In a move aimed at increasing foreign currency inflows into India, the Reserve Bank of India (RBI) has announced a major relief for banks raising Foreign Currency Non-Resident (Bank) or FCNR(B) deposits.
The central bank has exempted eligible new FCNR(B) deposits from maintaining Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR), making these deposits more attractive for banks and Non-Resident Indians (NRIs).
The decision comes as part of RBI’s recently announced US Dollar-Rupee swap facility and takes effect immediately.
What Has RBI Announced?
According to the RBI, fresh FCNR(B) deposits raised by banks will not be subject to CRR and SLR requirements.
However, the exemption will apply only to deposits that meet the following conditions:
Minimum tenure of 3 years
Maximum tenure of 5 years
Deposits mobilized up to September 30, 2026
Includes deposits renewed upon maturity
The benefit will be available to:
Commercial banks
Small finance banks
Regional rural banks (RRBs)
Rural cooperative banks
The RBI clarified that the exemption will remain valid for the original deposit amount as long as the deposit stays on the bank’s books.
Why Is This Move Important?
Banks are normally required to keep a portion of their deposits as CRR and SLR reserves.
By exempting eligible FCNR(B) deposits from these requirements, the RBI has reduced the regulatory burden on banks.
This means banks can use a larger portion of the funds they receive through these deposits, making it more attractive for them to mobilize foreign currency from NRIs.
The move is expected to help bring additional foreign currency into the country at a time when strengthening external finances remains a priority.
How Will the US Dollar-Rupee Swap Facility Help?
The RBI has also opened a special US Dollar-Rupee swap window that will remain available until September 30, 2026.
Under this arrangement, banks can swap the US dollar deposits they receive with the RBI.
This provides two key benefits:
Helps banks manage and hedge currency-related risks
Encourages banks to offer attractive returns to NRI depositors
By reducing exchange-rate concerns, the facility is expected to encourage greater participation from both banks and overseas depositors.
Similar to a Measure Used During the 2013 Crisis
The latest move is not entirely new.
A similar mechanism was introduced by the RBI during the 2013 balance-of-payments crisis, when India needed to attract foreign currency inflows and strengthen its external position.
That initiative helped bring significant foreign deposits into the banking system, and the current measure is expected to have a similar impact.
What Does This Mean for NRIs?
For NRIs looking to invest in India, FCNR(B) deposits may become more attractive as banks could offer better terms due to lower regulatory costs.
Since these deposits are held in foreign currency, they also help investors avoid direct exchange-rate risks on their principal amount.
The RBI’s latest decision is expected to support higher foreign currency deposits while strengthening India’s banking and financial system.
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 aims to attract more foreign currency into India, reduce costs for banks, and encourage NRI participation.
Combined with the special US Dollar-Rupee swap facility, the measure is expected to boost foreign inflows and support the country’s financial stability.
