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RBI Announces Third Amendment Directions for Local Area Banks
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RBI Announces Third Amendment Directions for Local Area Banks

September 1, 2026

The Reserve Bank of India has issued a third amendment to the interest rate directions for Local Area Banks, permitting a temporary withdrawal of the interest rate ceiling.

RBI Announces Third Amendment Directions for Local Area Banks

On August 25, 2026, the Reserve Bank of India (RBI) issued the Reserve Bank of India (Local Area Banks – Interest Rate on Deposits) Third Amendment Directions, 2026. This amendment updates previous directives established in 2025 concerning interest rates on fresh deposits.

Key to this amendment is the temporary removal of the interest rate ceiling on new deposits, which aims to boost competitiveness within the local banking sector. This change aligns with updates made as of June 17, 2026, ensuring local banks have the flexibility to offer more favorable rates.

Practitioners in financial law should consider advising local banks on restructuring their deposit offerings to leverage the competitive edge gained through these amendments, as they may lead to substantial alterations in market behavior.

Citations

  • Reserve Bank of India (Local Area Banks – Interest Rate on Deposits) Third Amendment Directions, 2026
Practice Areas:banking

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