims by DICGC and verifying their willingness to receive insurance claim amount from DICGC.

After the first list is cleared, the Bank, which is under AID, will submit a second and final list, following the above procedure. This list will be verified within a maximum of 15 days of receipt from the bank by CA and certified.

“As the payments to depositors who are willing to receive the insured amount have to be made within statutory time limits, it is emphasised that time is of the essence and verification and the ascertainment process has to be completed within the period specified by the Corporation at the time of giving the claim lists.

“As such, the CA firms while applying, must ensure that they have the adequate manpower to carry out the task in a timely manner,” DICGC said.

Satish Marathe, Founder-Member, Sahakar Bharati, and Director, Central Board of RBI, emphasised that the five-fold increase in the deposit insurance amount to ₹5 lakh (with effect from February 4, 2020), coupled with the amendment to the DICGC Act will provide much-needed relief to depositors of UCBs under Directions.

However, revival of such UCBs may become difficult as their deposit base would have dwindled substantially due to settlement of deposit insurance claim by DICGC and the banks would have to repay to DICGC the amount disbursed by it out of the amount realised from their assets.

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HC to liquidator, BFSI News, ET BFSI

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Panaji: The high court of Bombay at Goa has directed the liquidator of Madgaum Urban Co-operative Bank S V Naik to take necessary steps expeditiously to provide relief to depositors from Curtorim, Macazanna, St Jose de Areal, Raia and others.

“The liquidator will have to pursue the matter with Deposit Insurance and Credit Guarantee Corporation (DICGC), so that at least depositors maintaining balance of less than Rs 5 lakh receive the amount up to Rs 5 lakh, in terms of the insurance scheme. Even the depositors maintaining a deposit of above Rs 5 lakh will be entitled to receive the amounts up to Rs 5 lakh under the scheme,” the court held.

“The liquidator should process all such claims as expeditiously as possible so that there is no undue delay in the matter,” stated the division bench comprising Chief Justice of the Bombay high court Dipankar Datta and Justice Mahesh Sonak.

The residents from Curtorim and neighbouring villages in Salcete, in a letter to the high court in September last year, stated that almost 8,000 account holders mostly agriculturists, fishermen, tenants and labourers had deposited their hard-earned earnings in the bank, which had now gone into liquidation.

They stated that they were not being permitted to withdraw any amount over Rs 5,000 from their bank accounts in terms of directives dated May 3, 2019 issued by the RBI and highlighted the immense difficulties faced by them, particularly during Covid-19 pandemic on account of being unable to access their bank accounts.

During the pendency of the petition, the limit for withdrawal was enhanced from Rs 5,000 to Rs 30,000 and on January 19, the high court directing RBI to consider whether the limit could be further enhanced to Rs 50,000 since Adv C A Coutinho, the counsel for the bank, submitted that the grievances of no less than 49,500 depositors from out of a total of 58,000 depositors would be redressed with the enhancement of such limit.

Assistant general manager of RBI, Sandra Rodrigues submitted to the high court on August 17 that in the present situation, where an order of liquidation or winding up of an insured bank has been made, every depositor in respect of his deposit in the bank shall be entitled to receive up to Rs.5 lakh from in accordance with the provisions of the Deposit Insurance and Credit Guarantee Corporation Act, 1961.

The court was told that almost 55,999 depositors had deposits of less than Rs 5 lakh with the bank and such depositors would therefore be entitled to receive amounts up to Rs 5 lakh from DICGC. This would leave about 636 depositors having a deposit of over Rs 5 lakh.



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RBI extends restrictions on PMC Bank further till Dec 31

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The Reserve Bank of India (RBI) has extended the validity of its Directions to the scam-hit Punjab and Maharashtra Co-operative (PMC) Bank for a further period from July 1 to December 31, 2021, subject to review.

RBI extended the validity of its directions by six months, taking into account the time required for completion of various activities involved in the process of rescuing the bank.

The central bank, in a statement, said certain proposals were received in response to the expression of interest (EOI) floated in November 2020 by PMC Bank for its reconstruction.

“After careful consideration, the proposal from Centrum Financial Services Ltd. (CFSL) along with Resilient Innovation Pvt. Ltd. (BharatPe) has been found to be prima facie feasible.

SFB proposal

“Accordingly, in specific pursuance to their offer dated February 1, 2021, in response to the EOI, RBI has, on June 18, 2021, granted “in-principle” approval, valid for 120 days, to CFSL to set up a small finance bank (SFB)…,”RBI said in a statement.

Once the SFB is floated, PMC Bank would be merged into it.

Jaspal Bindra, Executive Chairman, Centrum Group, said that CFSL and BharatPe, equal partners in the proposed SFB, will together commit ₹900 crore to their joint venture in the first year.

As and when required, the partners will commit ₹900 crore more. The minimum paid-up net worth requirement for starting an SFB is only ₹200 crore.

Chander Purswani, President, PMC Depositors Forum, emphasised that the central bank must ensure that retail depositors get all their savings back.

Currently, withdrawals from PMC Bank are capped at ₹1 lakh per depositor for the entire duration that it is under RBI Directions. The bank has been under Directions with effect from the close of business on September 23, 2019.

The bank got into trouble due to fraud/ financial irregularities associated with huge exposure, which according to reports was at 73 per cent of its total advances, to a real estate group and manipulation of its books of accounts.

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Covid-19: Depositors’ body seeks suspension of penalty on premature FD withdrawal

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The All India Bank Depositors’ Association (AIBDA) wants the Reserve Bank of India (RBI) to direct banks to suspend penalty charges on premature withdrawal of Fixed Deposits (FDs) in view of the Covid-19 pandemic.

In its “Addendum to Memorandum to the Reserve Bank of India,” the AIBDA observed that many depositors are under compulsion to prematurely withdrawal their savings to defray the excessive medical bills for treatment of Covid virus and many have lost their jobs.

Hence, the association requested the RBI for a moratorium on penalty charges for premature deposit withdrawal up to ₹5 lakh.

AIBDA underscored that this request is in light of the accommodation given (with respect to moratorium on loan repayments and resolution framework) to small borrowers, MSME loans up to a given limit.

Depositors need relief

“When borrowers are accommodated then why is there no relief for bank depositors – it is unfair and iniquitous.

“This has become of paramount importance in the current pandemic scenario with unemployment, economic uncertainties, health concerns and unexpected expenses,” said DG Kale, President, and Amitha Sehgal, Honorary Secretary, AIBDA.

The association’s office bearers emphasised that many sections of the society depend on FD interest income as a primary source of income.

“It is only in case of extreme necessity/ emergency that a depositor may withdraw the FD prematurely. It is unfortunate that if they need to break the FD receipt, they also have to forego a part of their income as ‘penalty’,” said Kale and Sehgal.

From the long-term perspective, AIBDA urged the RBI to nudge banks to have a more reasonable penalty structure, that is responsive to the current predicament faced by depositors.

The association said while FD rates are currently hovering at around 4 to 5 per cent per annum, the premature withdrawal penalty can be nearly 0.50 to 1 per cent per annum.

Earlier the FD rates used to hover around 7-8.50 per cent. According to AIBDA’s calculation, the penalty of 1 per cent was reducing the return by approximately by 12 per cent (1 per cent divided by 8 per cent).

Currently, FD rates are hovering around 4 to 5 per cent. The penalty of 1 per cent will bring the return down by 20 per cent (1 per cent divided by 5 per cent).

Unfair to depositors

“This is unfair to depositors. In the best interests of retail/ small depositors and in the light of the current falling interest rate scenario, the existing policy related to penalty on premature withdrawal needs a review,” said the AIBDA office bearers.

AIBDA reiterated its concern that retail depositors are likely to be lured by riskier financial assets to improve on the rate of return on their savings.

Against the backdrop of the impending turbulence and uncertainty in the financial market and a likelihood of stress in the banking/ NBFC/ corporate sector, it is important to take care of this risk, it added.

The association emphasised on the need for some calibration in penalty, linking it to absolute percentage return so that retail depositors are able to meet their objective of generating suitable return from this banking product.

It suggested that the penalty may be linked with the value of the FD, with small value FDs having nil or lower penalty structure.

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