Banks are seeking relief from sustainable lending norms for loans made against foreign currency non-resident deposits by international banking units in GIFT City. As of October 25, 2026, some banks had held informal discussions with the regulator, but a formal request had yet to be submitted.
Key Takeaways
- Banks want loans against FCNR(B) deposits excluded from the calculation of mandatory sustainable lending targets.
- The existing requirement is at least 5% of the preceding financial year’s aggregate loans disbursed and specified investments.
- No change to the rule or effective date for an exemption has been announced.
What the sustainable lending norms require
International banking units, or IBUs, must deploy an amount equivalent to at least 5% of their aggregate loans disbursed and specified investments made in the preceding financial year toward sustainable lending and investments.
Banks want the International Financial Services Centres Authority (IFSCA) to exclude loans extended against Foreign Currency Non-Resident (Bank), or FCNR(B), deposits from that calculation. A bank executive said lenders plan to make a formal request after consulting stakeholders.
Another bank executive said a carve-out could be considered because limited investment avenues would make it difficult for lenders to deploy large amounts in the sector. The proposed relief has not been approved.
Why banks are seeking an exemption
The request follows a sharp increase in FCNR(B) deposit mobilization through GIFT City after the Reserve Bank of India introduced a special foreign exchange swap facility in June 2026.
IFSCA data showed that 20 IBUs at GIFT IFSC had sanctioned $54.02 billion under the facility by August 31, 2026, of which $52.82 billion had been disbursed.
A bank executive pointed to existing RBI exemptions involving priority-sector lending and reserve requirements on fresh FCNR(B) deposits. In August, the RBI said advances against fresh deposits mobilized under the scheme with maturities of three to five years would be excluded from adjusted net bank credit calculations.
Next milestone
The next step is the formal request banks plan to send to IFSCA after internal consultations.
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