Faculty Desk: ECONOMIC & FINANCIAL INSIGHTS

RBI, Banking, Financial Sector & Economic Intelligence Dossier

JANUARY-MARCH 2026

Research period: 1 January 2026 to 31 March 2026

Analytical theme of the quarter:

India entered 2026 with strong growth, rapidly improving inflation dynamics and a resilient banking system, but faced tight liquidity, rupee pressure, external-sector uncertainty and a rapidly evolving regulatory agenda.

The quarter is particularly important because several seemingly separate developments actually form one connected story:

Strong growth + low inflation
↓
RBI maintains 5.25% repo
↓
Liquidity becomes the immediate monetary-operational issue
↓
RBI deploys VRR + OMO + FX swap
↓
Rupee and capital-flow pressures remain important
↓
Budget 2026-27 seeks deeper financial-sector development
↓
RBI simultaneously strengthens consumer protection, market infrastructure, fintech regulation and financial inclusion

QUARTER AT A GLANCE

Area	January-March 2026 picture
Monetary policy	Repo maintained at 5.25% in February
Stance	Neutral
FY26 GDP	Revised/estimated around 7.6% in new GDP series
FY26 inflation	RBI February projection 2.1%
January CPI	2.74%
February CPI	3.21%
March CPI	3.40%
March WPI	3.88%
March bank credit	~16.1% growth
January UPI	21.70 bn, ₹28.33 lakh crore
February UPI	20.39 bn, ₹26.84 lakh crore
March UPI	22.64 bn, ₹29.53 lakh crore
Key liquidity action	₹25,000 crore VRR + $10 bn FX swap + ₹1 lakh crore OMO announced in January
Budget	High Level Committee on Banking for Viksit Bharat
Financial inclusion	KCC, UCB, MSME and Mission SAKSHAM initiatives
External sector	CAD widened in Q3, but services/remittances provided support
Trade	India-EU FTA concluded; major India-US tariff development
Technology	Stronger digital-fraud/customer-liability framework
Financial markets	Credit derivatives, REIT/InvIT lending and capital-market exposure reforms

PART I

JANUARY 2026

1. RBI ANNOUNCES MORE THAN ₹2 LAKH CRORE OF LIQUIDITY SUPPORT

Date: 23 January 2026
Priority: TIER 1

RBI announced a package consisting of:

90-day Variable Rate Repo: ₹25,000 crore
USD/INR buy/sell swap: $10 billion for three years
OMO purchases: ₹1 lakh crore, in two ₹50,000 crore tranches

The measures were designed to inject durable and/or term liquidity into the banking system and maintain orderly financial conditions. PolicyIndex

Why this is one of the most important developments of the quarter

The three instruments address liquidity through different channels.

VRR

Provides rupee liquidity directly to banks.

OMO purchases

RBI buys government securities:

RBI buys G-Secs

→ banking-system reserves increase

→ liquidity improves

→ bond yields can receive downward pressure.

USD/INR buy/sell swap

RBI buys dollars from banks in the near leg and sells them back in the future.

The near-leg transaction releases rupee liquidity while temporarily absorbing dollars.

The important distinction

This is liquidity management, not necessarily a change in the monetary-policy stance.

The repo rate remained 5.25%.

Therefore:

Policy rate unchanged does not mean monetary conditions cannot be actively managed.

2. FIRST 90-DAY VRR MARKS A SIGNIFICANT OPERATIONAL DEVELOPMENT

The January package included a 90-day VRR of ₹25,000 crore, longer than the previous VRR tenors used by RBI. PolicyIndex

Why longer-term VRR matters

A short-tenor operation solves a short-term liquidity mismatch.

A 90-day operation provides banks greater certainty of funding.

The distinction is:

Short-term liquidity management → overnight/short tenor

versus

More durable liquidity support → longer tenor operations

Senior policy implication

RBI was not merely injecting money. It was calibrating:

quantum
maturity
instrument
market pricing

This illustrates the increasing sophistication of liquidity management.

3. $10 BILLION USD/INR SWAP

RBI conducted the $10 billion three-year USD/INR buy/sell swap on 4 February.

Demand was strong:

Notified amount: $10 billion
Bids received: $25.03 billion
Bid-to-cover: approximately 2.5 times
Weighted-average premium: 751.66 paise. Business Standard

Why banks participated

The transaction offered banks an opportunity to obtain rupee liquidity against dollars without permanently disposing of their foreign-currency position.

Important conceptual point

An FX swap can simultaneously affect:

banking-system liquidity
forward-premium dynamics
banks' foreign-currency positions
RBI's balance sheet
money-market conditions.

4. ECONOMIC SURVEY 2025-26: INDIA'S GROWTH ENGINE REMAINS STRONG

Date: 29 January 2026

The Economic Survey estimated:

FY26 real GDP growth: 7.4%
FY26 GVA growth: 7.3%
Potential growth: around 7%
FY27 GDP projection: 6.8%-7.2%
GNPA ratio: 2.2% in September 2025
Services exports: $387.6 billion in FY25
Remittances: $135.4 billion in FY25
PMJDY accounts: 55.02 crore as of March 2025. Press Information Bureau

What matters beyond the headline GDP number?

The Survey's narrative was that India's growth was increasingly supported by:

Consumption + Investment + Services + Manufacturing

rather than being driven by only one component.

This matters for financial stability because a broader growth base generally creates a more diversified credit-demand environment.

5. NEW GDP SERIES WITH BASE YEAR 2022-23

This became one of the most important statistical developments of the quarter.

On 27 February, MoSPI introduced a new national-accounts series with 2022-23 as the base year, replacing 2011-12. Press Information Bureau

The revised methodology incorporates newer data sources and reflects structural changes in the Indian economy.

Why base-year revision matters

GDP is not simply a number.

It is an estimate based on:

coverage
classifications
data sources
weights
methodology
deflators.

As the economy changes, the statistical system must change with it.

Key analytical lesson

A change in GDP methodology can change the measured growth rate without the underlying economic activity changing proportionately.

6. CPI INFLATION FALLS TO HISTORICALLY LOW LEVELS

Using the new CPI series with base 2024=100:

Month	CPI	Food inflation
January	2.74%	2.13%
February	3.21%	3.47%
March	3.40%	3.87%

Interpretation

Inflation was well below the 4% target in January and February, although it began moving upward.

The trajectory:

2.74 → 3.21 → 3.40

is important.

It suggests that the extreme disinflationary conditions of late 2025 were unlikely to continue indefinitely.

7. RBI'S FEBRUARY POLICY: REPO REMAINS 5.25%

4-6 February 2026

The MPC unanimously kept:

Repo: 5.25%
SDF: 5.00%
MSF: 5.50%
Bank Rate: 5.50%
Stance: Neutral Track RBI

RBI estimated FY26 growth at 7.4% and projected FY26 CPI inflation at 2.1%. It projected Q1 and Q2 FY27 inflation at approximately 4.0% and 4.2%. Scribd

The policy logic

With:

Growth strong

Inflation low

External uncertainty elevated

RBI had little reason to aggressively alter the policy rate.

The more important question became:

How long can unusually low inflation persist, and what happens when base effects fade?

8. UNION BUDGET 2026-27: HIGH-LEVEL COMMITTEE ON BANKING FOR VIKSIT BHARAT

Date: 1 February 2026

The Budget proposed a High-Level Committee on Banking for Viksit Bharat to align the financial sector with India's next phase of growth.

Other important financial-sector proposals included:

restructuring Power Finance Corporation (PFC) and REC Ltd. (formerly Rural Electrification Corporation)
market-making framework for corporate bond indices
encouraging large municipal bond issuance
permitting non-resident individuals to invest in listed Indian companies through the portfolio investment route. Press Information Bureau

Why this matters?

The policy question is moving from:

"How do we expand banking?"

to:

"What financial architecture does a $4-5 trillion-plus economy need?"

That includes:

bank capital
bond markets
infrastructure finance
risk transfer
long-term savings
institutional investors
municipal finance
development finance.

9. INDIA-EU FTA CONCLUDED

Date: 27 January 2026

India and the European Union announced conclusion of their Free Trade Agreement after years of negotiations. Press Information Bureau

Financial-sector relevance

An FTA affects more than merchandise trade.

Potential channels include:

Trade

→ exports

→ corporate revenues

→ investment

→ employment

→ foreign-exchange earnings

→ capital flows

→ current account

→ financial markets.

Banking relevance

Banks could see increased demand for:

trade finance
foreign-exchange hedging
working capital
supply-chain finance
investment banking
cross-border payments.

10. NEW FEMA FRAMEWORK FOR EXPORTS AND IMPORTS

RBI issued the Foreign Exchange Management (Export and Import of Goods and Services) Regulations, 2026 in January, replacing the 2015 regulations. The new framework is scheduled to come into force on 1 October 2026. TaxGuru

The objective is to simplify the framework and improve ease of doing business, particularly for exporters and importers.

Why this is important

FEMA regulation is increasingly moving towards:

simplification + delegated decision-making + technology-enabled compliance

rather than excessive transaction-level centralisation.

JANUARY: 10 THINGS TO REMEMBER

Repo remained 5.25%.
RBI used multiple liquidity instruments.
₹25,000 crore 90-day VRR was introduced.
$10 billion three-year FX swap was conducted.
Economic Survey projected strong FY26 growth.
Budget proposed the Banking for Viksit Bharat committee.
India-EU FTA was concluded.
New GDP methodology was being prepared.
Inflation remained exceptionally low.
FEMA export-import regulations were comprehensively rewritten.

PART II

FEBRUARY 2026

11. RBI'S REGULATORY AGENDA EXPANDS SIGNIFICANTLY

The February policy statement was much more than a rate announcement.

RBI announced a broad regulatory agenda covering:

financial-product advertising and sales
recovery agents
digital-transaction customer liability
REIT lending
UCB lending norms
NBFC regulation
digital-payment safeguards
KCC
Lead Bank Scheme
MSME lending
corporate-bond derivatives
VRR for FPIs
FEMA reforms
Mission SAKSHAM for UCBs. Scribd

Key lesson

The RBI's role increasingly involves micro-architecture of the financial system, not just the repo rate.

12. RBI PROPOSES BANK LENDING TO REITs

Previously, commercial banks could not lend to REITs.

RBI proposed allowing such lending subject to safeguards.

Proposed conditions included:

REIT must be listed and SEBI-regulated
minimum three years of operations
positive net distributable cash flows in the preceding two years
no material adverse regulatory action
underlying SPVs not facing financial difficulty.

Aggregate bank exposure to a REIT and underlying SPVs would be capped at 49% of asset value, while an individual bank's overall REIT exposure would be capped at 10% of eligible capital. PRS Legislative Research

Why this matters?

It represents a gradual shift from:

Bank-only real-estate financing

towards:

Capital-market-based pooled financing.

REITs allow completed income-generating real estate to be financed through institutional and retail investors.

Bank lending can complement this ecosystem, provided leverage remains controlled.

13. BANKS GET GREATER FLEXIBILITY IN CAPITAL-MARKET EXPOSURE

RBI amended capital-market exposure rules.

The framework:

permits acquisition financing for Indian non-financial companies in certain circumstances
raises limits on lending against shares and REIT/InvIT units
removes the regulatory ceiling on lending against listed debt securities
adopts a more principle-based approach to lending to capital-market intermediaries.

The changes were scheduled to take effect from 1 April 2026. PRS Legislative Research

Policy trade-off

More bank financing

→ deeper capital markets

but

More bank-market interconnectedness

→ potentially greater contagion during market stress.

Therefore:

Market development and systemic-risk management have to move together.

14. RBI MOVES TOWARDS HARMONISED LOAN-RECOVERY CONDUCT

RBI proposed a comprehensive framework covering regulated entities and recovery agents.

It focuses on:

fair treatment
employee conduct
recovery-agent conduct
due diligence
training
code of conduct
borrower protection. PolicyIndex

Why this is a regulatory issue

Loan recovery is not merely an operational matter.

Poor recovery practices can create:

reputational risk
conduct risk
legal risk
consumer-protection problems
systemic trust issues.

This is a good example of the transition from:

prudential regulation

prudential + conduct regulation.

15. DIGITAL FRAUD BECOMES A CORE CUSTOMER-PROTECTION ISSUE

RBI proposed revising its 2017 framework on customer liability for unauthorised electronic transactions.

The objective was to:

broaden coverage to more types of fraudulent electronic transactions
reduce complaint-processing time
create compensation for certain small-value frauds. Track RBI

Why this matters?

The nature of fraud has changed.

Earlier:

Unauthorised transaction

was relatively straightforward.

Today:

Customer is socially engineered into authorising the transaction.

This creates a difficult question:

If the customer technically authorised the transaction but was manipulated, who should bear the loss?

That is a major future banking-regulation issue.

16. FINANCIAL LITERACY WEEK 2026: KYC AS THE FIRST LINE OF DEFENCE

RBI's Financial Literacy Week 2026 focused on:

"KYC – Your First Step to Safe Banking"

The campaign emphasised:

KYC
re-KYC
CKYCR
fraud prevention
safe banking
responsible use of accounts. Scribd

Deeper significance

KYC is no longer merely a compliance formality.

It supports:

Identity

→ account integrity

→ transaction monitoring

→ AML/CFT

→ fraud prevention

→ financial inclusion

17. COOPERATIVE BANKING: MISSION SAKSHAM

RBI announced Mission SAKSHAM to strengthen capabilities and skills in the Urban Cooperative Banking sector. Scribd

Why capacity building matters

Regulation is effective only if regulated entities have:

trained staff
adequate systems
governance capability
risk-management expertise
technology
internal controls.

This is especially important for smaller institutions.

18. MSME CREDIT: COLLATERAL-FREE LIMIT RAISED

RBI announced that the collateral-free loan limit for Micro and Small Enterprises would rise from ₹10 lakh to ₹20 lakh, effective 1 April 2026. Scribd

Potential benefit

Lower collateral requirement

→ broader formal credit access

→ improved working capital

→ reduced dependence on informal finance.

Supervisory concern

Collateral-free lending shifts emphasis from:

security-based lending

cash-flow and credit-assessment-based lending.

Therefore, underwriting quality becomes even more important.

19. FEBRUARY BANK CREDIT REMAINS STRONG

Bank credit growth was approximately:

14.6% at end-January
around 13.6% by mid-February.

Deposit growth was approximately:

12.5% at end-January
11.2% by mid-February.

The credit-deposit ratio reached about 82.47% in mid-February. The Financial Express

Interpretation

Credit was expanding faster than deposits.

That is not automatically a problem.

But sustained divergence can create:

funding pressure
higher deposit competition
CD issuance
market borrowing
liquidity-management challenges.

20. FEBRUARY GDP DATA SHOW STRUCTURAL STATISTICAL REVISION

The new GDP series showed Q3 FY26 growth at approximately 7.8%, while FY26 growth was estimated around 7.6% under the revised 2022-23 base. India Today

Why this matters?

The revision strengthened the view that India's growth momentum was stronger than previously estimated.

But it also means analysts must distinguish:

change in economic activity

from

change caused by statistical methodology.

FEBRUARY: 10 THINGS TO REMEMBER

Repo remained 5.25%.
RBI maintained a neutral stance.
FY26 inflation projection was 2.1%.
New GDP series used 2022-23 as base year.
RBI proposed bank lending to REITs.
Capital-market exposure rules were liberalised.
Recovery-agent conduct moved towards a harmonised framework.
Digital-fraud customer liability became a major regulatory issue.
Collateral-free MSE lending limit rose to ₹20 lakh from April.
Mission SAKSHAM targeted UCB capability building.

PART III

MARCH 2026

21. MARCH MARKS THE START OF THE NEW GDP DATA ERA

The new GDP series with 2022-23 base year became an important analytical reference point.

The new framework is designed to better capture the current structure of the Indian economy through updated data sources and methodology. Press Information Bureau

Why RBI and financial-sector analysts care

Monetary policy depends heavily on estimates of:

output
potential growth
output gap
productivity
sectoral activity.

Therefore:

Better national accounts improve the information set available for monetary policy.

22. MARCH CPI RISES TO 3.40%

March CPI:

3.40%

Food inflation:

3.87%

compared with February CPI of 3.21%. Press Information Bureau

Quarter trend

January 2.74%

→ February 3.21%

→ March 3.40%

This is still below the 4% target but represents a clear upward movement.

Important policy implication

The question changes from:

"How much can RBI ease?"

to:

"How persistent is the disinflationary process?"

23. WPI RISES TO 3.88%

March WPI inflation was 3.88%, up from:

January: 1.81%
February: 2.13%.

Primary articles inflation reached 6.36%, while manufactured products inflation was 3.39%. Press Information Bureau

Why this matters?

The WPI acceleration preceded the much larger wholesale-price increase seen later in the year.

It was therefore an early indicator of emerging input-price pressure.

24. BANK CREDIT ACCELERATES TO ABOUT 16.1%

March bank-credit growth rose to approximately 16.1%, a 21-month high according to RBI data. Non-food credit growth reached approximately 15.9%. P S Jajodia & Associates

Sectoral growth included:

agriculture and allied: 15.7%
services: around 19%
personal loans: around 16.2%. P S Jajodia & Associates

Why this matters?

The credit cycle was clearly strengthening.

That is positive for growth but creates three supervisory questions:

Is credit going into productive activity?
Are underwriting standards keeping pace?
Are some retail/sectoral segments becoming overheated?

25. RBI UPDATES CUSTOMER LIABILITY FRAMEWORK

RBI issued draft amendments on 6 March 2026 to its digital-transaction customer-liability framework. Simpliance

The framework sought to broaden coverage beyond conventional unauthorised transactions to more forms of fraud.

The underlying regulatory philosophy

Digital banking requires a shift from:

"Was the transaction authorised?"

to:

"What was the nature of the fraud, who controlled the authentication process, what did the bank do to prevent it, and what responsibility should each party bear?"

This is a much more sophisticated consumer-protection framework.

26. RBI REVISES FOREIGN-EXCHANGE RISK FRAMEWORK

RBI's revised Net Open Position framework was subsequently finalised in June, building on the January consultation.

The changes included:

removal of separate offshore/onshore NOP calculation where applicable
inclusion of accumulated overseas-operation surplus
forex-risk capital charge based on actual NOP
changes to the shorthand method
separate treatment of gold
exemption for certain structural forex positions.

The revised directions take effect from 1 April 2027. Complied AI

Why this matters?

The objective is greater alignment with Basel standards and more consistent treatment of forex risk across regulated entities.

27. CRED RECEIVES PAYMENT-AGGREGATOR AUTHORISATION

RBI authorised CRED, operated by Dreamplug Technologies, to operate as a Payment Aggregator during March 2026. Scribd

Why payment-aggregator regulation matters

A PA sits between:

merchant

and

customer/payment system

and therefore handles important responsibilities around:

onboarding
settlement
KYC
merchant risk
fraud
customer funds
grievance redressal.

This demonstrates the continued formalisation of fintech companies into the regulated financial architecture.

28. PAYMENT-AGGREGATOR AUTHORISATION EXPANDS

In February, In-Solutions Global received authorisation covering:

Online Payments
Physical/Offline Payments
Cross-Border Payments. Scribd

Larger trend

Fintech regulation is gradually shifting from:

entity-based innovation

activity-based regulation.

The same payment activity should increasingly be subject to comparable risk-management expectations regardless of the technology company behind it.

29. DIGITAL PAYMENTS AWARENESS CAMPAIGN

RBI launched a pilot Awareness Program on Digital Payments during Digital Payments Awareness Week in March.

It also launched the campaign:

"Thoda Dhyan Se"

to encourage safer digital transactions. Scribd

Why this is important

Digital financial inclusion creates a paradox:

The more people use digital finance, the more important digital financial literacy becomes.

Thus:

Access without literacy

can create

fraud vulnerability.

30. UPI REACHES A NEW MONTHLY RECORD

March 2026:

22.64 billion transactions
₹29.53 lakh crore
approximately 705 live banks.

February:

20.39 billion
₹26.84 lakh crore.

January:

21.70 billion
₹28.33 lakh crore. Press Information Bureau

FY26 significance

UPI's FY26 annual volume reached about 24,161.69 crore transactions, with value around ₹314 lakh crore. UPI accounted for roughly 85% of India's digital payments in FY26. Press Information Bureau

The bigger question

The challenge is no longer merely adoption.

It is:

Can India's payment infrastructure maintain reliability, cybersecurity, consumer protection and financial sustainability at extraordinary scale?

31. MARCH EXTERNAL SECTOR: CURRENT ACCOUNT PRESSURE BUT SERVICES PROVIDE BUFFER

For Q3 FY26:

CAD: $13.2 billion
CAD/GDP: 1.3%
April-December CAD: $30.1 billion
Services receipts: $57.5 billion
Remittances: $36.9 billion. Scribd

Interpretation

India's merchandise trade deficit remains large.

But:

Services exports

remittances

capital flows

help finance the external imbalance.

This is a crucial structural feature of India's balance of payments.

32. INDIA-US TRADE DEVELOPMENT

On 2 February, the US announced an agreement to reduce tariffs on Indian goods from 50% to 18%, alongside commitments concerning trade barriers and Russian oil purchases. The announcement lacked some implementation details and therefore required careful distinction between an announced political agreement and fully operational trade arrangements. Reuters

Why this matters for RBI?

Trade policy can affect:

exports
current account
corporate earnings
FDI
capital flows
rupee
inflation
investment.

This is therefore a financial-sector issue, not merely a commerce issue.

MARCH: 10 THINGS TO REMEMBER

New GDP series became the basis for analysis.
March CPI rose to 3.40%.
March WPI rose to 3.88%.
Bank-credit growth reached about 16.1%.
Digital-fraud protection became more comprehensive.
RBI continued moving towards Basel-aligned FX-risk management.
Fintechs continued moving into formal payment regulation.
UPI reached 22.64 billion transactions.
CAD remained manageable because of services/remittance buffers.
External trade policy remained a major macro-financial variable.

Faculty Desk

Wednesday, 7 October 2026

ECONOMIC & FINANCIAL INSIGHTS — JANUARY–MARCH 2026

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