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Education Loans: How the RBI Makes Banks Fund Students — and What Happens When They Can't Repay
In the summer of 2000, the Finance Minister of India sat down with the chief executives of public sector banks and told them something they did not want to hear: commercial banks needed to fund higher education for poor students. Banks were in the business of lending to businesses. They evaluated cr
Government Business Through Banks: Why Your Pension Comes From a Bank, Not the Government
On March 31, 2026 — a Tuesday and a public holiday — every agency bank branch in India dealing with government receipts and payments was ordered to remain open. The March 31, 2026 notification (RBI13288) was routine — the same instruction goes out every year — but it captures something fundamental a
How the RBI Manages India's Currency: From Printing Press to Your Wallet
On a Saturday morning in November 2016, two RBI Deputy Governors — R. Gandhi and S.S. Mundra — sat before reporters and delivered an accounting of the largest currency swap in modern history. Since November 10, banks had issued notes valued at Rs 4.61 lakh crore while taking in demonetised Rs 500 an
What Banks Must Disclose in Their Financial Statements — and Why It Prevents Fraud
In September 2019, the Reserve Bank of India placed Punjab and Maharashtra Co-operative Bank under restrictions after discovering that a single borrower — HDIL — accounted for 73% of the bank's total loan book, a fact hidden from depositors, regulators, and auditors through years of falsified financ
Interest Subvention: How the Government Subsidises Farm Loans and Export Credit Through the RBI
In 2006, the Finance Minister announced that farmers borrowing crop loans up to Rs 3 lakh would pay only 7% interest — roughly half the prevailing market rate. The government would pay the difference to banks. Two decades later, the scheme persists with the same core structure: the government absorb
The Co-Lending Model: How Banks and NBFCs Share the Same Loan
India's largest banks sit on trillions of rupees in low-cost deposits. They can lend at 9-10% and still earn a healthy spread. But their branch networks thin out dramatically beyond district headquarters. A farmer in rural Odisha, a micro-entrepreneur in a Rajasthan village, a self-help group in Jha
Sovereign Gold Bonds and Gold Monetisation: The RBI's Attempt to Reduce Physical Gold Imports
India has historically been one of the world's largest gold consumers. In a November 2017 speech, the RBI noted that an annual average of 700-800 tonnes of gold imports had surged past 1,000 tonnes during the troubled years of 2009-12, with gold constituting 11 per cent of total imports. At current
The Account Aggregator Revolution: How India Is Building Consent-Based Data Sharing
A small business owner walks into a bank to apply for a working capital loan. The loan officer asks for six months of bank statements, the last two years of GST returns, insurance policies, and mutual fund statements. The business owner spends the next week collecting physical documents from four di
What Banks Pay Their CEOs — and Why the RBI Gets to Decide
In 2008, the chief executives of the world's largest banks collected record bonuses while their institutions were collapsing. Lehman Brothers paid out $5.2 billion in bonuses the year before it filed for bankruptcy. The crisis demonstrated a fundamental flaw in banking compensation: executives were
The Digital Rupee Experiment: What CBDC Means for Indian Banking
On November 1, 2022, nine banks settled government securities using tokens that did not exist six months earlier. The Reserve Bank of India had launched the wholesale pilot of its Central Bank Digital Currency — the Digital Rupee, branded e₹-W — and for the first time, interbank settlement happened
Which Indian Banks Are Too Big to Fail? The D-SIB Framework
In December 2013, the Reserve Bank of India published a draft that asked a question no Indian regulator had formally addressed before: which banks in India are so large, so interconnected, and so critical that their failure would bring down the entire financial system? The Draft Framework for Dealin
What Fair Practice Actually Means for Borrowers: The Customer Protection Framework
In October 2007, the Reserve Bank of India issued something that looked unremarkable: a set of guidelines requiring every NBFC to adopt a "Fair Practices Code." The Guidelines on Fair Practices Code for Non-Banking Financial Companies RBI/2007-08/158 prescribed that NBFCs must acknowledge loan appli
When Banks Merge: How the RBI Reconstructs Failing Institutions
On March 5, 2020, the Reserve Bank of India imposed a moratorium on Yes Bank, restricting withdrawals to Rs 50,000 per depositor. Four days later, the RBI announced a reconstruction scheme. Thirteen days after the moratorium began, the scheme was notified and the moratorium was lifted. The Yes Bank
How SARFAESI Gave Banks Power Without Courts: The Collateral Seizure Framework
In April 2004, the Supreme Court of India issued a landmark ruling that changed the trajectory of Indian banking. The Mardia Chemicals Ltd. vs Union of India decision (In the Supreme Court of India - Transfer case( Civ) (since withdrawn) upheld the constitutional validity of the Securitisation and R
Why ATM Rules Keep Changing: Free Transactions, Interchange, and White-Label Machines
In March 2025, the Reserve Bank of India revised the interchange fee structure for ATM transactions for the first time in over a decade. The Review of Interchange Fee and Customer Charges for ATMs and Cash Recycler Machines RBI/2021-22/52 changed not just what banks pay each other when their custome
Core Investment Companies: The NBFCs Behind the NBFCs
In October 2021, the Reserve Bank of India filed applications to initiate corporate insolvency resolution against two companies: Srei Infrastructure Finance Limited and Srei Equipment Finance Limited. The press release (Application for initiation of corporate insolvency) confirmed it was filed under
The Credit Card Rules That Protect You — and the Ones That Don't
In December 2004, the Reserve Bank of India called a meeting of credit card issuing banks in Mumbai. The agenda was blunt: customer complaints about credit cards had become a regulatory concern. Banks were mailing active cards to people who never applied. Interest rates were disclosed monthly — 3.5%
How Foreign Banks Operate in India: Different Rules, Same Regulator
In March 2026, the Reserve Bank of India imposed a monetary penalty of Rs 31.80 lakh on The Hongkong and Shanghai Banking Corporation Limited — HSBC — for non-compliance with directions on inoperative accounts and unclaimed deposits. The penalty order (RBI imposes monetary penalty on The Hongkong an
When Your Bank Sells You Insurance: The Bancassurance Rules Nobody Reads
A retired schoolteacher walks into her bank branch to renew a fixed deposit. She leaves with an insurance policy. She did not ask for it. She may not even realise she bought it. The bank staff told her it was a "guaranteed return product" — better than a fixed deposit — and she trusted the person be
Why Banks Can't Charge Whatever They Want on Loans: The Penal Charges Revolution
In February 2023, the Reserve Bank of India made an announcement that most borrowers missed entirely. Buried in the Statement on Developmental and Regulatory Policies (RBI releases Draft Circular on Fair Lending Practi), the central bank said it would review the guidelines on penal interest charged
What the RBI Looks For When It Licences a New Bank
In April 2014, the Reserve Bank of India announced that it would grant banking licences to exactly two applicants out of twenty-five that had applied. Bandhan Financial Services and IDFC Limited would become banks. The other twenty-three — including industrial conglomerates, real estate firms, and l
How Interest Rate Policy Actually Works: From MPC Vote to Your EMI
On February 7, 2025, six people sat in a room at the Reserve Bank of India's headquarters in Mumbai and voted to reduce the policy repo rate by 25 basis points to 6.25 per cent. The Monetary Policy Statement, 2024-25 — Resolution of the MPC, February 5 to 7, 2025 (PR59692) recorded the decision. The
Why 196 RRBs Became 43: The Amalgamation Story Nobody Talks About
In October 2020, the Reserve Bank of India issued a notification that most people outside banking regulation never noticed. The Inclusion in/exclusion from the Second Schedule — Regional Rural Banks RBI/2020-21/57 simultaneously added newly amalgamated RRBs to the Second Schedule of the RBI Act and
What Happened When India Banned Rs 500 and Rs 1000 Notes: The Regulatory Response
At 8:15 pm on November 8, 2016, the Prime Minister of India appeared on live television and announced that all Rs 500 and Rs 1000 denomination banknotes would cease to be legal tender at midnight — less than four hours away. In a single sentence, 86% of India's currency in circulation became worthle