Reserve Bank of India
Central Office
Department Of Banking Operations & Development
Centre - 1, World Trade Centre
Cuffe Parade, Colaba, Mumbai - 400 005

October 29, 1999
Kartika 07, 1921(Saka)

All Regional Rural Banks

Dear Sirs

As per the instructions contained in RBI circular DBOD No. Dir. BC.37/13.01.04/99 dated April 23, 1999, interest rate chargeable on loans and advances granted to depositors against their domestic term deposits should not exceed the normal lending rate which the bank is charging on its best borrowal accounts, except in cases where deposit rates are equal to or more than the normal lending rate, which the bank is charging on its best borrowal accounts or less than one percentage point below the normal lending rate, the banks have freedom to charge suitable rates of interest without reference to the ceiling of their own normal lending rate.

2. Consequent on the statement released by the Governor, Reserve Bank of India on "Mid-Term Review of Monetary and Credit Policy for the year 1999-2000" a Directive DBOD No. Dir. BC. 107/13.01.04/99 dated October 29, 1999, has been issued, a copy of which is enclosed. Accordingly, Regional Rural Banks will have freedom to charge interest rates on advances granted to depositors against their domestic term deposits without reference to their own normal lending rate.

Yours faithfully

(M. P. Kothari)
General Manager

Encl:1

Endt. DBOD No. Dir. /13.01.04/99 of date.

Copy forwarded for information and necessary action to All Sponsor Banks.

(S. P. Padgaonkar)
Deputy General Manager
Encl:1