RBI Updates Priority Sector Lending Norms for FCNR(B)/NRE-backed Advances

The Reserve Bank of India, through Circular RBI/2026-27/232 dated August 07, 2026, has brought in a key change to the computation of Adjusted Net Bank Credit (ANBC) for priority sector lending (PSL) purposes. Under the Reserve Bank of India (Priority Sector Lending – Targets and Classification) Second Amendment Directions, 2026, specified advances backed by eligible FCNR(B) and NRE deposits will now be excluded from the ANBC base, subject to defined conditions.

This change is closely aligned with earlier policy measures on the US Dollar–Rupee swap facility for FCNR(B) deposits and CRR/SLR exemptions to encourage longer-term foreign currency and NRE rupee deposits.

Regulatory Background

Earlier policy measures referred

The amendment relies on and cross-references the following earlier regulatory actions:

  • Governor’s Statement dated June 05, 2026 – announcing policy intent regarding FCNR(B) deposits.
  • RBI Circular FMOD.MAOG.No.S-56/01.06.016/2026-27 dated June 08, 2026 – titled ‘Swap Facility for FCNR (B) Deposits’, under which:
    • A US Dollar–Rupee swap facility was introduced.
    • It applies to fresh Foreign Currency Non-Resident (Bank) [FCNR (B)] dollar deposits.
    • The eligible tenor range is a minimum of three years and a maximum of five years.

In addition, the following amendment directions relating to reserve requirements are central to the current PSL change:

  • Reserve Bank of India (Cash Reserve Ratio and Statutory Liquidity Ratio) Second Amendment Directions dated June 08, 2026
  • Reserve Bank of India (Cash Reserve Ratio and Statutory Liquidity Ratio) Third Amendment Directions dated June 19, 2026

Under these CRR/SLR directions, banks were granted exemption from maintaining Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR) in respect of:

  1. Fresh FCNR(B) deposits

    • Minimum tenor: three years
    • Maximum tenor: five years
    • Period of mobilisation (including renewals on maturity):
      • Between June 08, 2026 and September 30, 2026

  2. Fresh Non-Resident (External) Rupee [NRE] term deposits

    • Tenor: three years or more
    • Period of mobilisation (including renewals on maturity):
      • Between June 19, 2026 and September 30, 2026

These exemptions are the foundation for the new treatment of ANBC under PSL norms.

Linkage with Existing PSL Directions

The present amendment modifies the framework laid down under the Reserve Bank of India (Priority Sector Lending – Targets and Classification) Directions, 2025 (Updated as on January 19, 2026). Those 2025 Directions set out the mechanism for computing ANBC and laid down which items must be deducted when deriving the base for meeting priority sector lending targets.

The 2026 Second Amendment Directions now carve out a specific category of advances extended in India that will not form part of ANBC, thereby impacting the denominator used in calculating compliance with PSL percentage targets.

Advances Now Excluded from ANBC

Nature of eligible advances

With immediate effect, the following categories of advances granted in India by banks are to be excluded from the computation of ANBC for priority sector purposes:

  1. Advances against fresh FCNR(B) deposits

    These are loans/advances sanctioned in India by banks against:

    • Fresh FCNR (B) deposits having:
      • Minimum tenor: three years
      • Maximum tenor: five years
    • Deposits mobilised between June 08, 2026 and September 30, 2026, including:
      • New deposits opened within this window; and
      • Deposits renewed upon maturity within the same period.

  2. Advances against fresh NRE term deposits

    These are advances extended in India against:

    • Fresh NRE term deposits with:
      • Tenor of three years or more
    • Deposits mobilised between June 19, 2026 and September 30, 2026, including:
      • Fresh term deposits initiated during the window; and
      • Existing NRE term deposits renewed upon maturity within that timeframe.

Key limitation on exclusion

Important: The quantum of advances that can be excluded from ANBC is capped.

The exclusion is limited to the amount of eligible FCNR(B)/NRE deposits that themselves qualify for CRR/SLR exemption under the relevant CRR/SLR Amendment Directions. In other words:

  • The maximum amount deductible from ANBC cannot exceed the value of the fresh FCNR(B)/NRE deposits that:
    • Fall within the specified mobilisation windows; and
    • Satisfy the tenor criteria; and
    • Are eligible for exemption from maintenance of CRR and SLR.