Dear Readers,

“Circumstances change, times change, requirements change, so nothing should be frozen in time,” remarked Reserve Bank of India Governor Sanjay Malhotra this week, offering a glimpse of how the central bank is tackling multiple challenges, from tariffs to a wobbly rupee, amid geopolitical tensions.


First, a sombre note. The torrential rains across Maharashtra, Punjab, and other regions have devastated vast swathes of farmland. Lakhs of acres lie submerged, and the loss of human and animal lives is heartbreaking. This is not just an erratic monsoon but a sharp reminder of the changing climate. My thoughts and prayers are with those affected, and I sincerely hope the situation improves soon.

Now, to the RBI’s Monetary Policy that was unveiled this week. Over the years, the RBI’s monetary policy statements have evolved from simple rate announcements into a comprehensive set of measures. But nowadays, the ecosystem spends more time dissecting the details than the headline repo rate. Rates still matter, of course, since they set the tone for banks and businesses, but this time the Governor packed in 22 measures during the monetary policy speech. The focus is to support growth, enc ourage banks, and equip them with the necessary tools to navigate the current challenging times.

RBI’s view on the current economic situation

This time, the RBI did not cut the policy rates, but there was an assurance that it will intervene when needed. Recall that in the past eight months it has cut rates by 100 bps and effected a 50 bps CRR cut, which has boosted consumer spending significantly. Still, growth seems to have hit a ceiling and remains a big concern amid the worsening geopolitical situation. Still, RBI has forecast GDP growth at 6.8% for this fiscal, while inflation, currently benign at 2.6%, is seen climbing back towa rds 4% by Q4. In a silver lining, liquidity is abundant, with daily surpluses averaging more than Rs 2 lakh crore, a rare phenomenon in current times.


RBI’s focus remains firmly on tackling geopolitical uncertainties while boosting the domestic economy. The agenda is clear: spur growth, with particular emphasis on credit expansion, which has been patchy for some time. On one hand, the RBI is nudging banks to step up lending, and on the other, it is introducing measures that indirectly fortify the economy.


Banking measures

Banks have now been allowed to finance mergers and acquisitions, meeting a long-standing demand that opens a fresh credit channel for lenders and corporates alike. Lending limits for investors in the capital market have been expanded to a range of Rs 25 lakh to Rs 1 crore, while the ceiling on loans against shares has been raised from Rs 20 lakh to Rs 1 crore, signalling a step towards liberalising the capital market. The RBI has also resumed granting licences to UCBs. Meanwhile, concerns over ECL and Basel norms have been addressed by extending the timeline for implementation, easing compliance pressures. To encourage infrastructure investment, risk weights on NBFC exposure to high-quality projects have been reduced.


Internationalisation of the rupee

The central bank is pushing the rupee further onto the global stage. Authorised Dealer banks can now settle non-resident transactions between India and Sri Lanka, Bhutan, and Nepal in INR. This builds on existing cross-border transaction facilities, such as the UPI link with Singapore, while RuPay debit cards are gradually being accepted in select overseas markets.


Ease of doing business

Regulatory simplification is another cornerstone of this policy. The RBI plans to consolidate nearly 9,000 circulars into a streamlined framework covering 11 categories of regulated entities, significantly reducing compliance burdens. At the same time, it has withdrawn the 2016 framework that restricted lending to large corporates, thereby enabling banks to extend credit to companies with borrowings exceeding Rs 10,000 crore. Consolidating a huge number of circulars and removing the 2016 framew ork for large corporates reduces bureaucracy and encourages banks to lend to bigger projects, supporting broader economic growth. The 22 measures collectively aim to empower banks, encourage investment, support consumption, and strengthen India’s economic resilience in uncertain times.

Macro backdrop

These moves come at a time when transmission of earlier rate cuts is still working its way through the system, and GST rationalisation has eased tax burdens. The broader picture is supported by strong foreign inflows, with FDI reaching a 38-month high in July 2025, while forex reserves have surpassed $700 billion, sufficient to cover 11 months of imports.


Yet the gap remains: consumer demand is still driven largely by small-ticket loans, while big-ticket investments and capacity expansions from India Inc have been slow to gather pace. If corporate spending begins to pick up, the economy could see a more sustained lift, and a real celebration will start from this festival.

This optimism will hopefully be reflected in India’s biggest FinTech gathering, the Global FinTech Festival, which takes place in Mumbai next week. My team and I will be there capturing conversations and insights. If you are attending, I look forward to meeting you in person.

Please share your feedback, suggestions if any. You can reach me on amol.dethe@timesinternet.in and follow me on LinkedIn at ETBFSI Digest.

As usual, I am adding here the top 5 stories of the week, trust you will find them meaningful.

1. Tata Capital IPO: Motor Finance merger gains from FY26 itself; cheaper funds to lift margins, says Rajiv Sabharwal
2. How will US tariffs impact Indian banks?
3. Kotak Bank, HDFC face higher attrition; private banks outpace PSBs in staff and branch additions
4. How H1-B visa fee hike may be positive for India in medium term
5. RBI MPC Meet: Top Policy Announcements on Banks, Credit and Consumers
   

Happy Reading
Amol Dethe,
Editor,
ETBFSI

(Editor's note is a column written by Amol Dethe, Editor, ETBFSI. Click here to read more of his articles exploring several buzzing topics)

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