New Delhi, 27 May 2025: To tackle slowing deposit growth, the Reserve Bank of India (RBI) is considering allowing banks to offer term deposits with tenures of less than seven days. The proposal has drawn mixed reactions from the banking sector & customers, highlighting a divide between flexibility and financial risk.
As of now, this proposal is under review with the RBI.
As of May 2, 2025, bank deposit growth had fallen to 10% year-on-year, a noticeable drop from 13% a year earlier, according to The Economic Times report. To overcome the situation, the RBI is consulting with major public and private sector banks such as the State Bank of India, Punjab National Bank, and Axis Bank.
Currently, banks are not allowed to offer term deposits shorter than seven days. Now, with the Indian Banks’ Association (IBA) expected to deliver collective feedback by the end of May.
Some bank executives are cautiously optimistic. One senior official suggested that shorter tenures for FDs might increase fixed deposits and inject liquidity into the system. However, he also noted that the RBI has not committed to giving banks complete freedom to set deposit durations for public concerns.
If banks rely on extremely short deposits to fund long-term credit, they risk destabilising their asset-liability balance—an outcome no regulator would want to encourage.
The RBI’s consideration of sub-seven-day term deposits signals a proactive response to a changing financial condition. But final decision to come from the RBI.
