In a move aimed at attracting more foreign currency into India, the Reserve Bank of India (RBI) has announced a major relief for banks raising funds through NRI deposits.
The central bank has exempted fresh Foreign Currency Non-Resident (Bank) or FCNR(B) deposits from Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR) requirements under its recently announced US Dollar-Rupee swap facility.
The decision is expected to encourage banks to mobilize more foreign currency deposits and strengthen foreign exchange inflows into the country.
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What Has RBI Announced?
According to the RBI, banks will not be required to maintain CRR and SLR on fresh FCNR(B) deposits raised under the special scheme.
The exemption applies to deposits with:
A minimum tenure of 3 years
A maximum tenure of 5 years
The benefit will be available for deposits mobilized up to September 30, 2026.
The RBI clarified that the exemption will also apply to deposits that are renewed upon maturity during this period.
Which Banks Can Avail the Benefit?
The new rule applies to a wide range of financial institutions, including:
Commercial banks
Small finance banks
Regional rural banks (RRBs)
Rural cooperative banks
The provisions have come into effect immediately.
This means eligible banks can start offering and mobilizing these deposits right away.
How Will the Dollar-Rupee Swap Facility Help?
The RBI’s special swap facility allows banks to swap US dollar deposits with the central bank.
This provides multiple benefits:
Helps banks manage currency risk more effectively
Supports foreign currency inflows into India
Makes FCNR(B) deposits more attractive for banks
Offers competitive returns to Non-Resident Indian (NRI) depositors
By reducing regulatory requirements such as CRR and SLR, banks can lower their costs and potentially offer better terms to depositors.
Why Is This Move Important?
The RBI’s latest decision is aimed at increasing the flow of foreign currency into India at a time when global economic conditions remain uncertain.
Industry experts believe the measure could encourage more NRIs to park their savings in Indian banks through FCNR(B) deposits.
The move is also similar to a special initiative introduced during the 2013 balance-of-payments crisis, when India used similar measures to attract foreign currency and strengthen its external position.
What Happens to Existing Deposits?
The RBI has clarified that the exemption applies to the original deposit amount for as long as the funds remain on the bank’s books.
This means banks can continue to enjoy the CRR and SLR exemption throughout the tenure of eligible deposits.
Key Takeaway
The RBI has exempted fresh FCNR(B) deposits with tenures between 3 and 5 years from CRR and SLR requirements until September 30, 2026.
The move is designed to attract more foreign currency inflows, reduce banks’ regulatory costs, and make NRI deposits more appealing.
With the support of the RBI’s special US Dollar-Rupee swap facility, banks are expected to strengthen foreign currency mobilization while offering attractive options to overseas Indian depositors.