The Reserve Bank of India (RBI) has issued the Third Amendment Directions, 2026, granting a temporary exemption from Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR) requirements on fresh Non-Resident (External) Rupee (NRE) term deposits mobilised by Small Finance Banks (SFBs). The circular, dated June 19, 2026, takes effect immediately.
Under the amended framework, NRE term deposits with a minimum tenor of three years, mobilised between June 19, 2026 and September 30, 2026, will be exempt from CRR and SLR maintenance. This benefit also extends to existing deposits that are renewed upon maturity during this window, provided they meet the three-year tenor requirement.
The CRR exemption will be applicable from the reporting fortnight beginning July 16, 2026, based on the Net Demand and Time Liabilities (NDTL) computation as on June 30, 2026, and will continue for subsequent fortnights. Crucially, the exemption applies to the original deposit amount for as long as the deposit remains on the bank’s books.
However, the RBI has placed a clear restriction: any funds transferred from Non-Resident (Ordinary) (NRO) accounts to NRE accounts will not be eligible for this exemption. This clause is aimed at preventing misuse of the concession through internal account transfers rather than fresh foreign inflows.
The amendment modifies the existing RBI (Small Finance Banks – Cash Reserve Ratio and Statutory Liquidity Ratio) Directions, 2025. Technically, a new sub-paragraph has been inserted under Paragraph 20 of those directions, and corresponding changes have been made to Paragraph 29(5) and Annex A to Form A to reflect the updated reporting structure.
The move is seen as a targeted measure to encourage Small Finance Banks to attract long-term NRE deposits from the Indian diaspora, thereby boosting foreign currency inflows at the retail banking level. By reducing the reserve maintenance burden on such deposits, the RBI is effectively improving the economics for SFBs that mobilise NRE funds, potentially enabling them to offer more competitive interest rates.
This directive has been issued under the powers vested in the RBI through Section 35A of the Banking Regulation Act, 1949, Section 42 of the RBI Act, 1934, and Sections 18 and 24 of the Banking Regulation Act, 1949.
Source: RBI Notifications
