The Reserve Bank of India has introduced a short-term measure allowing commercial banks to exclude certain foreign currency-backed advances from their credit calculations, easing compliance amid rising overseas fund mobilisation efforts.
The Reserve Bank of India has given commercial banks temporary relief in meeting priority sector lending targets by allowing them to leave out certain advances backed by fresh non-resident deposits from the adjusted net bank credit base used for the calculation. The move is aimed at easing compliance for lenders that are actively raising overseas funds during a limited window, according to the bank’s Friday announcement.
Under the central bank’s decision, loans against fresh Foreign Currency Non-Resident (Bank), or FCNR(B), deposits with maturities of three to five years raised between June 8, 2026 and September 30, 2026 will be excluded from adjusted net bank credit. The same treatment will apply to loans against non-resident external, or NRE, term deposits of at least three years mobilised between June 19, 2026 and September 30, 2026, including deposits renewed on maturity.
The RBI said the exclusion cannot be larger than the fresh FCNR(B) and NRE deposits that qualify for relief from cash reserve ratio and statutory liquidity ratio requirements. Banks and analysts said the step should reduce the strain of priority sector compliance for lenders tapping non-resident capital, especially after the central bank in June introduced a dollar-rupee swap facility for eligible FCNR(B) funds to support foreign inflows and the balance of payments.
Priority sector lending rules normally require commercial banks to direct 40% of adjusted net bank credit to areas such as agriculture, micro-enterprises and weaker sections. The latest relief sits alongside a wider round of 2026 changes to priority sector norms, including tighter verification rules, updated exemptions and revised treatment of certain lending categories, according to advisory updates published by KPMG and BSR & Co. LLP.
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