What changed
The exemption from CRR and SLR maintenance on incremental FCNR(B) and NRE deposits (maturity of three years and above, base date July 26, 2013) will be withdrawn effective the reporting fortnight beginning March 8, 2014. Only the eligible amount outstanding as on March 7, 2014 will continue to enjoy the exemption until maturity or premature withdrawal. Advances extended against these deposits will still be excluded from Adjusted Net Bank Credit (ANBC) for priority sector lending computation until repayment.
What it means for you
Banks must prepare to resume CRR/SLR maintenance on new incremental FCNR(B) and NRE deposits from March 8, 2014, which will increase their reserve requirements and potentially reduce lendable resources. However, the continued exclusion of advances against these deposits from ANBC provides ongoing relief for priority sector lending targets, allowing banks to maintain their priority sector compliance without additional burden.
What you must do
- Identify all incremental FCNR(B) and NRE deposits (3+ years maturity, base date July 26, 2013) outstanding as on March 7, 2014 and ensure CRR/SLR exemption is applied only to these until maturity.
- Update internal systems to calculate CRR/SLR requirements from the fortnight beginning March 8, 2014, excluding only the grandfathered deposits.
- Continue to exclude advances against these grandfathered deposits from ANBC for priority sector lending reporting until repayment.
- Communicate the withdrawal timeline to treasury and compliance teams to avoid reserve shortfalls.
Who it affects
All scheduled commercial banks (excluding RRBs), Treasury departments managing CRR/SLR compliance, Priority sector lending reporting teams
Will all FCNR(B)/NRE deposits lose CRR/SLR exemption from March 8, 2014?
No. Only incremental deposits (base date July 26, 2013) with maturity of three years and above that are outstanding as on March 7, 2014 will retain the exemption until their maturity or premature withdrawal. New deposits after that date will not qualify.
Does the ANBC exclusion for priority sector lending also end on March 8, 2014?
No. Advances extended against the grandfathered deposits will continue to be excluded from ANBC until their repayment, even after the CRR/SLR exemption is withdrawn.