MUMBAI: RBI has exempted advances against fresh FCNR(B) and NRE term deposits from priority sector lending calculations, completing a three-part policy push to boost foreign currency inflows and ease compliance burdens for banks.The move will enable banks to earn a decent spread by deploying funds raised from FCNR(B) deposits where the yields are around 7%. Banks have raised over $36 billion until the end of last month. According to a circular issued on Friday, the new rule takes immediate effect and allows banks to exclude such advances from the computation of adjusted net bank credit, which is used to determine priority sector lending targets.Under existing norms, banks are required to allocate a defined share of their adjusted net bank credit to sectors such as agriculture, MSMEs, and affordable housing. The amendment allows exclusion of advances extended in India against eligible deposits, thereby lowering the base on which these targets are calculated.To qualify for this exclusion, the advances must be backed by deposits that meet specific criteria. Fresh FCNR(B) deposits must have a tenor of three to five years and be mobilised between June 8 and Sep 30, 2026. Fresh NRE term deposits must have a minimum tenor of three years and be mobilised between June 19 and Sep 30, 2026. Renewals of existing deposits during these windows will also be eligible.
