Reporting relief did not remove the aggregate limit
RBI’s Deposits and Accounts Master Direction, Part III paragraph 1.6(i), permits the specified temporary overdrawals for normal business requirements up to ₹500 lakh in aggregate across overseas branches and correspondents in all Indian branches’ books of the AD Category-I bank. Circular No. 20 of 2 September 2026 removed two specified reporting requirements immediately. It did not abolish this ceiling. This analysis checks the Master Direction updated on that date and the circular on 27 October 2026. RBI Deposits and Accounts Master Direction: Part III paragraph 1.6.
Define the bank-wide exposure population
Obtain balances from every relevant Indian branch, with the overseas branch or correspondent identified consistently. A local branch ledger is not the whole exposure population. Use a common cut-off and distinguish an actual overdrawn balance from an approved but unused facility. The calculations below measure outstanding temporary overdrawals; they do not convert this facility into a general lending permission. RBI Deposits and Accounts Master Direction: Part III paragraph 1.6.
Do not net unrelated positive account balances automatically
A credit balance held for one overseas correspondent is not the same as settlement of another correspondent’s overdraft. In the control model, aggregate actual outstanding overdrafts and reconcile any adjustments to valid posted transactions. A free-form spreadsheet net balance can conceal the debit exposure. Resolve disputed value dates and posting errors with evidence, preserving the actual and corrected positions. RBI Deposits and Accounts Master Direction: Part III paragraph 1.6.
Treat timing and purpose as separate controls
Paragraph 1.6(i) states that the facility should not postpone account funding. An amount below the monetary limit can still require scrutiny if it is being used for that purpose. Monitor additions and settlements at relevant operating cut-offs, rather than relying only on a month-end amount. The paragraph does not create a universal number of permitted overdraft days merely because older reporting language referred to five days. RBI Deposits and Accounts Master Direction: Part III paragraph 1.6.
Identify exactly what changed on 2 September 2026
The circular dispensed with the annual list of offices or branches maintaining Rupee accounts of non-resident banks, and the specified report of over-limit temporary overdrawals not adjusted within five days. Update the compliance calendar and remove those superseded report tasks. Keep operational exposure monitoring and separately applicable reporting duties. Reporting relief does not authorise an excess or excuse a control breach. RBI Deposits and Accounts Master Direction: Part III paragraph 1.6. Read the specific reporting relief circular.
Escalate additional credit before relying on it
Under Part III paragraph 1.6(ii), an AD Category-I bank wishing to extend another credit facility to overseas banks beyond the stated facility should seek prior RBI approval through the specified Foreign Exchange Department authority. Internal sanction and RBI permission are different records. For a projected excess, identify an actually completed funding solution or the applicable prior approval rather than treating later reporting as permission. RBI Deposits and Accounts Master Direction: Part III paragraph 1.6.
Applicable primary references
RBI Deposits and Accounts Master Direction: Part III paragraph 1.6 RBI A.P. (DIR Series) Circular No. 20 dated 2 September 2026
Six worked illustrations
All facts and amounts below are fictional. Assumptions describe the model, not additional statutory rules.
Illustrative example 1: Aggregate three Indian branches
All amounts are ₹ lakh. Branch A records temporary overdrawals of 180, Branch B 170 and Branch C 130. Bank-wide exposure is 480, leaving 20 below the 500 ceiling. Each branch being individually below 500 is not the statutory aggregation test.
Illustrative example 2: Test a proposed additional draw
The bank-wide starting exposure is 480. A proposed further temporary draw of 35 would produce 515, exceeding the stated ceiling by 15. An internal sanction does not itself resolve that excess; establish permitted funding or the required prior approval before proceeding.
Illustrative example 3: Avoid unsupported cross-account netting
Actual overdrafts are 260, 180 and 90 across three correspondents, totalling 530. A fourth correspondent has a positive 100 balance. Subtracting that credit yields a misleading net 430. Without actual settlement of the overdrafts, the control exposure remains 530, or 30 above 500.
Illustrative example 4: Verify a completed settlement
Opening aggregate temporary overdrawals are 490. A documented settlement reduces them by 75 and a later draw adds 60. The resulting exposure is 475, leaving 25. An unposted promise to fund 75 would not justify using the same closing figure.
Illustrative example 5: Find an intraday peak
Exposure is 450 before a draw of 80, rising to 530. A subsequent settlement of 60 brings it down to 470. The closing amount does not erase the earlier 30 excess over 500. Record the sequence and escalate the actual event under the bank’s control process.
Illustrative example 6: Reconcile duplicate feeds without losing exposure
A consolidated report totals 620, including a verified duplicate 70 from a branch feed. Correct exposure is 550, not 480: subtract the duplicated record once. The corrected position remains 50 above 500, so fixing the data error does not remove the underlying limit issue.
Ten-step verification table
| Step | Action | Evidence |
|---|---|---|
| 1 | Identify the facility and account population | Part III paragraph 1.6 scope |
| 2 | Collect every relevant Indian branch balance | Bank-wide source inventory |
| 3 | Identify overseas counterparties consistently | Branch and correspondent master |
| 4 | Fix the measurement cut-off | Time and value-date evidence |
| 5 | Aggregate actual temporary overdrawals | Outstanding exposure calculation |
| 6 | Review duplicate feeds and settlements | Posted transaction support |
| 7 | Compare exposure and projected draws to 500 | Headroom and excess working |
| 8 | Check purpose and funding behaviour | Normal requirements and funding trail |
| 9 | Apply current reporting instructions | 2 September circular and separate obligations |
| 10 | Escalate additional credit requirements | Prior approval and internal control records |
Sixteen practitioner FAQs
1. Which institutions does this article address?
AD Category-I banks operating the specified overseas-branch or correspondent temporary-overdrawal facility.
2. Is ₹500 lakh a limit for every Indian branch separately?
No. The Master Direction specifies aggregate exposure across the relevant overseas branches and correspondents in all Indian branches’ books.
3. Is ₹500 lakh equal to ₹5 crore?
Yes. One crore equals 100 lakh.
4. Does the limit apply only at month end?
The facility is a limit on outstanding exposure; a month-end-only control can miss earlier excesses.
5. Can unrelated correspondent credit balances automatically reduce exposure?
Do not treat them as settlement of actual overdrafts without a valid transaction basis.
6. Does an unused internal sanction count as a completed draw?
Distinguish sanctioned capacity from actual outstanding overdrawals.
7. Does reporting relief make an excess permissible?
No. Removing a reporting requirement does not remove the retained limit or approval conditions.
8. What happened on 2 September 2026?
The RBI circular dispensed with the two specified reporting requirements with immediate effect.
9. Which annual report was removed?
The specified annual list of offices or branches maintaining Rupee accounts of non-resident banks.
10. Which temporary-overdrawal report was removed?
The specified report for over-limit temporary overdrawals not adjusted within five days.
11. Does five days now become a general permitted tenure?
No. The old reporting trigger should not be converted into a universal permission period.
12. Can the facility postpone funding indefinitely?
The Master Direction expressly says it should not be used to postpone account funding.
13. Does a later settlement erase an earlier excess?
No. Preserve the sequence and assess the earlier position.
14. What if another credit facility beyond this permission is proposed?
Review paragraph 1.6(ii)’s prior RBI approval requirement before relying on the facility.
15. Does internal credit approval replace RBI approval?
No. Maintain the distinct internal and regulatory evidence where each is required.
16. Can all other regulatory reports be discontinued?
No. The circular removes the two identified reports, not every separately applicable obligation.
Conclusion
Aggregate Rupee Vostro temporary overdrawals across branches and correspondents; distinguish the retained ₹500 lakh limit from September 2026 reporting relief.