THE deregulation of time deposits will start as early as October when banks begin to gradually phase out interest rate caps, taking particular care over 24-hour call deposits, banking sources say. Discussion on ways to remove the interest rate rules on time deposits to avoid causing instability to the banking system was close to completion, a banker said. It was suggested that such deregulation be in various phases, with a view to achieving the complete removal of restrictions on interest rates on time deposits within one year. The first stage of deregulation will start in October, with longer-maturity time deposits, while subsequent stages will see the interest rate restrictions on shorter-term accounts gradually phased out. However, the biggest headache for bankers is 24-hour call deposits. Worries have been expressed about a migration of deposits from regulated savings accounts to the liberalised time deposits. In this regard, a proposal was forwarded to defer the cap removal on 24-hour deposits until the final stage of deregulation. The interest rate rules apply to Hong Kong dollar deposits of less than $500,000 and with a maturity of less than 15 months.