What changed
Previously, all FCNR(B) and NRE deposits were included in NDTL for CRR/SLR computation. Now, incremental deposits of these types with a maturity of 3 years or more, measured against the July 26, 2013 base, are exempt from CRR/SLR requirements. Additionally, advances funded by such exempt deposits are excluded from Adjusted Bank Credit for priority sector lending targets.
What it means for you
Urban cooperative banks can now raise long-term foreign currency and NRE deposits without the cost of maintaining CRR/SLR, freeing up funds for lending. This also reduces the priority sector lending burden for advances backed by these deposits, offering more flexibility in asset allocation. Banks should see improved net interest margins on these specific deposit products.
What you must do
- Identify the base date (July 26, 2013) and track incremental FCNR(B) and NRE deposits with maturity of 3 years or more.
- Exclude these qualifying deposits from NDTL for CRR/SLR maintenance from the fortnight beginning August 24, 2013.
- Ensure that advances against such deposits are excluded from Adjusted Bank Credit when computing priority sector lending targets.
- Do not apply the exemption to transfers from NRO to NRE accounts.
Who it affects
All Primary (Urban) Co-operative Banks, Treasury and ALM teams, Priority sector lending compliance officers
What is the base date for calculating incremental deposits?
The base date is July 26, 2013. Only deposits mobilised after this date, with a maturity of 3 years or more, qualify for the exemption.
Do transfers from NRO to NRE accounts qualify for the exemption?
No, any transfer from Non-Resident (Ordinary) accounts to NRE accounts will not qualify for CRR/SLR exemption.
How does this affect priority sector lending calculations?
Advances extended in India against the qualifying incremental FCNR(B)/NRE deposits are excluded from Adjusted Bank Credit, reducing the base for computing priority sector lending targets.