The RBI has issued a third amendment to its Cash Reserve Ratio and Statutory Liquidity Ratio directions, effective immediately as of June 19, 2026. Fresh Non-Resident (External) Rupee term deposits with a tenor of three years or more, mobilized between June 19, 2026 and September 30, 2026, are now exempt from CRR and SLR maintenance requirements.
What Changed: The 30-Second Answer
On June 19, 2026, the RBI issued the Reserve Bank of India (Commercial Banks – Cash Reserve Ratio and Statutory Liquidity Ratio) Third Amendment Directions, 2026. The directive exempts fresh NRE term deposits of three years or longer tenor, mobilized between June 19, 2026 and September 30, 2026 (including renewed deposits), from CRR maintenance effective from the reporting fortnight of July 16, 2026. The exemption applies to the original deposit amount for as long as deposits remain on the bank’s books, but excludes transfers from NRO to NRE accounts.
Why the RBI Made This Move
This is a liquidity management play—pure and simple. By exempting fresh NRE term deposits from reserve requirements, the RBI is signaling a desire to attract overseas rupee inflows during this window without imposing the drag of CRR/SLR drag. The exemption window runs precisely 104 calendar days: June 19 through September 30, 2026. Banks that mobilize NRE deposits during this period get breathing room on their reserve maintenance ratios, making these products more competitive against foreign currency alternatives.
The move doesn’t affect SLR directly in the text—the circular mentions CRR explicitly in the operative paragraph but the amendment to paragraph 29(5) cross-references SLR obligations. This suggests the exemption covers CRR only, though the introductory language says “exempted from maintenance of CRR and SLR.”
Who This Applies To
Commercial banks in India. The circular amends the 2025 CRR/SLR Directions; only entities subject to those Directions are bound. NRE deposits are mobilized from Non-Residents (overseas individuals, entities); the circular specifies that the exemption covers fresh NRE term deposits with tenor of three years or more.
Critically, renewals count. The text states: “including deposits that are renewed upon maturity.” So if a Non-Resident’s three-year NRE deposit matures during the exemption window and is rolled over, the renewed deposit qualifies. The exemption does not apply to transfers from NRO (Non-Resident Ordinary) accounts to NRE accounts—only original NRE mobilizations.
What “Exemption” Means Here
Banks must not maintain CRR against the original amount of qualifying NRE deposits. Normally, commercial banks hold cash reserves (currently 4.5% of NDTL under RBI policy) and SLR investments (18.25% of NDTL). This exemption removes the CRR burden for the deposit amount, freeing up that capital.
The exemption applies “from the reporting fortnight beginning July 16, 2026 (i.e., based on the NDTL computation as on June 30, 2026) and subsequent fortnights thereafter.” NDTL = Net Demand and Time Liabilities. Banks file CRR returns fortnightly; the first reporting cycle to reflect the exemption covers the fortnight starting July 16, calculated on June 30 NDTL. The exemption persists “for as long as the deposits are held in the bank books”—so if a deposit matures or is withdrawn, the exemption lapses for that amount.
Key Dates and What Happens When
- June 19, 2026: Circular issued; directions effective immediately.
- June 19–September 30, 2026: Window for mobilizing fresh NRE term deposits (3+ years tenor) that qualify for exemption.
- July 16, 2026: First reporting fortnight in which exemption applies (based on June 30 NDTL snapshot).
- October 1, 2026 onwards: New NRE deposits mobilized after September 30 do not qualify for exemption. Deposits mobilized during the window remain exempt for as long as they’re held.
What’s NOT Covered
Short-tenor NRE deposits (under 3 years) do not qualify. The exemption is strictly for “tenor of three years or more.” NRE deposits renewed by deposit holders are fine; but if a customer converts an NRO account balance to an NRE account (an account transfer, not a new deposit), that does not qualify. The text is explicit: “Any transfer from Non-Resident (Ordinary) (NRO) accounts to NRE accounts will not qualify for such exemptions.”
The exemption window closes September 30, 2026. Deposits mobilized on October 1 or later have no exemption. The circular is also silent on whether deposits held in foreign currency (say, USD converted to rupees on arrival) qualify; the exemption applies to “Non-Resident (External) Rupee term deposits,” implying the deposits are in rupees.
How Banks Must Report This
The RBI has amended Form A (the standard CRR/SLR reporting template) to add a new line item: “NRE Term deposits – 2026 [para 20(9)]” as item VIII.8. This is a disclosure requirement—banks must separately track and report the amount of qualifying NRE deposits. The old item VIII.8 has been renumbered VIII.9.
Banks will report this data fortnightly alongside their standard CRR/SLR returns. The RBI’s Department of Regulation, Central Office (DOR.RET.REC.123/12.01.001/2026-27) will monitor compliance via these filings.
The Algoy Perspective
Here’s the implementation challenge your finance and treasury teams will face: deposit tenor documentation. You must establish ironclad proof that a deposit has a three-year tenor at origination. The circular says exemption applies to deposits “mobilized” during the window “of tenor of three years or more.” If a customer deposits ₹10 crores on June 20, 2026, your system must record maturity date as June 20, 2029 or later. If an internal audit or RBI inspection later questions whether a deposit was actually booked for three years, you lose the exemption retroactively—and have to make good the reserve deficiency plus interest.
Second, renewals are in scope but require tight documentation. When a three-year NRE deposit matures in, say, August 2026, and the customer renews it for another three years (to August 2029), your system must flag this as a “renewal upon maturity” and ensure it’s counted as part of the exemption window mobilization. If you accidentally treat it as a separate new deposit after the window closes, you’ve miscategorized it. Audit trails matter.
Third, NRO-to-NRE transfers are explicitly carved out. Some customers may have rupee balances in NRO accounts and want to convert them to NRE to get better returns during the exemption. You cannot allow this and claim the exemption. Your deposit operations team must have clear instructions: if a customer initiates a transfer from their NRO account to an NRE account, that does not qualify, even if the overall NRE balance is within the exemption window. Only new deposits from overseas sources count.
For treasury teams managing liquidity, this exemption is valuable—it reduces CRR drag on NRE balances for 104 days. But it’s time-bound. By early September, you should be reviewing your NRE pipeline to ensure you’ve mobilized target amounts during the window. Deposits booked on September 30 (the last eligible day) will qualify; deposits on October 1 will not.
Frequently Asked Questions
Does this exemption apply to resident rupee deposits or only NRE?
Only NRE (Non-Resident External) deposits. Resident deposits, FCNR deposits, and NRO deposits are unaffected. The exemption is a targeted incentive to attract overseas rupee mobilization and reduce foreign exchange pressure.
If an NRE deposit of ₹5 crores is renewed on maturity during the window, does the entire renewed amount get the exemption?
Yes. The circular states: “including deposits that are renewed upon maturity.” If the original deposit was three years or longer and is renewed (rolled over) at maturity before October 1, 2026, the renewed amount qualifies for the exemption for the duration of the renewed tenor.
What if a customer withdraws an NRE deposit partway through—does the exemption end immediately?
The exemption applies to the “original deposit amounts till such time the deposits are held in the bank books.” Partial withdrawal reduces the exemption-eligible amount accordingly. Full withdrawal ends the exemption for that deposit. The RBI doesn’t specify whether exemption is recalculated fortnightly based on average balances or opening balances; standard CRR/SLR practice uses opening balance snapshots, so assume the same applies here.
Can a bank use the freed-up CRR space for any purpose, or is there a restriction?
The circular is silent on how banks must deploy freed CRR. In standard RBI practice, CRR is held in cash or at the central bank; the exemption simply removes the requirement to hold cash against that deposit amount. The bank can deploy that capital to lending, investments, or other purposes—standard asset-liability management applies.
Sources and Further Reading
- Reserve Bank of India (Commercial Banks – Cash Reserve Ratio and Statutory Liquidity Ratio) Third Amendment Directions, 2026
- Reserve Bank of India Official Website
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