Previous Year Question

The question concerns the regulatory position prevailing in 2010. At that time, the interest rate payable on savings bank deposits of commercial banks was prescribed by the Reserve Bank of India (RBI). Since the RBI is not mentioned in the options, option (d) is correct.

In 2010, the interest rate on domestic savings deposits was 3.5 per cent per annum. The RBI increased it to 4 per cent per annum with effect from May 3, 2011.

On October 25, 2011, the RBI deregulated the savings bank deposit interest rate. Under the initial deregulated framework:

• Each bank had to offer a uniform rate on end-of-day balances up to ₹1 lakh.

• Banks could offer differential rates on balances exceeding ₹1 lakh, subject to non-discrimination between deposits of the same amount.

• Consequently, the earlier system of a single RBI-prescribed savings deposit rate for all banks came to an end.

Option-wise examination:

• Union Ministry of Finance: It formulates the Union Government’s fiscal and economic policies but was not the banking regulator prescribing the savings deposit rate.

• Union Finance Commission: Constituted under Article 280, it recommends the distribution of tax revenues between the Union and the States. It does not regulate bank deposit rates.

• Indian Banks’ Association: It is a representative association of banks and not the statutory regulator responsible for prescribing savings deposit rates.

• The competent authority in 2010 was the RBI, which is absent from the options.