Summary: The Reserve Bank of India (RBI) has issued RBI/2026-27/245, DOR.SOG(SPE).REC.215/13.03.00/2026-27 dated August 25, 2026, titled Reserve Bank of India (Local Area Banks – Interest Rate on Deposits) Third Amendment Directions, 2026. The Amendment Directions modify the Reserve Bank of India (Local Area Banks – Interest Rate on Deposits) Directions, 2025, dated November 28, 2025, which were updated as on June 17, 2026.
The amendment relates to a temporary relaxation introduced with effect from June 17, 2026 concerning interest rates on certain non-resident deposits. Under the June 17, 2026 amendment, the restriction on interest rates for fresh NRE deposits of three years and above, including deposits renewed upon maturity, and the interest-rate ceiling applicable to fresh FCNR(B) deposits having three-to-five-year tenors, including renewed deposits, were temporarily withdrawn until September 30, 2026. The corresponding June 17, 2026 amendment for Local Area Banks modified paragraphs 26(4) and 31(7) of the 2025 Directions.
The present Third Amendment Directions shorten the period of that temporary relaxation. RBI has decided to replace the date September 30, 2026 with August 31, 2026. Thus, the temporary relaxation referred to in the supplied regulatory text will operate until August 31, 2026 rather than September 30, 2026.
The amendment specifically changes two provisions. First, in paragraph 26(4) subscript (1), the phrase stating that the temporary relaxation operates from June 17, 2026 until September 30, 2026 is replaced with a phrase stating that it operates until August 31, 2026. Second, an identical date substitution is made in paragraph 31(7) subscript (2). These provisions relate respectively to the NRE/NRO deposit interest-rate framework and the FCNR(B) deposit interest-rate ceiling. The underlying 2025 Directions prescribe, among other things, the general framework for Local Area Banks’ deposit interest rates and specific rules for NRE/NRO and FCNR(B) deposits.
The Amendment Directions are issued in exercise of powers conferred by Section 35A of the Banking Regulation Act, 1949. The supplied material expressly states that the RBI is satisfied that the amendment is necessary and expedient in the public interest. The Amendment Directions come into force with immediate effect. Accordingly, Local Area Banks covered by the Directions are subject to the revised August 31, 2026 end date for the specified temporary relaxation.
Reserve Bank of India
RBI/2026-27/245
DOR.SOG(SPE).REC.215/13.03.00/2026-27 | Dated: August 25, 2026
Reserve Bank of India (Local Area Banks – Interest Rate on Deposits) Third Amendment Directions, 2026
Please refer to the Reserve Bank of India (Local Area Banks – Interest Rate on Deposits) Directions, 2025 (hereinafter referred to as ‘Directions’), dated November 28, 2025 (Updated as on June 17, 2026), wherein temporary withdrawal of the interest rate ceiling on fresh FCNR(B) deposits of 3-5 year tenors and restriction on interest rates on NRE deposits of 3 year and above tenors, including the deposits that are renewed upon maturity, have been provided with effect from June 17, 2026, for the period until September 30, 2026. On a review, it has been decided to amend the date ‘September 30, 2026’ to the date ‘August 31, 2026’ for the aforementioned temporary relaxation.
2. Accordingly, in exercise of the powers conferred by Section 35A of the Banking Regulation Act,1949 and all other laws enabling the Reserve Bank India (RBI) in this regard, the RBI, being satisfied that it is necessary and expedient in public interest so to do, hereby, issues the Amendment Directions hereinafter specified.
3. These Amendment Directions shall be called the Reserve Bank of India (Local Area Banks – Interest Rate on Deposits) Third Amendment Directions, 2026.
4. These Amendment Directions shall come into force with immediate effect.
5. These Amendment Directions shall modify the Directions, as under:
i. In paragraph 26(4) subscript (1), the phrase “with effect from June 17, 2026, for the period until September 30, 2026” shall be substituted with “with effect from June 17, 2026, for the period until August 31, 2026”.
ii. In paragraph 31(7) subscript (2), the phrase “with effect from June 17, 2026, for the period until September 30, 2026” shall be substituted with “with effect from June 17, 2026, for the period until August 31, 2026”.
(Dr. Sudarsana Sahoo)
Chief General Manager
