SDG 8: Decent Work & Economic Growth | SDG 16: Peace, Justice & Strong Institutions
Institutions: Reserve Bank of India (RBI) | Ministry of Finance
The Reserve Bank of India has announced a wide set of new measures covering banking rules, foreign exchange, consumer protection, and financial markets.
Banking Rules:
RBI will soon shift banks to an Expected Credit Loss (ECL) model, which makes them set aside money for loans they think could go bad in the future, not just after defaults happen.
New draft rules will also bring India closer to Basel III global standards on how banks calculate risk.
A new risk-based deposit insurance premium will mean safer banks pay less, while riskier banks pay more.
Banks will get more freedom in investing through group companies, and rules on lending against shares and securities will be eased.
Older rules limiting funding to very large borrowers will be scrapped, and NBFCs lending to infrastructure will move to a more flexible, risk-based approach.
RBI also plans a fresh licensing framework for Urban Co-operative Banks (UCBs) and will consolidate nearly 250 scattered circulars into simplified Master Directions.
Foreign Exchange:
Exporters using accounts in IFSCs (India’s offshore centres) will now get three months (up from one) to bring back their foreign earnings.
Indian merchants in global trade will get six months instead of four to settle forex outlays.
Compliance rules for small exporters and importers will be simplified, reducing paperwork.
A revised ECB framework will expand eligible borrowers/lenders and simplify rules.
Regulations for foreign companies opening offices in India will be updated to reduce red tape.
Consumer Protection:
RBI will modernise the Basic Savings Bank Deposit (BSBD) account so it remains free, simple, and useful in a digital era.
The Internal Ombudsman system in banks will be strengthened with powers to award compensation and more direct access for complainants.
The RBI Integrated Ombudsman Scheme will be expanded to cover State and District Central Co-operative Banks, so rural customers also get quicker grievance redress.
Financial Markets:
Indian banks can now lend in rupees to residents of Bhutan, Nepal, and Sri Lanka, encouraging more trade in INR.
More global currencies will be included in the official daily reference rates published by Financial Benchmarks India Ltd (FBIL).
Surplus balances in Special Rupee Vostro Accounts (SRVAs) can now also be invested in corporate bonds and commercial papers, beyond government securities.
These reforms aim to make India’s financial system stronger, simpler, and more globally aligned-by improving how banks manage risk, making forex rules more flexible, strengthening customer protection, and expanding the use of the rupee in international trade.
What is ECL? → The Expected Credit Loss framework makes banks plan ahead for potential bad loans, rather than waiting for losses to show up. It’s considered safer and more transparent.
What is Basel III? → Basel III is a global banking standard developed by the Basel Committee on Banking Supervision after the 2008 financial crisis. It sets rules on how much capital (safety buffer) banks must hold against their loans and investments, making banks safer and more shock-resistant.
What is Risk-Based Deposit Insurance? → In India, the Deposit Insurance and Credit Guarantee Corporation (DICGC) insures bank deposits up to ₹5 lakh. Today all banks pay the same flat premium for this cover. A risk-based system means safer banks will pay lower premiums, while riskier banks pay higher ones. This encourages stronger risk management and rewards well-run banks, while protecting depositors equally.
What is a UCB? → An Urban Co-operative Bank (UCB) is a small, member-owned bank set up under co-operative principles, mainly serving local communities in towns and cities. They provide savings and loans to individuals and small businesses. RBI regulates them to ensure stability and depositor protection.
What is a Vostro Account? → A Vostro Account is a bank account that one country’s bank holds on behalf of another country’s bank in the local currency. In India, Special Rupee Vostro Accounts (SRVAs) allow foreign banks to hold rupees to settle trade in INR instead of dollars. This promotes the rupee’s use in global trade.
Follow the full release here: RBI Press Release PRID 61334