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Thursday, April 12, 2012

RBI directs banks to pay 8% compensation on delayed interest payment on Relief Bonds

Banks are expected to be more prompt in crediting interest amount of Relief or Saving Bond investors to avoid a heavy compensation they will have to pay for delayed payment.

The Reserve Bank of India (RBI) has directed banks to compensate investors of Relief or Savings Bonds at 8% per annum for financial loss incurred to them due to delay in payment of interest amount. Earlier RBI had asked banks to compensate for the delay in payment at their own savings bank rate, irrespective of the amount.

However, the move to fix a uniform rate of 8% for all banks comes in context of different banks offering different rate on savings account after it was deregulated in October 2011. RBI said that the move is aimed at "avoiding ambiguity and variation in compensation rates across different agency banks."

Banks like Yes Bank and Kotak Mahindra Bank are offering 6% while State Bank of India, HDFC Bank, ICICI Bank continue to pay 4% on saving account. The compensation of 8% is higher than savings rates offered by any bank now.

In a letter to all commercial banks that are operating as agency banks for Relief bonds, RBI said, "an agency bank shall compensate an investor in Relief/Savings bonds, for the financial loss due to late receipt/delayed credit of interest warrants/maturity value, at a fixed rate of 8% per annum."

Investors are paid interest on these bonds through interest warrants by registered post or the bank directly credits the amount in the investor's bank account. banks will now ensure that the interest is credited on due date.

Source: EconomicTimes


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