RBI Allows ANBC Exclusion for Advances Against Eligible FCNR(B) and NRE Deposits

Can Banks Exclude Advances Against FCNR(B) and NRE Deposits While Computing ANBC for Priority Sector Lending Targets? RBI’s Second Amendment Directions, 2026 Explained

Summary: With effect from August 07, 2026, the Reserve Bank of India (Priority Sector Lending – Targets and Classification) Second Amendment Directions, 2026 permit specified advances extended in India to be excluded from Adjusted Net Bank Credit (ANBC) for computing priority sector lending targets. The amendment covers advances against fresh FCNR(B) deposits of three to five years mobilised, including eligible renewals, between June 08, 2026 and September 30, 2026, and advances against NRE term deposits of three years or more mobilised, including eligible renewals, between June 19, 2026 and September 30, 2026. The exclusion is capped at the amount of such deposits eligible for exemption from Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR) under the related June 2026 directions. The amendment modifies Item VI of paragraph 6.1 of the RBI (Priority Sector Lending – Targets and Classification) Directions, 2025 and deletes the earlier footnote 3 formula based on 2013-14 reference dates. The measure follows the June 05, 2026 Governor’s Statement, the June 08 FCNR(B) swap facility and the June 2026 CRR/SLR exemptions, completing the stated three-part package. The source material states that banks should reconcile qualifying deposits, advances and CRR/SLR exemption records when applying the revised ANBC treatment.

Short Answer

Yes. With effect from August 07, 2026, banks may exclude, from their ANBC for the purpose of computing priority sector lending targets, advances extended in India that are funded out of (a) fresh FCNR (B) deposits of minimum three-year and maximum five-year tenor mobilised (including renewals) between June 08, 2026 and September 30, 2026, and (b) fresh NRE term deposits of three years or more mobilised (including renewals) between June 19, 2026 and September 30, 2026. The exclusion is not open-ended – the amount excluded from ANBC cannot exceed the quantum of such deposits that is actually eligible for exemption from Cash Reserve Ratio (“CRR”) and Statutory Liquidity Ratio (“SLR”) maintenance under the RBI’s related CRR/SLR Amendment Directions of June 2026. Banks that do not raise fresh deposits within this window, or that fund advances from other sources, get no benefit under this amendment.

Applicable Regulatory Provisions

• Sections 21 and 35A, Banking Regulation Act, 1949 – the statutory source of RBI’s power to issue binding directions to banks, including directions on priority sector lending; this is the enabling power under which every Direction discussed below has been issued.
• Reserve Bank of India (Priority Sector Lending – Targets and Classification) Directions, 2025 (updated as on January 19, 2026) – the principal, consolidated Directions governing PSL targets, sub-targets, eligible categories, and the computation of ANBC; Paragraph 6.1 (the table listing items to be netted off for arriving at ANBC) and the accompanying footnotes are the provisions actually amended.
• Reserve Bank of India (Priority Sector Lending – Targets and Classification) Second Amendment Directions, 2026 [RBI/2026-27/232, FIDD.CO.PSD.BC.No.08/04.09.001/2026-27, dated August 07, 2026] – the amending notification itself, which modifies Item VI of the Paragraph 6.1 table and deletes the erstwhile footnote 3.
• Governor’s Statement dated June 05, 2026 – the policy announcement (part of a broader capital-inflow package) that first flagged RBI’s intention to incentivise long-tenor FCNR(B)/NRE mobilisation.
• RBI circular FMOD.MAOG.No.S-56/01.06.016/2026-27 dated June 08, 2026 (‘Swap Facility for FCNR (B) Deposits’) – introduced the US Dollar-Rupee swap facility for fresh FCNR(B) deposits of three-to-five-year tenor, the first leg of the package. The related RBI FCNR(B) swap facility coverage provides the related regulatory context.
• Reserve Bank of India (Cash Reserve Ratio and Statutory Liquidity Ratio) Second Amendment Directions dated June 08, 2026 and Third Amendment Directions dated June 19, 2026 – exempted the same categories of fresh FCNR(B) and NRE deposits from CRR/SLR maintenance; this exemption is the yardstick against which the ANBC exclusion discussed here is capped. The June 08 commercial-bank FCNR(B) exemption is reflected in RBI (Commercial Banks – Cash Reserve Ratio and Statutory Liquidity Ratio) Second Amendment Directions, 2026, while the June 19 NRE exemption is reflected in RBI (Commercial Banks – Cash Reserve Ratio and Statutory Liquidity Ratio) Third Amendment Directions, 2026.
• Legacy reference circulars carried over for context – DBOD.No.Ret.BC.36/12.01.001/2013-14 dated August 14, 2013, DBOD.No.Ret.BC.93/12.01.001/2013-14 dated January 31, 2014, the DBOD mailbox clarification dated February 06, 2014, and UBD.BPD.(PCB).CIR.No.5/13.01.000/2013-14 dated August 27, 2013 read with UBD.BPD.(PCB).Cir.No.72/13.01.000/2013-14 dated June 11, 2014 – these governed the 2013-14 FCNR(B)/NRE swap-and-exemption scheme and its associated ANBC treatment; the 2026 Amendment Directions build on the same drafting template but substitute the new 2026 CRR/SLR Amendment Directions as the operative reference.

Relevant Extracts

“Advances extended in India against the incremental fresh FCNR (B) / NRE deposits (including deposits that are renewed upon maturity), qualifying for exemption from Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR) requirements, as per the Reserve Bank’s circulars… [and] Reserve Bank of India (Cash Reserve Ratio and Statutory Liquidity Ratio) Second and Third Amendment Directions dated June 08, 2026 and June 19, 2026, as applicable to various banks.” – Item VI, Paragraph 6.1 table, PSL Directions 2025, as amended.

“The amount to be excluded from ANBC for computation of priority sector targets shall not exceed the fresh FCNR (B) / NRE deposits eligible for exemption from maintenance of CRR / SLR in terms of the above Amendment Directions.” – Note to Item VI, Paragraph 6.1 table.

The erstwhile footnote 3 to Paragraph 6.1, which tied the exclusion to a formula measuring the difference between outstanding advances on a fixed base date (July 26, 2013) and a later reference date (March 07, 2014, or June 13, 2014 for UCBs), stands deleted by the 2026 Amendment Directions and is no longer part of the computation mechanism.

Regulatory Position

ANBC Computation and PSL Targets

ANBC is, in simple terms, a bank’s net bank credit adjusted for certain statutory add-backs and deductions, and it is the denominator against which every PSL target and sub-target (agriculture, MSME, weaker sections, and so on) is measured. Anything a bank can legitimately net out of ANBC lowers the base, which in turn lowers the absolute rupee amount the bank must lend to priority sectors to hit the same percentage target. Item VI of the Paragraph 6.1 table has, since 2013-14, allowed banks to net out advances funded from certain non-resident deposits that also enjoyed a CRR/SLR carve-out – the logic being that money mobilised under a special RBI incentive scheme, and already exempted from cash and liquidity reserve requirements, should not simultaneously inflate the bank’s PSL obligation. The RBI FAQs on Priority Sector Lending also address ANBC computation under the 2025 PSL framework.

2026 Three-Part Regulatory Package

The 2026 package repeats that logic for a new set of deposits. Following the Governor’s Statement of June 05, 2026, RBI first opened a US Dollar-Rupee swap window (June 08, 2026 circular) so that banks could raise fresh FCNR(B) deposits of three-to-five-year tenor without bearing the full currency-hedging cost themselves. It then exempted the same fresh FCNR(B) deposits, and separately fresh NRE term deposits of three years or more, from CRR/SLR maintenance (June 08 and June 19, 2026 Amendment Directions respectively). The notification dated August 07, 2026 completes the sequence by amending the PSL Directions so that advances funded out of these specific deposits are also kept out of ANBC – subject to the cap that the amount excluded can never exceed the quantum of deposits that actually qualified for the CRR/SLR exemption.

Replacement of Earlier Footnote Formula

This is a narrower and administratively simpler mechanism than the one it replaces. The pre-2026 footnote 3 required banks to compute the incremental advances funded from eligible deposits using a base-date/reference-date formula anchored to 2013-14 dates – a calculation that had grown stale for any bank raising deposits under the 2026 scheme. The 2026 amendment removes that formula altogether and simply ties the ANBC exclusion to whatever amount is independently certified as eligible for the CRR/SLR exemption under the June 2026 Amendment Directions, which keeps the two computations (CRR/SLR exemption and ANBC exclusion) aligned to a single, current source of truth.

Applicability Across Categories of Banks

The PSL Directions, 2025 apply to all Scheduled Commercial Banks (including Regional Rural Banks), Small Finance Banks, and Primary (Urban) Co-operative Banks, each under its own PSL target structure, and the August 07, 2026 amendment modifies the common ANBC-computation paragraph that all of them refer back to. There is no category of bank carved out of this particular amendment – unlike a Companies Act exemption notification, RBI’s PSL framework does not provide a separate relaxed regime for any class of bank on this point; the benefit is available uniformly, subject only to the bank actually having mobilised qualifying deposits within the stated windows and holding the CRR/SLR exemption certification that the ANBC exclusion is capped against.

Practical Interpretation

• Treasury and PSL/compliance teams should work off a single, reconciled figure: the amount of fresh FCNR(B) (mobilised June 08–September 30, 2026) and fresh NRE term deposits of three years or more (mobilised June 19–September 30, 2026) that has actually been certified as eligible for CRR/SLR exemption under the June 2026 Amendment Directions – this is the hard ceiling for the ANBC exclusion, not the full value of advances the bank may have funded from these deposits.
• Maintain deposit-wise and advance-wise linkage records (mobilisation date, tenor, renewal status, and the corresponding CRR/SLR exemption certificate) so that the ANBC exclusion claimed in PSL returns can be reconciled, on demand, against the CRR/SLR exemption already claimed – RBI’s supervisory teams are likely to cross-check the two.
• Deposits renewed upon maturity remain eligible, but only within the same mobilisation window and tenor conditions; a renewal that pushes the deposit outside the June–September 2026 window, or changes its tenor outside the three-to-five-year (FCNR(B)) or three-year-plus (NRE) band, should not be treated as automatically eligible without a fresh check.
• Since the amendment took effect immediately (August 07, 2026), banks should apply the revised Item VI treatment, and stop applying the deleted footnote 3 formula, from the very next PSL return or ANBC computation due after that date.
• This is a Directions-level amendment with no separate penalty clause of its own; a bank that overstates the ANBC exclusion (for instance, by excluding advances beyond the CRR/SLR-exempted quantum) exposes itself to the general PSL shortfall consequences – recomputation of the target and, where applicable, contribution to the Rural Infrastructure Development Fund or other specified funds for non-achievement – rather than to any distinct penal provision under this particular amendment.

Example

A scheduled commercial bank mobilises a fresh FCNR(B) deposit of USD 40 million on July 10, 2026, for a four-year tenor, and the entire amount is certified as eligible for CRR/SLR exemption under the June 08, 2026 Amendment Directions. The bank goes on to extend rupee advances of an equivalent value, funded from this deposit, to a mix of borrowers. For the quarter in which these advances are outstanding, the bank may exclude from its ANBC an amount up to the CRR/SLR-exempted deposit value (i.e., the rupee equivalent of USD 40 million) – not the entire book of advances the bank may separately attribute to this deposit, if that figure happens to be higher.

Conclusion

The Reserve Bank of India (Priority Sector Lending – Targets and Classification) Second Amendment Directions, 2026 close out a three-part package – a dollar swap facility, a CRR/SLR exemption, and now an ANBC exclusion – designed to make fresh, long-tenor FCNR(B) and NRE mobilisation between June and September 2026 more attractive for banks to pursue. For PSL compliance purposes, the amendment is a narrow, well-defined relief: it lowers the ANBC base only to the extent of advances funded from deposits that independently qualify for the CRR/SLR exemption, and only within the stated mobilisation windows. Banks and their compliance advisors should treat the CRR/SLR exemption certificate as the controlling document for this exclusion, keep the old footnote-3 formula out of any computation done after August 07, 2026, and build in a reconciliation check before every PSL return is filed.

FAQs

Q1. Does this amendment apply to advances funded from FCNR(B)/NRE deposits mobilised before June 2026?

No. The exclusion applies only to fresh deposits mobilised within the specific windows – June 08 to September 30, 2026 for FCNR(B), and June 19 to September 30, 2026 for NRE term deposits – including eligible renewals within those windows.

Q2. Is there a separate cap on the value of advances a bank can exclude, apart from the deposit-linked cap?

No separate cap is prescribed; the sole ceiling is the quantum of deposits actually eligible for the CRR/SLR exemption under the June 2026 Amendment Directions.

Q3. Does the exclusion apply automatically, or does a bank need to make an election?

The Directions do not prescribe a separate election or filing; the exclusion is applied by the bank itself while computing ANBC for its PSL returns, supported by its internal CRR/SLR exemption certification and deposit records.

******

Author – CS Divesh Goyal, GOYAL DIVESH & ASSOCIATES Company Secretary in Practice from Delhi and can be contacted at [email protected]).