RBI Eases Priority Sector Lending for Select Deposits

The Reserve Bank of India (RBI), vide the Reserve Bank of India (Priority Sector Lending – Targets and Classification) Second Amendment Directions, 2026, bearing reference no. RBI/2026-27/232 FIDD.CO.PSD.BC.No.08/04.09.001/2026-27 dated August 7, 2026 (the “Amendment Directions”), has modified the framework for computation of Adjusted Net Bank Credit (ANBC) for determining banks’ priority sector lending targets. The amendment permits specified advances backed by certain fresh Foreign Currency Non-Resident (Bank) [FCNR(B)] deposits and Non-Resident (External) Rupee (NRE) term deposits to be excluded from ANBC.

The Amendment Directions follows RBI’s decision to introduce a US Dollar-Rupee swap facility for fresh FCNR(B) dollar funds mobilized for a minimum tenor of 3 years and a maximum tenor of 5 years. RBI had also provided exemptions from Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR) requirements vide Reserve Bank of India (Cash Reserve Ratio and Statutory Liquidity Ratio) Second and Third Amendment Directions dated June 08, 2026, and June 19, 2026, for specified fresh FCNR(B) and NRE deposits mobilized during the prescribed periods.

Under the amended framework, the following advances extended in India shall be excluded from the computation of ANBC:

• advances against fresh FCNR(B) deposits of 3 to 5 years, including deposits renewed upon maturity, mobilized between June 8, 2026, and September 30, 2026; and
• advances against NRE term deposits of 3 years or more, including deposits renewed upon maturity, mobilized between June 19, 2026, and September 30, 2026.

The Amendment Directions further modify Item VI of the table under paragraph 6.1 of the RBI’s Priority Sector Lending Directions, 2025. The amount excluded from ANBC for computing priority sector lending targets shall not exceed the amount of fresh FCNR(B)/NRE deposits eligible for exemption from CRR/SLR requirements under the applicable RBI directions.

The Amendment Directions has also deleted Footnote No. 3 to the relevant provision, thereby removing the earlier methodology based on the difference between specified historical outstanding advances and the prescribed base date for determining the eligible deduction from ANBC.

The Amendment Directions come into force with immediate effect and provide banks with greater flexibility in the treatment of advances funded against specified non-resident deposits for the limited purpose of calculating ANBC and determining priority sector lending obligations.