RBI Introduces CRR & SLR Exemption on Fresh FCNR(B) Deposits
— Five Simultaneous Notifications Explained
Following the Governor's Statement of June 5, 2026, the Reserve Bank of India issued five simultaneous Amendment Directions on June 8, 2026 granting CRR and SLR exemptions on fresh FCNR(B) dollar deposits to all categories of banks — Commercial Banks, Small Finance Banks, Urban Co-operative Banks, Rural Co-operative Banks, and Regional Rural Banks.
At a Glance — Five Notifications, One Policy
Governor's Statement — June 5, 2026
June 8, 2026 (5 Notifications: RBI/2026-27/102 to 106)
CRR & SLR maintenance on fresh FCNR(B) US dollar deposits (3–5 year tenor)
June 8, 2026 to September 30, 2026 (including renewals at maturity)
Fortnight beginning July 1, 2026 (based on NDTL as of June 15, 2026)
Till the deposits are held in the bank's books (original deposit amounts)
Section 35A of Banking Regulation Act, 1949; Section 42 of RBI Act, 1934; Sections 18 & 24 of BR Act, 1949
Manoranjan Padhy, Chief General Manager, RBI
Key Numbers
What Happened on June 5–8, 2026? — Background and Context
On June 5, 2026, RBI Governor Sanjay Malhotra delivered the Monetary Policy Committee's policy statement. Among the several liquidity and monetary measures announced, one stood out for its potential to attract significant foreign currency inflows into India: the introduction of a US Dollar-Rupee swap facility for fresh Foreign Currency Non-Resident (Bank) — commonly known as FCNR(B) — dollar deposits mobilised for a minimum tenor of three years and maximum tenor of five years.
To operationalise this policy and make it commercially attractive for banks to mobilise long-tenor FCNR(B) deposits, the RBI followed up three days later on June 8, 2026 with five simultaneous Amendment Directions — one each for the five different categories of banks regulated by RBI. The core incentive in each notification is identical: fresh FCNR(B) dollar deposits mobilised between June 8 and September 30, 2026 are exempt from the mandatory maintenance of Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR) on such deposit amounts.
💡 Why Does CRR/SLR Exemption Matter for FCNR(B) Deposits?
Banks are ordinarily required to set aside a portion of their deposits as mandatory reserves — CRR (cash parked with RBI, currently 4%) and SLR (liquid assets like government securities, currently 18%). This means for every ₹100 of deposits, a bank can only deploy ₹78 for lending or investment — the rest sits as statutory reserves earning little or nothing. For foreign currency deposits like FCNR(B), these requirements reduce the cost-effective return for banks and make them less competitive in pricing these deposits to NRI depositors. By exempting FCNR(B) deposits from CRR and SLR, RBI is effectively allowing banks to deploy 100% of these dollar deposits, dramatically improving the economics of mobilising them and enabling banks to offer better rates to NRI depositors.
What is FCNR(B)? — Understanding the Foundation
FCNR(B) — Foreign Currency Non-Resident (Bank) — is a term deposit account available in India to Non-Resident Indians (NRIs) and Persons of Indian Origin (PIOs). Key characteristics:
📈 Why USD FCNR(B) Specifically — The USD-Rupee Swap
The June 5 announcement specified a USD-Rupee swap facility for FCNR(B) deposits. This means RBI itself will offer a swap to banks: the bank mobilises US dollars from NRIs via FCNR(B), converts them to INR using RBI's swap facility (at a known, predictable exchange rate), deploys the INR in India, and at maturity converts back to USD using the forward leg of the swap to repay the depositor in foreign currency. This removes the exchange rate risk from the bank's books — making it even more attractive for banks to aggressively mobilise FCNR(B) deposits. Combined with the CRR/SLR exemption, the economics for banks become highly compelling.
The Five Notifications — Who, What, and How
Commercial Banks — CRR & SLR Second Amendment Directions, 2026
Applicable to all scheduled commercial banks, payment banks, and local area banks (excluding RRBs and co-operative banks covered by separate notifications). Inserts new sub-paragraph 8 in Paragraph 20 of the CRR/SLR Directions, 2025 (Updated January 22, 2026). Also updates para reference in Paragraph 29(5) and updates Annex A to Form A (CRR reporting form) to add a separate reporting line "FCNR(B) – 2026 [Para 20(8)]".
Small Finance Banks — CRR & SLR Second Amendment Directions, 2026
Applies to all SEBI-regulated Small Finance Banks. Inserts new sub-paragraph 6 in Paragraph 20 of the SFB CRR/SLR Directions, 2025. Also updates Paragraph 29(5) and adds a separate reporting line "FCNR(B) – 2026 [Para 20(6)]" in Annex A to Form A. Exact same exemption terms as commercial banks.
Urban Co-operative Banks — CRR & SLR Second Amendment Directions, 2026
Applies to all Urban Co-operative Banks (UCBs) regulated by RBI. Inserts new sub-paragraph 5 in Paragraph 21 of the UCB CRR/SLR Directions, 2025. Updates Paragraph 29(4) to include the new reference. Legal authority additionally includes Section 56 (AACS) of the Banking Regulation Act, 1949, which is the section applicable to co-operative societies.
Rural Co-operative Banks — CRR & SLR Second Amendment Directions, 2026
Applies to Rural Co-operative Banks (State Co-operative Banks, District Central Co-operative Banks). Inserts new sub-paragraph 5 in Paragraph 21 of the Rural Co-operative Banks CRR/SLR Directions, 2025. Updates Paragraph 29(4) accordingly. Also invokes Section 56 (AACS) of the Banking Regulation Act, 1949.
Regional Rural Banks — CRR & SLR Second Amendment Directions, 2026
Applies to all 43 Regional Rural Banks (RRBs). Inserts new sub-paragraph 5 in Paragraph 20 of the RRB CRR/SLR Directions, 2025. Updates Paragraph 28(5) to include the new reference. Adds separate reporting line in Annex A to Form A for FCNR(B) 2026 deposits.
Exact Terms of the Exemption — Every Condition Explained
The text of the new paragraph inserted in each notification's parent directions is identical in substance across all five bank categories:
📄 Verbatim Substance of the New Paragraph (Inserted in Each Bank Category's Directions)
"Fresh FCNR (B) deposits of minimum tenor of three years and maximum tenor of five years mobilized (including deposits that are renewed upon maturity) by the banks between June 8, 2026 and September 30, 2026 are exempt from maintenance of CRR from the reporting fortnight beginning July 1, 2026 (i.e., based on the NDTL computation as on June 15, 2026) and subsequent fortnights thereafter. The exemption on reserves maintenance is available for the original deposit amounts till such time the deposits are held in the bank books."
Condition-by-Condition Analysis
How the Full Mechanism Works — Step by Step
NRI Opens FCNR(B) USD Deposit (June 8 – Sep 30, 2026)
An NRI approaches any bank with US dollars and opens a 3–5 year FCNR(B) USD deposit. The bank books this as a fresh FCNR(B) deposit in its books within the qualifying window.
Bank Accesses RBI's USD-Rupee Swap Facility
The bank sells the USD to RBI under the swap facility at a fixed exchange rate (forward rate). RBI provides INR to the bank. This eliminates exchange rate risk for the bank — it knows the exact cost of converting back to USD when the deposit matures.
Bank Deploys 100% of INR for Lending/Investment
Since the FCNR(B) deposits are exempt from CRR and SLR, the bank can deploy the full INR proceeds for lending to borrowers or investing in assets — no portion is locked up as mandatory reserves earning zero or below-market returns.
RBI Gains USD Reserves — Rupee Support
RBI accumulates US dollar reserves from the swap transactions. These reserves can be used to support the Indian Rupee in the currency market, reduce INR volatility, and build India's foreign exchange buffer — the underlying macroeconomic objective of the scheme.
At Maturity — Bank Buys USD from RBI, Repays NRI Depositor
When the deposit matures (3–5 years later), the bank buys USD from RBI at the pre-agreed forward rate (completing the swap), repays the NRI depositor in USD (principal + interest), and the scheme comes full circle. The forward leg of the swap protects the bank from any USD appreciation risk during the deposit period.
Why Did RBI Do This Now? — Macroeconomic Context
🌎 India's Foreign Exchange Management Strategy
The June 2026 FCNR(B) scheme is part of RBI's larger toolkit for managing India's external sector. Key drivers:
- Rupee management: Foreign capital inflows through FCNR(B) deposits increase dollar supply in India, providing natural support to the INR exchange rate without directly depleting forex reserves
- Forex reserve building: The USD-Rupee swap allows RBI to accumulate dollar reserves, strengthening India's import cover and reducing vulnerability to external shocks
- NRI engagement: NRI remittances and deposits are a major and relatively stable source of foreign capital. A well-structured FCNR(B) scheme makes India's deposit market more competitive globally
- Monetary transmission: By providing banks with lower-cost dollar funding (exempt from CRR/SLR), RBI helps banks offer competitive NRI deposit rates, attracting flows that support domestic liquidity
Historical Precedent — FCNR(B) Schemes Before 2026
Impact on Different Categories of Banks
Commercial Banks
Largest players in NRI banking. Large private banks (HDFC, ICICI, Axis, Kotak) and PSU banks (SBI, Bank of Baroda) with significant NRI branch networks or overseas presence are best positioned to mobilise FCNR(B) dollars quickly. For them, the economics are most compelling given their global reach.
Notification 13471 | RBI/2026-27/102Small Finance Banks
Smaller institutions with limited NRI customer base. The exemption applies equally but practical mobilisation capacity is lower. Some SFBs with diaspora-heavy service areas may benefit. SLR exemption is particularly valuable given SFBs typically have lower surplus liquidity to invest in G-Secs.
Notification 13472 | RBI/2026-27/103Urban Co-operative Banks
UCBs typically serve urban communities including merchant communities and diaspora networks with strong ties to specific geographies. The inclusion of UCBs acknowledges their role in NRI deposit mobilisation in cities like Mumbai, Surat, and Pune. Legal authority additionally invokes Section 56(AACS) of BR Act applicable to co-operative institutions.
Notification 13473 | RBI/2026-27/104Rural Co-operative Banks
State and District Co-operative Banks serving agricultural and rural communities. Some rural communities have significant diaspora members in the Middle East and other countries. The inclusion signals RBI's intent to democratise access to this scheme across the banking spectrum. Practical mobilisation may be limited.
Notification 13474 | RBI/2026-27/105Regional Rural Banks
43 RRBs serving semi-urban and rural areas with sponsor bank support. Like co-operative banks, RRBs are unlikely to mobilise large FCNR(B) volumes, but their inclusion signals universal applicability. RRBs may leverage their sponsor bank's NRI networks to attract eligible deposits.
Notification 13475 | RBI/2026-27/106What Banks Need to Do — Compliance Steps
✅ Action Points for Bank Compliance Teams
- Update Internal Systems: Configure core banking systems to tag qualifying FCNR(B) deposits (USD, 3–5 year tenor, mobilised June 8 – September 30, 2026) with a specific exemption code for CRR and SLR reporting purposes
- Prepare CRR Reporting: For the NDTL computation as on June 15, 2026, include these deposits in NDTL but mark them as exempt from CRR maintenance. From the July 1, 2026 fortnight, ensure these deposits are reflected in the new reporting line added in Annex A to Form A
- Update SLR Calculation: Ensure that qualifying FCNR(B) deposits are excluded from the SLR calculation base (NDTL) — or alternatively, ensure that the corresponding SLR is marked as exempt in regulatory reports (as per the amendment to the respective paragraphs in SLR reporting)
- Treasury and ALM: Asset-Liability Management teams should model the impact of potential FCNR(B) mobilisation on the bank's USD/INR position, the cost/benefit of the RBI swap facility, and the deployment strategy for INR proceeds within the CRR/SLR-free environment
- Product Team: Revise FCNR(B) product terms to ensure the scheme parameters (USD only, 3–5 year, window dates) are accurately communicated to NRI customers and relationship managers
- Track Expiry: The exemption is deposit-specific and runs for the life of the deposit. Banks must have systems to track each qualifying deposit and ensure exemption reporting continues until each specific deposit matures or is withdrawn
What This Means for NRI Depositors
👤 Should NRIs Consider FCNR(B) USD Deposits Now?
The CRR/SLR exemption reduces the cost of FCNR(B) deposits for banks — which should allow banks to offer higher interest rates on qualifying FCNR(B) deposits compared to what they would otherwise offer. Combined with the RBI's swap facility reducing banks' exchange rate risk, NRI depositors may find the June–September 2026 window offers particularly competitive FCNR(B) rates.
Key considerations for NRIs:
- Lock-in: FCNR(B) deposits of 3–5 years are a medium-to-long-term commitment. Premature withdrawal (before 1 year) earns no interest; after 1 year, it attracts a penalty
- No currency risk: Since deposits are in USD and repaid in USD, the NRI depositor bears no exchange risk — they get their dollars back regardless of where USD/INR moves during the deposit period
- Compare rates: Banks will compete for FCNR(B) deposits; compare rates across banks before committing
- Tax-free in India: FCNR(B) interest is exempt from Indian income tax for NRIs
Legal Authority Behind These Notifications
Frequently Asked Questions (FAQs)
📚 Basics
⚖ Regulatory
Conclusion
The five RBI notifications of June 8, 2026 are a coordinated, well-structured policy intervention to attract foreign currency inflows into India through the FCNR(B) route. By simultaneously amending CRR and SLR directions for all five categories of banks — Commercial, Small Finance, Urban Co-operative, Rural Co-operative, and Regional Rural Banks — RBI has created a level playing field where every bank in India can participate in this scheme, regardless of its size or segment. The combination of the USD-Rupee swap facility (announced on June 5) and the CRR/SLR exemption (implemented on June 8) is a powerful twin incentive for banks to aggressively mobilise NRI dollar deposits in the coming months.
For banks, compliance teams must act quickly: update CRR/SLR reporting systems to correctly track qualifying deposits, engage treasury teams on the swap strategy, and ensure product documentation is accurate. For NRI depositors, this window offers a potentially advantageous time to lock in competitive FCNR(B) rates on dollar deposits. For the broader Indian economy, successful mobilisation would strengthen forex reserves, support INR stability, and provide banks with stable long-tenor foreign currency funding.
