What changed
Previously, incremental FCNR(B) and NRE deposits with maturity of three years or more (from base date July 26, 2013) were exempt from CRR/SLR maintenance. Effective the reporting fortnight beginning June 14, 2014, this exemption is withdrawn for new deposits. Only the eligible amount outstanding as on June 13, 2014, continues to enjoy CRR/SLR exemption until maturity or premature withdrawal.
What it means for you
Urban co-operative banks can no longer park new incremental FCNR(B) or NRE deposits (3+ years) without maintaining CRR/SLR, increasing their reserve costs. However, advances made against these deposits that were already exempt will still be excluded from Adjusted Bank Credit for priority sector lending targets until repayment. Banks must adjust their liquidity management and lending strategies accordingly.
What you must do
- Stop treating new incremental FCNR(B)/NRE deposits (3+ years maturity) as CRR/SLR-exempt from June 14, 2014.
- Maintain CRR/SLR on all such deposits received after June 13, 2014, as per standard requirements.
- Continue to exclude advances against eligible outstanding deposits (as of June 13, 2014) from Adjusted Bank Credit for priority sector lending computation until repayment.
- Update internal systems and reporting processes to reflect the withdrawal of exemption for new deposits.
Who it affects
All Primary (Urban) Co-operative Banks, Treasury and ALM teams at urban co-op banks, Priority sector lending compliance departments
Does this circular affect deposits already exempted before June 14, 2014?
No. Incremental FCNR(B) and NRE deposits (3+ years maturity) outstanding as on June 13, 2014, continue to enjoy CRR/SLR exemption until their maturity or premature withdrawal.
Are advances against these deposits still excluded from Adjusted Bank Credit for priority sector lending?
Yes, advances extended in India against the eligible incremental deposits that qualify for CRR/SLR exemption will remain excluded from Adjusted Bank Credit until repayment.
What is the base date for calculating incremental deposits?
The base date remains July 26, 2013, as per the earlier circular. Only deposits above that base are considered incremental.