Executive Summary

On 25 August 2026, RBI issued amendment directions advancing, from 30 September 2026 to 31 August 2026, the end date of the temporary relaxation on interest rates and CRR/SLR treatment applicable to fresh FCNR(B) deposits (3–5 year tenor) and NRE term deposits (3 years and above). The change was issued separately for six categories of banks — Commercial Banks, Small Finance Banks, Local Area Banks, Regional Rural Banks, Urban Co-operative Banks and Rural Co-operative Banks — under both the Interest Rate on Deposits Directions and, for certain categories, the applicable CRR/SLR framework. One confirmed reference: RBI/2026-27/245 (Local Area Banks – Interest Rate on Deposits Third Amendment Directions, 2026).

Correction to earlier draft: this change was not limited to Small Finance Banks or to the CRR/SLR framework alone — it spans six bank categories, and the Interest Rate on Deposits Directions amendments are confirmed directly from RBI's own circular text.

Background

In June 2026, amid FX-inflow and rupee-support objectives, RBI temporarily lifted the interest-rate ceiling on fresh 3–5 year FCNR(B) deposits and relaxed rate restrictions on 3-year-plus NRE deposits, effective 17 June 2026 through 30 September 2026, across the six bank categories above.

What Has Changed?

The date "September 30, 2026" is substituted with "August 31, 2026" wherever it appears in the relevant paragraphs of each affected Directions document. The amendment directions come into force with immediate effect (25 August 2026).

Key Provisions

• FCNR(B) deposits eligible for the relaxation must be mobilised between 17 June 2026 and 31 August 2026.
• NRE term deposits eligible for the relaxation follow the same revised end date.
• Deposits already booked under the relaxed terms before 31 August 2026 continue at their contracted rate for the agreed tenor.
• From 1 September 2026, fresh or renewed deposits revert to the standard rate ceilings under the applicable Master Directions.

Applicability / Who Are Affected

Commercial Banks, Small Finance Banks, Local Area Banks, Regional Rural Banks, Urban Co-operative Banks and Rural Co-operative Banks — specifically their treasury, ALM and deposit-compliance functions.

Practical Implication

Banks must ensure CBS interest-rate parameters reset for foreign-currency and NRE deposits from 1 September 2026, and statutory auditors should treat late-August/early-September deposit bookings as a cut-off testing area.

What Businesses Should Do

1. Update rate cards, branch disclosures and digital-channel information before 1 September 2026.
2. Reset CBS parameters for the relevant deposit categories.
3. Reconcile hedge/swap positions tied to deposits booked under the relaxed window.
4. Flag deposit samples around the cut-off for audit testing.

KGS Perspective

This is a macro-prudential unwind, not a change in the underlying deposit product. Audit and compliance teams should verify the bank's internal cut-off implementation matches the regulatory date exactly, given the one-month acceleration.

Conclusion

RBI has shortened the temporary FCNR(B)/NRE relaxation window by one month across six bank categories; affected banks should confirm system and disclosure changes are effective from 1 September 2026.

Source / Regulatory Reference

• RBI Notification (Local Area Banks – Interest Rate on Deposits Third Amendment Directions, 2026, RBI/2026-27/245): https://rbidocs.rbi.org.in/rdocs/Notification/PDFs/NT2459761406F857D4303BBAA454C7C6A3FB4.PDF
   
• RBI Circular Index (parallel amendment directions for other bank categories): https://www.rbi.org.in/Scripts/BS_CircularIndexDisplay.aspx