The RBI has announced the Third Amendment Directions aimed at local area banks, enabling them to adjust interest rates on new deposits without ceilings.
RBI Issues Third Amendment Directions for Local Area Banks
On August 25, 2026, the Reserve Bank of India released the 'RBI (Local Area Banks – Interest Rate on Deposits) Third Amendment Directions, 2026,' effectively updating the previous directions from 2025. This amendment temporarily lifts the interest rate ceilings on fresh deposits.
The objective behind this revision is to allow local area banks to offer more attractive interest rates for FCNR(B) deposits, thereby enhancing their ability to compete in the financial market and attract deposits from local patrons.
Practitioners are advised to assess how this regulatory update might affect local area banks' strategies. Increased flexibility in interest offerings can lead to a more vibrant financial environment and potentially improve the financial health of these banks.
Citations
- Reserve Bank of India (Local Area Banks – Interest Rate on Deposits) Third Amendment Directions (2026)