RBI Issues Second Amendment Directions 2026: CRR and SLR Relief for Urban Co-operative Banks on FCNR(B) Dollar Deposits

Background and Context

The Reserve Bank of India has taken a significant regulatory step by issuing the Reserve Bank of India (Urban Co-operative Banks – Cash Reserve Ratio and Statutory Liquidity Ratio) Second Amendment Directions, 2026, which came into force with immediate effect from June 8, 2026. This directive forms part of a broader monetary policy initiative aimed at attracting foreign currency inflows into the Indian banking system, particularly through the urban co-operative banking sector.

The foundation for this amendment was laid through the Governor's Statement dated June 5, 2026, in which the Reserve Bank announced its decision to introduce a US Dollar-Rupee swap facility specifically designed for fresh Foreign Currency Non-Resident (Bank) [FCNR(B)] dollar funds mobilized for tenures ranging from a minimum of three years to a maximum of five years. The amendment directions now give operational and regulatory substance to that policy announcement.

The RBI has exercised its statutory powers under multiple provisions to issue these directions. Specifically, the amendment has been made:

  • Under Section 35A of the Banking Regulation Act, 1949
  • Pursuant to Section 42 of the Reserve Bank of India Act, 1934
  • Under Sections 18 and 24, read with Section 56 (AACS), of the Banking Regulation Act, 1949, as amended from time to time

The Reserve Bank, being satisfied that issuing such directions is necessary and expedient in the public interest, has exercised its full enabling authority to introduce these regulatory relaxations for urban co-operative banks.

Reference Circular: RBI/2026-27/104 | DOR.RET.REC.86/12.01.001/2026-27 | Dated June 08, 2026

Key Amendments Introduced

Amendment to Paragraph 21 – CRR Exemption for Fresh FCNR(B) Deposits

The most consequential change brought about by these directions is the insertion of a new sub-paragraph 21(5) into the Reserve Bank of India (Urban Co-operative Banks – Cash Reserve Ratio and Statutory Liquidity Ratio) Directions, 2025 (Updated as on January 22, 2026).

The newly inserted provision reads as follows: