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- RBI's Sixth Amendment to the FEMA (Deposit) Regulations: Liberalising the Framework for Special Non-Resident Rupee (SNRR) Accounts
Introduction
On June 18, 2026, the Reserve Bank of India (RBI) notified the Foreign Exchange Management (Deposit) (Sixth Amendment) Regulations, 2026 through Notification No. FEMA 5(R)(6)/2026-RB. The amendments introduce significant changes to the Foreign Exchange Management (Deposit) Regulations, 2016, with a primary focus on liberalising the regulatory framework governing Special Non-Resident Rupee (SNRR) Accounts. The reforms aim to simplify banking arrangements for non-residents, strengthen the role of International Financial Services Centres (IFSCs), and support India's growing cross-border financial ecosystem.
Expansion of the SNRR Account Framework
SNRR accounts were introduced in 2016 to enable persons resident outside India to under-take permissible current and capital account transactions in Indian Rupees while maintaining segregation from Non-Resident External (NRE) and Non-Resident Ordinary (NRO) accounts.
Under the Sixth Amendment, the RBI has substantially expanded the scope and utility of these accounts. A significant change is the removal of the requirement that a person resident outside India must have a "business interest in India" to open an SNRR account, thereby widening access to the facility.
A key reform is the substitution of Paragraph 1 of Schedule 4, allowing non-residents to open and maintain SNRR accounts with authorised dealers in India, overseas branches, and IFSC branches. The accounts may now be used for permissible current and capital account transactions, as well as bona fide transactions with other non-residents, enhancing flexibility for multinational businesses, foreign investors, and cross-border operations.
Recognition of IFSC Branches
The amendment also formally recognises International Financial Services Centres (IFSCs) within the Deposit Regulations by incorporating the definition contained in the International Financial Services Centres Authority Act, 2019. Consequently, non-residents may now maintain SNRR accounts with banking units operating in IFSCs, such as GIFT IFSC. This integration is likely to facilitate greater participation by foreign financial institutions, investment funds, and international businesses while further strengthening the role of IFSCs in India's cross-border financial ecosystem.
Greater Flexibility in Movement of Funds
The amendment provides greater flexibility in transfers between non-resident accounts by permitting transfers from NRO accounts to NRE and SNRR accounts, subject to the limits prescribed under the Foreign Exchange Management (Remittance of Assets) Regulations, 2016. It also clarifies that transfers from NRO accounts to SNRR accounts will be governed by the applicable provisions of the Deposit Regulations.
The Sixth Amendment removes several operational restrictions on SNRR accounts by deleting Paragraphs 2, 5, 6, 7 and 8 of Schedule 4. Earlier, SNRR accounts were subject to conditions relating to tenure, operation, and usage, including a maximum validity period of seven years unless extended by the RBI. The deletion of these provisions provides greater operational flexibility for eligible account holders.
The amendments also indicate a shift towards a more principles-based regulatory approach by placing greater responsibility on authorised dealer banks to ensure FEMA compliance and alignment with the purpose of the account. This reduces operational complexity and provides greater flexibility to foreign businesses maintaining long-term commercial relationships in India.
Additionally, Paragraph 16 in Schedule 4 permits authorised dealer banks to process certain transactions between non-residents through SNRR accounts based on the account holder's instructions and the stated purpose of the transfer, where such transactions are not otherwise subject to FEMA requirements.
Conclusion
The Foreign Exchange Management (Deposit) (Sixth Amendment) Regulations, 2026 mark a significant modernisation of India's non-resident deposit framework by enhancing the flexibility and commercial utility of SNRR accounts through expanded eligibility, broader permissible transactions, recognition of IFSC banking operations, and the removal of operational restrictions. The reforms reflect the RBI's continued efforts to facilitate cross-border financial transactions, improve ease of doing business for foreign investors and multinational enterprises, and support India's growth as a competitive international financial centre.
- RBI's Concessional Swap Scheme for PSUs and NRI Deposits
Introduction
Economic uncertainty has increasingly become a defining feature of the global financial environment. Geopolitical tensions, changing interest rate cycles, and volatile international capital flows can significantly impact domestic economies. For India, maintaining adequate foreign exchange reserves and ensuring stability in the rupee remain key priorities in managing external sector risks. The Reserve Bank of India (RBI) has consistently adopted measures aimed at strengthening foreign currency inflows and enhancing resilience against global financial disruptions.
A concessional foreign exchange swap is one such mechanism through which the RBI provides favourable swap terms to eligible entities, enabling them to convert foreign currency into Indian rupees at a lower cost than prevailing market arrangements. By reducing hedging costs, such facilities encourage foreign currency inflows, support exchange rate stability, and strengthen India's foreign exchange reserves.
Recognising the potential of this mechanism to attract stable foreign currency inflows, the RBI introduced special concessional foreign exchange swap facilities in June 2026 to strengthen India's foreign exchange reserves and support the external sector amid global economic uncertainties. The facilities primarily cover eligible Foreign Currency Non-Resident (Bank)[FCNR (B)] deposits mobilised by banks and eligible External Commercial Borrowings (ECBs) raised by Public Sector Undertakings (PSUs).
Under the scheme, authorised dealer banks can swap foreign currency received from eligible FCNR(B) deposits with the RBI at concessional terms, while eligible PSU ECBs can be swapped at a concessional premium of 1.5% per annum, significantly below prevailing market rates.
For eligible FCNR(B) deposits, the facility enables participating banks to reduce hedging costs, which may provide greater flexibility in offering competitive deposit rates, subject to applicable regulatory requirements. This could encourage greater participation in FCNR(B) deposits and increase foreign currency inflows into the banking system. Similarly, the facility provides PSUs with access to relatively cheaper foreign currency funding, supporting their external borrowing requirements.
The scheme is temporary in nature. Eligible FCNR(B) deposits mobilised between 8 June and 30 September 2026 can access the swap window until 16 October 2026, while eligible PSU ECB drawdowns made up to 31 December 2026 may utilise the facility until 15 January 2027.
Alongside this initiative, the RBI introduced a fresh FCNR(B) deposits with original maturities of three to five years from the maintenance of Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR) requirements for specified categories of banks, in accordance with the applicable regulatory framework. The measure is intended to reduce the regulatory cost of mobilising such deposits and encourage greater foreign currency inflows.
Conclusion
The RBI's concessional foreign exchange swap scheme represents a targeted policy intervention aimed at strengthening India's external sector, improving foreign exchange reserves, and supporting overall financial stability during periods of global uncertainty. The facilities provide cheaper funding avenues for banks and eligible PSUs while encouraging foreign currency inflows through concessional swap arrangements. When read alongside the accompanying regulatory measures, the initiative reflects the RBI's broader objective of facilitating foreign currency inflows, maintaining financial stability, and enhancing India's resilience against external economic shocks.
- Comprehensive RBI Regulations on Bank Financing to REITs and InvITs
Introduction
The Reserve Bank of India ("RBI") has, over the years, strengthened its regulatory framework to promote responsible business conduct and ensure fair treatment of customers in the banking sector. In furtherance of this objective, the RBI issued the Reserve Bank of India (Commercial Banks - Responsible Business Conduct) (Second Amendment) Directions, 2026 Effective from 15 June 2026, amending the existing Reserve Bank of India (Commercial Banks - Responsible Business Conduct) Directions, 2025. om 1 January 2027, the Amendment Directions introduce enhanced requirements governing the advertisement, marketing and sale of financial products and services by commercial banks, with particular focus on customer consent, product disclosures, digital sales practices, and the prevention of misselling
Key Changes
Explicit Customer Consent
The Amendment Directions require banks to obtain a customer's explicit consent before offering or selling any financial product or service. Such consent must be specific, informed, and unambiguous, and may be obtained through a signed declaration, OTP-based approval, digitally recorded confirmation, or consent incorporated in a clearly demarcated section of the relevant agreement. Where more than one product is offered through a single physical or digital application, each product must be separately identified, enabling customers to choose only those products they intend to avail. Banks are also required to preserve records of such consent until one year after the contractual arrangement has ceased.
Product Disclosures and Digital Sales Practices Before obtaining customer consent, banks must prominently disclose key product features, including fees, charges, interest rates, risks, financial commitments, lock-in conditions, and exit terms. Where prescribed, standard disclosure formats such as the Key Facts Statement (KFS) or Most Important Terms and Conditions (MITC) must be used. The Directions further require consent interfaces to ensure that customers review the applicable terms and conditions before providing consent and prescribe that the default option for consent should be "No" or "I do not agree". Banks and their DSAs/DMAs are also prohibited from deploying dark patterns in customerfacing digital interfaces.
Measures Against Mis-selling
The Amendment Directions define "mis-selling" to include, among other things, the sale of unsuitable financial products, sale without explicit consent, compulsory bundling of products, and sale based on misleading or incomplete information. Banks are required to assess the suitability and appropriateness of products by considering factors such as product features, risk-return attributes, and complexity in light of the customer's age, income, financial literacy, and risk tolerance. The Directions also prohibit compulsory bundling of third-party financial products with a bank's own products, except in the limited circumstances specified in the Directions.
Conclusion
The Amendment Directions introduce a more structured framework for the advertisement, marketing, and sale of financial products by commercial banks, with particular emphasis on customer consent, product disclosures, and fair sales practices. As the revised framework comes into effect on 1 January 2027, commercial banks and their distribution partners will need to ensure that their product distribution processes, customer consent mechanisms, and digital sales practices are aligned with the requirements prescribed by the RBI.
- RBI Removes Mandatory Investment Fluctuation Reserve (IFR) Requirement for Commercial Banks
Introduction
The Reserve Bank of India (RBI) issued new Directions on 10 June 2026 to strengthen and streamline the governance of risk management, compliance, and internal audit functions in regulated entities. By consolidating and harmonsing several existing regulatory requirements into a unified framework, the RBI seeks to promote greater coordination among these control functions while preserving their functional independence.
The framework applies to scheduled commercial banks, small finance banks, and specified non-banking financial companies, reshaping how risk management, compliance, and internal audit functions report to senior management and the Board.
As financial institutions operate in an increasingly complex and interconnected environment, organisational risks have become more dynamic and multifaceted. Mere compliance with legal and regulatory requirements is no longer sufficient to effectively manage enterprise-wide risks. Greater coordination, timely communication, and integrated risk assessment are essential to identifying emerging risks at an early stage. The new framework seeks to address this governance gap.
Structural Core of the Framework
The consolidated Directions are built around three key themes.
Horizontal Synchronisation
The Board requires a holistic view of the institution's risk profile. Fragmented functioning of the risk, compliance, and internal audit functions can result in incomplete reporting to the Board and reduce the effectiveness of governance and control measures. The Directions therefore encourage greater coordination among these functions while maintaining their functional independence. By improving information sharing and coordination, institutions can develop a more integrated view of enterprise-wide risks and address potential control gaps more effectively.
Segregation of Duties and Independence
The Chief Risk Officer (CRO), Chief Compliance Officer (CCO), and Head of Internal Audit (HIA) continue to head separate control functions. They are required to function independently of business units and revenue-generating responsibilities while having appropriate access to records and information necessary to discharge their responsibilities.
To promote stability, these officers are generally required to have a minimum tenure of three years, and specified changes relating to these positions are required to be reported to the RBI. The governance framework is further strengthened through periodic interactions between the Board and the heads of the risk, compliance, and internal audit functions, without the presence of executive management, wherever prescribed under the Directions.
The CRO is also required to be a permanent member of the credit sanction committee, without voting rights. Where the CRO's risk advice is not accepted, the matter is required to be escalated to the next higher authority within the organisational hierarchy for appropriate consideration.
Focus on Digital and Systemic Vulnerabilities The Directions formally incorporate the Risk-Based Internal Audit (RBIA) framework into the broader regulatory framework. Regulated entities are required to implement a Risk Exposure Matrix, a Risk Audit Prioritisation Matrix, and Quality Assurance and Improvement Programmes. These measures are intended to strengthen the internal audit function by moving beyond traditional retrospective compliance reviews towards a more risk-based assessment of operational resilience and emerging vulnerabilities.
Conclusion
The unified Directions strengthen the governance framework by clearly defining and expanding the roles and responsibilities of the Board and senior management in enterprise-wide risk management. The Board is responsible for approving the enterprise-wide risk appetite framework, while senior management is accountable for its implementation, ongoing compliance, timely reporting, and corrective action where necessary. Overall, the framework seeks to strengthen the ability of regulated entities to identify, monitor, and mitigate risks while enhancing organisational resilience.
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