RBI Curtails Duration of Relaxed Deposit Rate Norms for Regional Rural Banks to August 31, 2026

The Reserve Bank of India has issued a further set of amendments to the regulatory framework governing deposit interest rates of Regional Rural Banks (RRBs). Through the Reserve Bank of India (Regional Rural Banks – Interest Rate on Deposits) Third Amendment Directions, 2026, the RBI has shortened the validity period of an earlier temporary relaxation relating to interest rate ceilings on certain foreign currency and Non-Resident deposits.

These latest changes, notified via RBI/2026-27/246, DOR.SOG(SPE).REC.213/13.03.00/2026-27 dated August 25, 2026, modify specific provisions of the Reserve Bank of India (Regional Rural Banks – Interest Rate on Deposits) Directions, 2025, which were originally issued on November 28, 2025 and updated as of June 17, 2026.

Background: 2025 Directions on RRB Deposit Interest Rates

The Reserve Bank of India (Regional Rural Banks – Interest Rate on Deposits) Directions, 2025 constitute the primary regulatory framework setting out how RRBs can determine interest rates on various categories of deposits. These Directions cover, among others:

  • Domestic deposit schemes of RRBs
  • NRE and NRO deposit accounts maintained by non-residents
  • FCNR(B) (Foreign Currency Non-Resident (Bank)) deposits

Within this overarching framework, the RBI prescribes norms on:

  • Benchmarking and ceilings for interest rates
  • Tenor-based differentiation of rates
  • Conditions for renewal and premature withdrawal
  • Special treatment for certain types of foreign currency deposits

The June 17, 2026 update to the 2025 Directions introduced a temporary relaxation in respect of the ceiling on FCNR(B) deposit interest rates and the restrictions on NRE deposit interest rates for longer tenors. The Third Amendment Directions now shorten the time window during which this relaxation remains operational.

Earlier Temporary Relaxation Introduced from June 17, 2026

The June 17, 2026 revision to the 2025 Directions carved out a special relaxation for RRBs in two specific areas:

  1. FCNR(B) Deposits (3–5 Years Tenor)

    • The interest rate ceiling applicable to fresh FCNR(B) deposits with maturities between three and five years was temporarily withdrawn.
    • This allowed RRBs to offer higher or more flexible interest rates on new FCNR(B) deposits in the 3–5 year bucket, subject to their internal policies and risk management frameworks.

  2. NRE Deposits (3 Years and Above Tenors)

    • The restriction on interest rates for NRE term deposits with a tenor of three years and above—including renewals on maturity—was also temporarily relaxed.
    • RRBs were thus permitted to price these longer-tenor NRE deposits more competitively than under the earlier cap-based regime.

Originally, this relaxation was expressly stated to be effective:

“with effect from June 17, 2026, for the period until September 30, 2026”

In other words, RRBs had a defined window—June 17, 2026 to September 30, 2026—during which they could deviate from the usual interest rate ceilings and restrictions for the specified deposit categories.

RBI’s Review and Decision to Advance the End Date

After reviewing the impact and continuing necessity of this relaxation, the RBI has now determined that the relaxed regime should not extend up to September 30, 2026, as initially envisaged.