RBI Advances End Date for UCB Deposit Interest Rate Relaxation from September 30 to August 31, 2026
Overview of the Amendment
The Reserve Bank of India has issued a fresh set of directions — formally cited as RBI/2026-27/247, DOR.SOG(SPE).REC.216/13.03.00/2026-27, dated August 25, 2026 — titled the Reserve Bank of India (Urban Co-operative Banks – Interest Rate on Deposits) Third Amendment Directions, 2026. This directive introduces a targeted modification to the existing regulatory framework governing deposit interest rates applicable to Urban Co-operative Banks (UCBs), specifically with respect to foreign currency and non-resident deposit schemes.
The amendment is brief in its scope but significant in its practical implications: it shortens a previously granted temporary relaxation window, pulling forward the expiry date from September 30, 2026 to August 31, 2026.
Background: The 2025 Directions and the June 2026 Amendment
To fully appreciate the impact of this latest amendment, it is necessary to trace the regulatory chain leading up to it.
The Original 2025 Directions
The Reserve Bank of India (Urban Co-operative Banks – Interest Rate on Deposits) Directions, 2025, were originally issued on November 28, 2025. These Directions established a comprehensive regulatory framework governing how UCBs may structure and offer interest rates on various deposit products, including domestic deposits, Non-Resident External (NRE) deposits, and Foreign Currency Non-Resident (Bank) — i.e., FCNR(B) — deposits.
Under the standard provisions of these Directions:
- FCNR(B) deposits of three-to-five-year tenors were subject to an interest rate ceiling, which UCBs were required to observe.
- NRE deposits of three years and above in tenor — including those being renewed upon maturity — were subject to a corresponding interest rate restriction.
These caps were designed to maintain orderly pricing of foreign-currency-linked and non-resident deposits within the UCB segment.
The June 17, 2026 Amendment
The Directions were subsequently updated as on June 17, 2026, through what may be regarded as the second amendment in this series. Under this update, the RBI decided to temporarily withdraw both:
- The interest rate ceiling on fresh FCNR(B) deposits of 3-to-5-year tenors; and
- The restriction on interest rates applicable to NRE deposits of 3 years and above, including such deposits being renewed at maturity.