Tag: RBI

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RBI transfers record ₹2.87 lakh cr to government

The Reserve Bank of India (RBI) has approved a record transfer of ₹2.87 lakh crore as surplus to the central government, marking the highest dividend payout in its history.

The decision was taken at the RBI’s Central Board meeting after finalising its accounts for the financial year and reviewing provisions under its risk framework. The payout reflects strong earnings from the central bank’s foreign exchange operations, interest income, and gains from global financial markets.

This large transfer is expected to give the government additional fiscal space at a time when it is balancing spending needs on infrastructure, welfare schemes, and efforts to manage the fiscal deficit. The extra funds could also help reduce borrowing pressure in the upcoming budget cycle.

The RBI’s surplus is calculated after it sets aside money under its Economic Capital Framework, which ensures the bank maintains adequate buffers to handle financial stability risks. Even after these provisions, the central bank reported higher-than-expected earnings, leading to the record payout.

Over the years, RBI dividends have become an important non-tax source of revenue for the government, often helping it manage fiscal gaps and support public spending priorities.

While the record payout strengthens the government’s financial position in the short term, experts also note that such transfers can vary significantly depending on market conditions and the RBI’s risk assessment each year.

Economists said the transfer was larger than many market expectations, which had factored in more conservative assumptions due to global volatility. However, strong balance sheet gains helped push the final figure higher.

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Beyond

Finance commission chief says rupee can cross ₹100

The Indian rupee remained under focus on Friday, trading at around 96.28 against the US dollar, as global developments and currency market movements continued to influence investor sentiment.

During these developments, comments by finance commission chief-Arvind Panagariya have sparked discussion over India’s approach to managing the currency. Panagariya said the Reserve Bank of India should not become overly concerned if the rupee moves beyond the ₹100-per-dollar mark, stressing that exchange rates should adjust according to market realities.

While the rupee witnessed some recovery during recent sessions, concerns over oil prices, global uncertainty and foreign investment flows continue to keep markets cautious.

According to him, levels such as ₹100 against the dollar often carry psychological importance, but they should not be viewed as strict barriers. He noted that several factors including inflation, trade activity, global capital flows and international market conditions play a role in determining currency values.

Economists pointed out that fluctuations in the rupee are common and often reflect broader global developments. While movements in the exchange rate can influence import costs and investor sentiment, they do not by themselves determine the overall health of the economy.

Experts expect the rupee’s direction in the coming weeks to depend on oil prices, global economic trends and foreign investment activity.

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RBI unveils $5 bn swap auction to support rupee

The Reserve Bank of India (RBI) has announced a $5 billion dollar-rupee swap auction to inject liquidity into the banking system and help stabilise the rupee, which has been under pressure in recent weeks.

The auction is scheduled for May 26 and will be conducted for a three-year period. Under the arrangement, banks will sell US dollars to the RBI in exchange for rupees and later buy them back after the swap period ends. This helps increase rupee liquidity in the financial system.

The move comes at a time when the Indian currency has been facing pressure due to rising global uncertainty, higher crude oil prices, and foreign investor outflows. Market volatility and geopolitical tensions have also added to concerns around the rupee’s stability.

Analysts say the RBI’s latest step is aimed at ensuring enough liquidity remains available in the banking system while also calming currency markets. The central bank has been actively managing rupee volatility in recent months through interventions in the foreign exchange market.

Such interventions often absorb rupee liquidity from the system, making additional support necessary. Economists believe the swap auction will help balance liquidity conditions without directly changing interest rates.

The announcement was viewed positively by financial markets, with bond yields easing slightly after the news. Experts also say the measure could help reduce pressure in the currency forward market and improve overall investor confidence.

The RBI has used similar swap auctions in the past during periods of market stress or liquidity tightening. These tools allow the central bank to manage short-term financial pressures while maintaining stability in currency and debt markets.

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RBI clears Kotak stakes in AU SFB, Federal Bank

Kotak Mahindra Bank has received approval from the Reserve Bank of India (RBI) to acquire up to 9.99% stake each in AU Small Finance Bank and Federal Bank, strengthening its presence in India’s private banking sector.

The approval allows Kotak Mahindra Bank, along with its group entities and investment arms, to increase its holding in both banks within the permitted limit. The move is being viewed as a strategic investment aimed at expanding Kotak’s footprint across different segments of the banking industry.

Both AU Small Finance Bank and Federal Bank informed stock exchanges that the RBI granted the approval earlier this week. However, the acquisition will still need to comply with banking, market, and foreign investment regulations.

The development comes at a time when Indian banks are increasingly exploring partnerships, investments, and consolidation opportunities to strengthen growth and improve market reach. Analysts believe Kotak’s investments in the two lenders could open the door for closer strategic cooperation in the future.

Federal Bank has a strong presence in retail and SME banking, particularly in south India, while AU Small Finance Bank has built a significant franchise in the small finance and rural lending segment. By investing in both institutions, Kotak gains exposure to different customer segments and regional markets.

The announcement also received a positive response from investors, with shares of the three banks witnessing gains during trading sessions following the RBI approval.

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RBI, IRDAI cautious on banks in commodity derivatives

India’s financial regulators have taken a cautious stance on allowing banks and insurance companies to participate in commodity derivatives trading, according to remarks made by SEBI chief Tuhin Kanta Pandey.

Pandey said that both the Reserve Bank of India (RBI) and the Insurance Regulatory and Development Authority of India (IRDAI) are currently not inclined to permit such participation due to risk and structural concerns. As a result, banks and insurers are expected to remain out of the commodity derivatives segment for now.

The clarification comes even as the Securities and Exchange Board of India (SEBI) had earlier explored expanding participation in the commodities market to deepen liquidity and improve price discovery. SEBI had also discussed allowing banks and pension funds to enter the segment as part of efforts to strengthen the ecosystem.

However, the latest stance from the RBI and IRDAI indicates that the proposal has hit a regulatory roadblock. Officials believe commodity-linked instruments may not align with the long-term investment mandates of banks and insurance companies, and could expose them to additional volatility risks.

Following the remarks, market sentiment turned negative for commodity exchanges. Shares of Multi Commodity Exchange of India (MCX) fell by around 3–3.5%, reflecting concerns that reduced institutional participation could limit liquidity and trading volumes.

MCX, which dominates India’s commodity derivatives market, is particularly sensitive to regulatory changes affecting institutional access. Investors worry that without banks and insurers, the growth potential of the segment could be constrained in the near term.

At the same time, SEBI’s broader agenda to develop the commodity market remains in focus, including earlier proposals to involve pension funds and other long-term investors. But regulatory alignment between the three major bodies, SEBI, RBI, and IRDAI, appears to be the key hurdle.

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Leaders

Rohit Jain camed RBI Deputy Governor

The government has appointed Rohit Jain as Deputy Governor of the Reserve Bank of India for a period of three years, marking an important leadership change at the central bank.

The appointment was cleared by the Appointments Committee of the Cabinet and will take effect from May 3, 2026. Jain replaces T Rabi Sankar, whose tenure recently concluded.

A career central banker, Jain brings close to three decades of experience within the RBI. He is currently serving as an Executive Director and has handled several key responsibilities during his tenure. His work has largely focused on banking supervision, risk management, and financial system oversight, areas that are critical to maintaining stability in the sector.

In his most recent role, Jain was associated with the Department of Supervision, where he dealt with risk assessment, analytics, and monitoring vulnerabilities in banks. His deep understanding of the financial system is expected to help the RBI navigate ongoing challenges.

The appointment comes at a time when the central bank is dealing with a rapidly evolving financial landscape. Issues such as digital banking, cybersecurity risks, and global economic uncertainties are increasingly shaping policy decisions. Jain’s experience in supervision and risk is likely to play a key role in addressing these concerns.

While his specific responsibilities as Deputy Governor are yet to be announced, the RBI is expected to assign him a portfolio soon after he formally takes charge. Deputy Governors typically oversee major areas such as banking regulation, financial markets, payment systems, and aspects of monetary policy.

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RBI brings new rules for bank loan losses

The Reserve Bank of India (RBI) has introduced a new framework that will require banks to prepare earlier for possible loan defaults. The new rules, which will come into effect from April 1, 2027, are aimed at making the banking system stronger and more resilient.

Under the revised system, banks will move to the Expected Credit Loss (ECL) model for provisioning. This means lenders must estimate the chances of loans turning bad in the future and set aside money in advance. At present, banks usually make provisions after stress begins to show or when repayments are missed.

The RBI believes the shift will help banks recognise risks sooner and improve financial stability. It also brings India’s banking practices closer to international standards followed in several major markets.

The new framework will classify loans into three categories depending on the level of risk. Standard loans with no major warning signs will need lower provisions. Loans showing signs of weakness will require higher reserves, while credit-impaired or troubled loans will need the highest level of provisioning.

Importantly, the RBI has kept the current 90-day overdue rule for identifying non-performing assets (NPAs). This means a loan will still be treated as bad if repayments remain overdue for more than 90 days.

Banks had sought more time to prepare for the transition, as the new model may increase the amount of money they need to keep aside. However, the central bank has retained the April 2027 deadline. To ease the shift, lenders will be allowed to spread any additional provisioning burden over four years.

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India’s forex reserves rise above $703 bn

India’s foreign exchange reserves have climbed to $703.3 billion, continuing a steady upward trend and strengthening the country’s financial buffer against global uncertainties.

According to the latest Reserve Bank of India data, the reserves increased by around $2.3 billion in the week ending April 17, 2026. The rise reflects a mix of valuation gains and stable external inflows.

The biggest contribution came from foreign currency assets, which make up the bulk of India’s reserves. These assets include holdings in major global currencies such as the US dollar and euro, and their value often changes with global currency movements and central bank operations.

Gold holdings also played a role in the increase. India’s gold reserves have seen a gradual rise in value in recent months, supported by higher global gold prices and consistent accumulation by the central bank. This has added another layer of stability to the overall reserves.

Other components, including Special Drawing Rights and India’s position with the International Monetary Fund, remained largely unchanged during the period.

The latest increase comes after some fluctuations earlier this year, when global uncertainties such as geopolitical tensions and changes in oil prices affected reserve levels. However, the recent trend shows a recovery and steady build-up.

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RBI cancels Paytm payments bank licence

The Reserve Bank of India (RBI) has cancelled the licence of Paytm Payments Bank and said it will move ahead with winding up the bank through legal process. The decision follows long-standing regulatory concerns over compliance and operations.

The RBI said the bank had repeatedly failed to meet required norms and its functioning was not in line with banking rules. Because of these issues, the central bank said continuing operations was no longer appropriate and ordered closure proceedings.

Paytm Payments Bank has already been under restrictions for a long time. It was first stopped from adding new customers, and later faced limits on deposits and account activity.

For customers, the RBI has assured that their money is safe. The bank has been told to repay all deposits during the winding-up process, and it is expected to have enough funds to do so.

The bigger concern for users is what happens to everyday services like wallets and payments. Paytm has clarified that its main app will continue to work. Services such as UPI payments, QR code scanning, mobile recharges, and payment systems used by merchants are expected to remain active.

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RBI partially withdraws curbs on rupee trades

The Reserve Bank of India (RBI) has partially withdrawn restrictions on rupee derivative trading that were introduced earlier this month to contain sharp volatility in the currency market.

The earlier curbs were imposed after the rupee weakened to record lows against the US dollar. To reduce pressure, the RBI had restricted certain derivative transactions, including non-deliverable forward (NDF) contracts and rebooking of cancelled forward deals.

In its latest move, the central bank has allowed some of these transactions to resume, signalling that pressure on the rupee has eased.

However, the RBI has kept limits on banks’ net open currency positions, showing that it remains cautious about speculative activity.

Market experts say the easing will help companies and banks hedge foreign exchange risks more smoothly, especially importers and businesses with overseas exposure.

The rupee has recovered from recent lows and is now trading in a more stable range. Analysts believe the RBI is trying to balance currency stability with normal market functioning.

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