The RBI has released the Third Amendment Directions concerning interest rates on deposits for urban co-operative banks, temporarily lifting the limit on interest rates for new deposits.
RBI Implements Third Amendment Directions for Urban Co-operative Banks
On August 25, 2026, the Reserve Bank of India issued the 'RBI (Urban Co-operative Banks – Interest Rate on Deposits) Third Amendment Directions, 2026.' This amendment revises the previous directions issued in November 2025, facilitating a temporary lift of the interest rate ceiling applicable to fresh deposits.
The key purpose of this amendment is to allow urban co-operative banks to offer competitive rates on new FCNR(B) deposits, supporting their liquidity and attracting potential depositors. By removing the ceiling, the RBI aims to empower these banks to respond to market demands more effectively.
This change will necessitate financial practitioners to reassess strategies for deposit structures and retention plans within urban co-operative banks. Enhanced interest offerings may drive customer deposit influx, further solidifying the role of urban co-operative banks in the national banking framework.
Citations
- Reserve Bank of India (Urban Co-operative Banks – Interest Rate on Deposits) Third Amendment Directions (2026)