RBI eases priority sector lending norms for overseas FX deposits
RBI exempts advances against 3-5 year overseas FX deposits and 3+ year NRE term deposits from adjusted net bank credit for priority sector lending targets.
The Reserve Bank of India (RBI) has announced a relaxation in the calculation of priority sector lending (PSL) targets for banks. Under the new rules, advances made against fresh overseas foreign currency (FX) deposits with tenors of between three and five years will be excluded from the computation of adjusted net bank credit (ANBC).
This exemption is designed to encourage banks to mobilise longer-term foreign currency deposits, which can provide a stable source of funding. By removing these advances from the ANBC denominator, banks will find it easier to meet their PSL obligations without being penalised for deploying funds into such deposits.
In a related move, the RBI also said that advances against non-resident rupee term deposits of three years or more mobilised by banks will be exempted from the ANBC calculation for PSL targets. This measure is expected to boost inflows into long-term rupee deposits from non-resident Indians, thereby improving the overall liquidity position of the banking system.
The central bank's decision comes as part of its ongoing efforts to rationalise PSL norms and support deposit mobilisation. Banks have often sought relief on the treatment of certain deposit-linked advances, and this step is seen as a positive move for the sector.
The exemptions apply to fresh deposits and are aimed at incentivising banks to attract longer-tenor funds, which are generally more stable and can be used for long-term lending. The RBI has not specified any further conditions or limits on the exemptions, leaving it to banks to structure their deposit products accordingly.