The Reserve Bank of India has initiated discussions with banks regarding a new savings product designed to help families build dedicated corpus for children's school education expenses. According to reports from The Economic Times, banks are currently holding industry-wide discussions and will submit their recommendations to the banking regulator. A senior public sector bank executive confirmed that the RBI has forwarded a suggestion on this matter and sought their views, with the industry conducting comprehensive discussions including private sector banks.
The proposed product addresses a critical market gap as education costs in India are increasing at an estimated 10-12% annually, significantly outpacing household income growth. As reported by The Economic Times, this rate of increase necessitates dedicated financial planning tools for families. An industry executive noted that any such product will require regulatory dispensation, as currently banks do not offer any product with preferential rates tied to a specific purpose. The only existing instrument with similar features is the Sukanya Samriddhi Yojana, which offers 8.2% interest per annum with deposits capped at ₹1,50,000 annually.
According to a Crisil Ratings report cited by The Economic Times, educational institutions are expected to record an 11-13% jump in total income during the current and next financial years. The report indicates this fiscal will mark the sector's fifth straight year of double-digit growth, primarily driven by higher household spending on education as incomes improve. K-12 education, accounting for a third of the sector's revenue, is expected to expand at a steady rate of 9-10%, supported by increasing urbanisation and affordability along with annual fee revisions at private schools.
The proposed product may require new regulatory dispensations from the RBI, as reported by The Economic Times. A bank executive emphasized that such a product carrying preferential interest rates tied to specific end-use will need new regulations that only the RBI can prescribe. The executive noted that banks will highlight these challenges in their recommendations to the central bank, as the current regulatory framework does not accommodate products with preferential rates tied to specific purposes.
State-owned Indian Bank is actively participating in the RBI's FCNR(B) deposit mobilization program, targeting $2 billion in foreign currency deposits under the special window. According to MD and CEO Binod Kumar, the bank has already mobilized $140 million and maintains a pipeline of nearly $1 billion that should help achieve the target before the window closes in September 2026. Other PSU banks including Punjab National Bank are pursuing similar targets, with PNB chasing $2.5-3 billion in foreign currency deposits. The initiative follows RBI's June decision to introduce a temporary dollar-rupee swap facility for fresh FCNR(B) deposits, with swap access available until mid-October 2026.
