Mumbai, July 30 -- The Reserve Bank of India (RBI) has allowed banks to offer different interest rates for various categories of bulk deposits of Rs.3 crore and above, based on their run-off risk, giving lenders greater flexibility in deposit pricing.

"A bank shall have the freedom to offer differential interest rates on bulk deposits, by considering the differential run-off rate applicable to deposits or unsecured wholesale funding under the LCR (Liquidity Coverage Ratio) framework," the central bank notified on Thursday. The norms will come into effect from 1 October.

A run-off rate is the estimated share of a bank's deposits or liabilities that customers may withdraw during a short-term financial stress event. It is used to calculate...