Issue: 1342
· GST Council may exempt banks’
inter-branch fund transfers from 18% tax.
· EPFO begins testing UPI-based
withdrawals; Official launch expected by year-end.
· RBI removes Paytm Payments
Bank from scheduled banks list after licence cancellation.
· Rupee slides to a five-month
low of 96.7/$, yields rise.
· Retail prices of diesel &
petrol will have to be raised at some point: Moody’s Ratings.
· NCLT approves 107 resolution
plans in second quarter, up 78% from last year.
HIGHLIGHTS
OF MONETARY POLICY STATEMENT DT. 07 OCTOBER 2026
The Monetary
Policy Committee (MPC) held its 63rd meeting from October 5 to 7, 2026, under
the chairmanship Governor, Reserve Bank of India. The highlights of the
resolution of MPC are as under;
·
The MPC voted
unanimously to increase repo rate by 25 bps to 5.50 per cent.
·
Consequently,
the SDF rate stands adjusted at 5.25 per cent and the MSF
rate and the Bank Rate at 5.75 per cent.
·
The MPC also
decided to change the stance to calibrated tightening.
OUTLOOK
·
As per National
Statistics Office (NSO) estimates, real GDP growth in Q1:2026-27 was at 7.8 per
cent.
·
Real GDP growth for 2026-27 is projected
at 7.1 per cent, with Q2 at 7.2 per cent; Q3 at 6.9 per cent and Q4 at
6.8 per cent.
·
Real GDP growth
for Q1:2027-28 is projected at 7.1 per cent.
·
CPI inflation
increased to 4.8 per cent in August 2026 from 4.5 per cent in July.
·
CPI inflation is projected to be 5.2 per
cent for 2026-27 with Q2 at 4.9 per cent; Q3 at 6.0 per cent; and Q4
at 5.7 per cent.
ANNOUNCEMENTS
MADE IN STATEMENT OF DEVELOPMENTAL & REGULATORY POLICY DT 07 OCT 2026
The following
two announcements made in the Statement of Developmental and Regulatory
Policies October 7, 2026;
·
Measures to Enhance the Customer
Convenience through the Account Aggregator Framework: It has been
decided to implement interoperability among NBFC-Account Aggregators (NBFC-AA).
This will enable customers to access and share their financial information,
across different Financial Information Providers. Additionally, Depositories
are being facilitated to include information related to bank deposit accounts
in their Consolidated Account Statement (CAS) through the NBFC-AAs. This will
enable demat account holders to view information relating to their demat
account holdings and bank deposit accounts at one place in the CAS. (To be
implemented by 31st Dec 2026).
·
Constitution of a Technical Consultative
Committee for Financial Markets: RBI decided to
constitute a Technical Consultative Committee for Financial Markets, which will
serve as a forum for structured engagement with market participants and
stakeholders by the Reserve Bank on policy and operational matters related to
money, government securities and foreign exchange markets as well as the
respective derivative markets and infrastructure.
India economy can double to
$8 trillion over next decade as reforms lift growth ceiling: KKR: India’s economy can double in size to more than $8
trillion over the next decade as structural reforms, infrastructure investment
and formalisation continue to raise the country’s growth potential, global
investment firm KKR has said. India has already crossed the $4-trillion mark and
remains on track to double again over the next 10 years, KKR said in its
Thoughts From the Road — Europe and Asia report for October 2026. “India
remains one of the clearest examples of how patient, structural reform can pay
off over a decade rather than a quarter,” the report said.
(Moneycontrol)
Liquidity surplus expected
to get drained out within the current financial year: RBI Guv: RBI Governor Sanjay Malhotra
sees the FCNR (B) deposit-related surplus liquidity in the banking system as a
temporary phenomenon, with the surplus expected to get drained out within the
current financial year. The Governor also emphasised that raising the CRR will
be one of the least preferred ways of withdrawing liquidity. He noted that
during August and September, system liquidity increased substantially on
account of the recent measures undertaken to attract capital inflows. As
measured by the net position under the LAF, system liquidity stood at an
average daily surplus of Rs.5.9 lakh crore since the last MPC meeting in August
2026.
(Business Line)
New RBI data reveals a
recast of India's overnight money market numbers: Private sector banks' share in
borrowing through the tri-party repo market fell considerably in the first half
of 2026-27, while govt banks increased their presence in the collateralised
overnight money market, RBI's monetary policy report released on October 7
showed. According to the data, private
lenders accounted for 14% of tri-party repo borrowing during April-September
2026, down from 24% in the preceding six-month period. Public sector banks'
contribution to the collateralised overnight money market increased to 35%
during the first half of the fiscal from 32% in the previous six months.
(Economic Times)
Kotak Securities rebrands
retail arm as Kotak Neo, eyes unified wealth play: Kotak Securities Ltd on
Wednesday rebranded its retail business as Kotak Neo, consolidating its digital
trading platform, research services, and relationship-based wealth management
under a single customer-facing identity. The rebrand, effective October 7,
2026, does not alter the legal entity, existing customer accounts, or regulatory
framework. Kotak Securities Ltd remains the incorporated company; Kotak Neo is
the retail brand through which it will now engage customers.
(Business Line)
NBFC services to banks will
attract 18% GST: The
fitment committee under the Goods and Services Tax (GST) Council has decided
that services provided by non-banking finance companies (NBFCs) to banks will
be taxable at 18% GST, with their value determined in the manner prescribed by
the Reserve Bank of India (RBI), people aware of the development said. The
interest on the underlying loan will remain exempt from GST. The 18% levy will
apply to the taxable service supplied by the NBFC to the bank in the co-lending
arrangement. The committee also decided to align the valuation of the NBFC's
service with the methodology prescribed by the Reserve Bank of India.
(Economic Times)
Govt asks banks to develop
a sector-wide quantum transition along with an AI resilience framework: According to the industry,
major concerns in this segment include 'harvest now, decrypt later' threats,
where cyber adversaries stockpile encrypted banking data for future quantum
decryption. The finance ministry has also asked banks to assess post-quantum
vulnerabilities and initiate mitigation measures, said an official, who did not
wish to be identified. "Each bank can prepare its internal strategy, but
there has to be some common industry parameters," he added.
(Economic Times)
RBI brings new rule for
banks to measure risks from derivatives, other such dealings: RBI has set a Rs 25,000 crore
threshold for banks required to adopt the Standardised Approach for
Counterparty Credit Risk, bringing greater clarity to how lenders must measure
risks arising from derivatives and other transactions. The approach will apply to
commercial banks that either have an international presence or report
derivative outstanding of Rs 25,000 crore or more on a consolidated group-wide
basis as of the reporting date. Banks that do not meet these
criteria will have the option of using either the Current Exposure Method (CEM)
or the Standardised Approach for Counterparty Credit Risk (SA-CCR).
(Economic Times)
S&P projects 12-14%
credit growth this fiscal, warns weak monsoon may hit rural lending: S&P Global forecasts a
12-14% increase in financial sector lending despite potential slowdowns in
rural areas. Concerns about weak monsoon rains may negatively impact rural
incomes and lending. A projected GDP growth of 7% for India in FY27 reflects
steady public investment and improved private sector investments. Economic
activity remains strong, although headwinds like inflation could constrain
momentum.
(Economic Times)
Repo-rate hike won’t derail
festive auto growth; protecting affordability could cost Rs.1,000 crore: The Reserve Bank of India’s 25-basis-point
repo-rate hike, from 5.25 per cent to 5.50 per cent, is unlikely to derail
festive auto growth, but protecting buyers from higher borrowing costs could
cost automakers and lenders nearly Rs.1,000 crore over four years, according to
estimates by auto and BFSI industry experts who spoke to businessline. The
calculation assumes manufacturers and financiers absorb around half the
incremental financing cost across roughly one crore two-wheeler loans, 20 lakh
passenger-vehicle loans and 10 lakh three-wheeler loans. The actual cost will
depend on financing penetration, lender pass-through and the extent to which
manufacturers subsidise interest rates.
(Business Line)
India's rural economy
decoupling from monsoon shocks, says RBI report: India’s rural economy is becoming more
resilient to weak monsoons as a growing share of non-crop activities,
diversification into allied sectors, and rising irrigation coverage reduce the
dependence of rural incomes on the rains, the Reserve Bank of India (RBI) said
on Wednesday. The findings come as India faces the likely impact
of a severely deficient southwest monsoon in 2026. Published in the Monetary
Policy Committee’s (MPC’s) report in a section titled ‘Indian Agriculture
Sector Amid Weather Shocks’, the study provides data and empirical evidence for
a trend that policymakers and researchers have highlighted in recent years.
(Business Standard)
'India-US trade
breakthrough unlikely soon; narrow interim deal possible': India and the US are unlikely to see a
breakthrough in trade negotiations in the near term, as the two sides remain
divided over market access, agriculture, purchases of US goods, and India’s
imports of Russian oil, according to BMI (formerly Business Monitor
International), a FitchSolutions company. However, the agency said they may
eventually conclude only a narrow interim trade deal.
(Business Standard)
SEBI exempts eligible
listed issuers from merchant banker requirement for private debt placements: SEBI on Wednesday relaxed the mandatory
merchant banker appointment requirement for certain listed issuers raising debt
through private placement, in a move aimed at easing fundraising and expanding
retail investor access to high-rated securities.
Under the revised
framework, eligible issuers can privately place debt securities with a face
value of Rs 10,000 without appointing a merchant banker, provided they meet
conditions prescribed by SEBI. The issuer must be registered with or regulated
by a financial sector regulator in India, including SEBI, the RBI, the IRDAI or
the PFRDA. The issuer must also have been listed on a
recognised stock exchange for at least one year. Further, there should be no
pending fines or penalties imposed by SEBI or stock exchanges for
non-compliance with applicable provisions of the SEBI Listing Obligations and
Disclosure Requirements Regulations.
(Moneycontrol)
Govt bond yields near
three-year high after RBI's hawkish policy shift: Government bond yields hardened after the
Reserve Bank of India changed its policy stance to withdrawal of accommodation
— which came as a surprise — while raising the policy repo rate by 25 basis
points (bps) to 5.5 per cent. The yield on the benchmark 10-year government bond
settled at 7.24 per cent, the highest since December 13, 2023, against the previous
close of 7.19 per cent. “Yields are likely to remain around current levels
unless there is some fresh action or commentary from the RBI or elsewhere.
(Business Standard)
Sebi brings risk-o-meter
for debt securities; eases norms for debt-raising: The Securities and Exchange
Board of India (Sebi) on Wednesday introduced a mandatory ‘Credit Risk-o-Meter’
for debt securities to help investors assess credit risk through colour-coded
visualisation. The framework will apply to listed and proposed issuances of
non-convertible securities, commercial papers, securitised debt instruments,
security receipts and structured debt. The meter will map credit ratings from
AAA to D across six risk levels.
(Business Standard)
DIGITAL CREDIT LINE
§ A
digital credit line is a flexible loan facility provided by financial
institutions that allows consumers or businesses to access funds as needed.
Unlike traditional loans, where you receive a lump sum upfront, a digital
credit line enables users to borrow varying amounts within a pre-approved
limit. This option offers more flexibility and control over finances,
especially for those who prefer borrowing in smaller amounts without the
commitment of a full loan.
§ With
the entire process managed digitally, from application to fund withdrawal, users
can access funds quickly and easily through an app or online platform.
§ Digital
credit lines are particularly useful for businesses managing fluctuating cash
flows or for individuals facing unexpected expenses.
RBI KEY RATES
Repo
Rate: 5.25%
SDF:
5.00%
MSF
/Bank Rate: 5.50%
CRR:
3.00%
SLR:
18.00%
FOREX RATES (RBI REF. RATE)
INR
/ 1 USD : 96.6230
INR
/ 1 GBP : 127.9772
INR
/ 1 EUR : 108.4503
INR
/100 JPY: 61.0100
EQUITY INDEX
Sensex:
72638.70 (-429.11)
NIFTY:
22603.05 (-173.05)
Bnk NIFTY: 55055.55 (-72.85)
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