Maximum Interest rate on Deposits – Fixed Deposits, Savings and Recurring deposits – Nidhi Rules, 2014
by Paras Mehra 15K
Introduction
We are now discussing the one of the most important area of Nidhi Company functioning, the interest offering on deposits. This is where competition commences. Every Nidhi company, in order to leverage the deposits, wants to offer maximum interest rate as possible to attract the common investor and member.
However, if Nidhi companies as not controlled and left open to decide the rate of Interest, then it might affect the finance market, because the gap between the Interest rate might force people to invest in Nidhi Companies and not in banks, due to this money flow into the economy will suffer.
There are three main products of Nidhi Limited on which Interest is offered to leverage the deposits.
- Saving Deposit
- Fixed account
- Recurring Deposits
Let us discuss it one by one:
- Maximum Interest on Saving Account/Deposits: The maximum rate of Interest offered by Nidhi Company shall be 2% above the rate of Interest payable by any Nationalized Bank in India on saving bank account.
We can form a formula out of the above rules which is as follow:
Maximum Interest offered by Nidhi Limited on Saving Account = 2% + Rate of Interest payable by Nationalized bank on saving bank Account.
Let us understand this via table:
INTEREST OFFERED BY BANKS AND NIDHI
| SBI | PNB | HSBC | Max. Ceiling Limit |
|---|---|---|---|
| 4% | 4.5% | 4% | 4.5% + 2 = 6.5% |
| 3% | 4% | 6% | 4% +2 = 6% (HSBC is not a nationalized bank) |
You can also verify the list of nationalized bank with rate of Interest on saving account from here.
Practically, the maximum rate offered on saving bank account is 4% and hence, the maximum rate of Interest on saving account/deposits will be 6% (4%+2%).
- Maximum Interest on Fixed Account/Deposits or Recurring deposits: The maximum rate of Interest offered by Nidhi Company will the rate not exceeding the maximum rate prescribed for Non Banking Financial Company (NBFC) by Reserve Bank of India (RBI). The maximum rate of interest an NBFC can offer is 12.5% (source: RBI LINK).
So, as per rules, the maximum rate of Interest that can be offered by a Nidhi Company on fixed Deposits or recurring deposits will be 12.5%.
The important point is to be noted is that the Interest rate is not fixed, Reserve Bank of India keeps it changing every time. So, it is always recommended to use the latest Interest Rate.
CONCLUSION
The above article is written to dissolve all the ambiguity towards the interest rate offered by Nidhi Company. In case, there is any other doubt, you may contact us.