RBI Amends Interest Rate Disclosure Framework for Local Area Banks — Second Amendment Directions, 2026

Overview of the Regulatory Change

The Reserve Bank of India has issued a significant amendment to the regulatory framework governing deposit interest rates applicable to Local Area Banks. Through a formal circular dated 30 July 2026, the RBI has introduced the Reserve Bank of India (Local Area Banks – Interest Rate on Deposits) Second Amendment Directions, 2026, which will come into force on 1 October 2026.

This amendment modifies the earlier Reserve Bank of India (Local Area Banks – Interest Rate on Deposits) Directions, 2025, originally issued on 28 November 2025, with a specific focus on revising the rules around how deposit interest rates — particularly for bulk deposits — must be disclosed and applied by Local Area Banks operating in India.

The Reserve Bank of India has issued these Amendment Directions in exercise of the powers vested in it under Section 35A of the Banking Regulation Act, 1949, along with all other applicable enabling laws. The RBI has stated that it is satisfied that the issuance of these directions is necessary and expedient in public interest, which forms the statutory basis for the amendment.

Reference: RBI/2026-27/218 | DOR.SOG(SPE).REC.177/13.03.00/2026-27 | Dated: July 30, 2026

What Has Been Amended — A Detailed Breakdown

The Amendment Directions bring about two key substitutions within Chapter II — General Guidelines (Interest Rate Framework) of the parent Directions dated November 28, 2025. Both substitutions target specific paragraphs dealing with disclosure practices and uniformity of interest rate application.

Amendment 1: Revised Disclosure Requirements for Deposit Interest Rates (Substitution of Paragraph 6(3))

The earlier paragraph 6(3) of Chapter II has been replaced entirely. The revised provision now reads as follows:

"Interest rates payable on deposits, including bulk deposits, shall be strictly as per the schedule of interest rates disclosed in advance on the bank's website. However, interest rates payable on bulk deposits shall be disclosed on the bank's website at 10:00 am with a grace time of 10 minutes, latest by 10:10 am, on each business day."

Key Implications of the Revised Paragraph 6(3)

The following points highlight the practical impact of this substitution:

  • Advance Disclosure Mandate: Interest rates — whether for regular deposits or bulk deposits — must be pre-disclosed on the bank's official website. No rate can be applied unless it has been published in advance as part of a formal interest rate schedule.

  • Specific Time-Window for Bulk Deposit Rates: Unlike regular deposits, bulk deposits are subject to a daily disclosure discipline. Banks are required to publish applicable bulk deposit interest rates on their website by 10:00 a.m. each business day.