RBI Excludes New FCNR(B) and NRE Loan Advances from Priority Sector Lending Calculation
Mumbai, August 7, 2026: The Reserve Bank of India (RBI) has issued a notification stating that loans extended against certain fresh foreign currency deposits will be excluded from the calculation of Adjusted Net Bank Credit (ANBC). This move is part of a broader set of measures to incentivize foreign currency inflows.
The decision, detailed in the “Reserve Bank of India (Priority Sector Lending – Targets and Classification) Second Amendment Directions, 2026,” aims to encourage banks to mobilize foreign currency and non-resident rupee deposits.
Key Highlights of the Amendment
Exclusion from ANBC: The new directive explicitly states that advances (loans) extended in India against the following types of deposits will not be counted when calculating ANBC for the purpose of meeting Priority Sector Lending (PSL) targets:
- Fresh FCNR (B) Deposits: Loans against Foreign Currency Non-Resident (Bank) deposits that have a minimum tenor of three years and a maximum tenor of five years. These deposits must have been mobilized (including renewals) by banks between June 08, 2026, and September 30, 2026.
- Fresh NRE Term Deposits: Loans against Non-Resident (External) Rupee term deposits with a tenor of three years or more. These deposits must have been mobilized (including renewals) by banks between June 19, 2026, and September 30, 2026.
Reason for the Change
This regulatory amendment is linked to recent RBI initiatives to attract foreign capital. The central bank has previously announced a US Dollar-Rupee swap facility for FCNR(B) deposits and has granted exemptions from maintaining Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR) on these specific deposit categories.
By excluding advances against these deposits from the PSL calculation, the RBI is effectively making it more attractive for banks to mobilize these funds, as the loans extended from them do not crowd out the lending space required for priority sectors like agriculture, MSMEs, and education.
Amendment to Existing Directions
The RBI has officially modified its “Priority Sector Lending – Targets and Classification” Directions, 2025. The new rules supersede previous regulations related to the exclusion of FCNR(B)/NRE deposit-linked advances.
- A new provision has been added to the table in paragraph 6.1 of the 2025 directions, clarifying the categories of advances eligible for exclusion.
- A previous footnote (footnote no. 3) that laid out older rules for this exclusion has been formally deleted.
Important Note for Banks
The RBI has clarified that the amount of such advances excluded from ANBC cannot exceed the total amount of fresh FCNR(B) and NRE deposits that are eligible for the CRR/SLR exemption.
The amendment came into effect immediately, on August 07, 2026.
