Paperless FDs on the cards

The Indian Banks' Association has held talks with the Reserve Bank of India (RBI) for dematerialisation of fixed deposits (FDs). If the concept gets the green signal, then the practice of issuing physical FD receipts will be scrapped and customers can access deposits from anywhere in the country.

At present, customers can access FDs only at branch concerned. The core banking solution being implemented across banks would give customers the flexibility of accessing fixed deposits from any branch.

At present, though physical FD receipts do not attract any stamp duty, there is no clarity on electronic receipts.

The central bank has informed the IBA that as per terms of Article 53 to Schedule I of Indian Stamps Act, 1899, 'receipt', as defined under Section 2(23) for any money exceeding Rs 5,000, is required to be stamped.

'Receipt' under Section 2(23) also includes any note, memorandum or writing whereby any money is acknowledged to have been received.

However, a 'receipt' given for money or security with a bank is exempted from stamp duty, provided it is given to the very person to whom the same is to be accounted for. It is on account of this exemption under Article 53 that, at present, bank FD receipts issued do not attract duty.

RBI has further advised that in case the receipt is in the form of electronic record, it should not attract stamp duty as it is levied on the document and not on transaction. The central bank's observation comes in wake of state governments levying duties on all electronic securities transactions.