The Reserve Bank of India (RBI) has granted 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), effective June 19, 2026.
As per the Third Amendment Directions issued under the Reserve Bank of India (Small Finance Banks – Cash Reserve Ratio and Statutory Liquidity Ratio) Directions, 2025, NRE term deposits with a tenure of three years or more — including those renewed upon maturity — collected between June 19, 2026 and September 30, 2026 will be exempt from mandatory reserve maintenance obligations.
The CRR exemption will apply starting from the reporting fortnight beginning July 16, 2026, which is based on the Net Demand and Time Liabilities (NDTL) computation as on June 30, 2026. The benefit will continue for subsequent fortnights as well. Importantly, the exemption is applicable on the original deposit amounts and will remain in force for as long as the deposits are maintained on the books of the respective Small Finance Banks.
The RBI has, however, clarified that any funds transferred from Non-Resident (Ordinary) or NRO accounts into NRE accounts will not be eligible for this exemption. This condition ensures that only genuine fresh foreign inflows or eligible renewals qualify for the regulatory relief.
The amendment also makes corresponding technical changes to the existing directions, including updates to paragraph 29(5) and the reporting form — Form A — where a new line item has been added specifically for NRE term deposits under paragraph 20(7).
The directive has been issued by the RBI in exercise of powers under Section 35A of the Banking Regulation Act, 1949, Section 42 of the Reserve Bank of India Act, 1934, and Sections 18 and 24 of the Banking Regulation Act, 1949. The changes have come into force with immediate effect.
This move is expected to incentivise Small Finance Banks to attract more long-term NRE deposits from the Indian diaspora, providing these lenders with a relatively cost-efficient source of foreign-origin rupee funding during the specified window.
Source: RBI Notifications
