The Reserve Bank of India (RBI) has issued the Reserve Bank of India (Local Area Banks – Cash Reserve Ratio and Statutory Liquidity Ratio) Second Amendment Directions, 2026 following the inclusion of a Local Area Bank in the Second Schedule to the RBI Act, 1934. The amendment incorporates the CRR and SLR provisions applicable to scheduled banks into the existing framework for Local Area Banks. The provisions take effect immediately.
The amendment introduces provisions on Incremental CRR, daily maintenance of CRR and exemptions applicable to scheduled LABs. Scheduled LABs are required to maintain a minimum daily CRR of 90% of the prescribed CRR during each reporting fortnight, while specified liabilities are exempted from CRR, including qualifying inter-bank liabilities, ACU (US$) account balances and funds borrowed under market repo against Government securities. Corresponding provisions have also been introduced for SLR exemptions and treatment of excess balances maintained with RBI.
The amendment also revises the penal interest framework for CRR shortfalls. For scheduled LABs, a daily CRR shortfall attracts penal interest at 3% per annum above the Bank Rate, increasing to 5% above the Bank Rate if the shortfall continues on succeeding days, besides the existing fortnightly shortfall provisions. The amendments therefore bring scheduled LABs within the applicable statutory reserve-maintenance and penalty framework prescribed for scheduled banks.
[RBI/2026-27/255; DOR.RET.REC.220/12.01.001/2026-27]
