BANKING AWARENESS — KEY UPDATES 2025-2026
Updated Edition: May 2026 | A to Z in Banking | Incorporating Latest RBI Guidelines, Amendments & Supreme Court Judgments 2024-2026
PART I: MONETARY POLICY & KEY RBI RATES (2025-2026)
Current RBI Policy Rates (May 2026)
The Reserve Bank of India has been on an accommodative policy stance since February 2025, cutting rates progressively to support growth amid controlled inflation.
Rate | Current Rate (May 2026) | Previous Rate | Effective From |
Repo Rate (Policy Rate) | 6.00% | 6.25% | April 9, 2025 |
Reverse Repo Rate | 3.35% | 3.35% | May 22, 2020 |
Marginal Standing Facility (MSF) | 6.25% | 6.50% | April 9, 2025 |
Standing Deposit Facility (SDF) | 5.75% | 6.00% | April 9, 2025 |
Bank Rate | 6.25% | 6.50% | April 9, 2025 |
Cash Reserve Ratio (CRR) | 4.00% | 4.50% | December 28, 2024 |
Statutory Liquidity Ratio (SLR) | 18.00% | 18.00% | Unchanged |
KEY: Repo Rate cut by 25 bps in February 2025, April 2025 — cumulative 50 bps cut in 2025. CRR cut by 50 bps in December 2024. RBI shifted to ‘accommodative’ stance.
RBI Governor
Current RBI Governor: Shri SANJAY MALHOTRA (appointed December 11, 2024, for a 3-year term). He succeeded Shri Shaktikanta Das (tenure: December 12, 2018 to December 10, 2024).
Governor | Tenure | Key Contribution |
Dr. D. Subbarao | 2008–2013 | Managed post-GFC monetary policy |
Dr. Raghuram Rajan | 2013–2016 | Inflation targeting framework |
Dr. Urjit Patel | 2016–2018 | Demonetisation, NPA recognition |
Shri Shaktikanta Das | 2018–2024 | COVID relief, repo rate cuts |
Shri Sanjay Malhotra | Dec 2024–Present | Accommodative policy, rate cuts 2025 |
Inflation Targeting Framework
India adopted a flexible inflation targeting (FIT) framework under the RBI Act (amended 2016). The Monetary Policy Committee (MPC) sets policy rates.
- Inflation Target: 4% (with +/- 2% tolerance band, i.e., 2% to 6%)
- MPC: 6 members — 3 RBI officials (Governor as Chairman) + 3 external members
- Policy decisions by majority vote; Governor has casting vote in case of tie
- MPC meets at least 4 times per year (typically 6 times)
- Failure trigger: If CPI inflation remains outside 2-6% for 3 consecutive quarters
Basel III Implementation in India
Capital Component | Minimum Requirement | Regulatory Buffer | Total Requirement |
Common Equity Tier 1 (CET1) | 5.5% | CCB: 2.5% | 8.0% |
Tier 1 Capital | 7.0% | CCB: 2.5% | 9.5% |
Total Capital (CRAR) | 9.0% | CCB: 2.5% | 11.5% |
D-SIB Surcharge | 0.2% to 0.8% | Additional buffer | Up to 12.3% |
LATEST 2026: Basel III Credit Risk (Standardised Approach) Directions 2026 issued April 27, 2026 — effective April 1, 2027 for all SCBs (excluding SFBs, Payment Banks and LABs).
PART II: PRIORITY SECTOR LENDING (PSL) — LATEST 2025-2026
PSL Directions 2025 (effective April 1, 2025)
Category | PSL Target/Sub-Target | Key Change in 2025 |
Agriculture (Overall) | 18% of ANBC | No change |
Small & Marginal Farmers | 8% of ANBC | No change |
Micro Enterprises | 7.5% of ANBC | No change |
Weaker Sections | 12% of ANBC | No change |
UCBs/SFBs Overall Target | 60% of ANBC | REVISED upward |
Housing — Metro (50L+ pop.) | Loan up to ₹50 lakh | REVISED from ₹25 lakh |
Housing — Cities (10L–50L pop.) | Loan up to ₹45 lakh | REVISED from ₹25 lakh |
Housing — Other centres | Loan up to ₹35 lakh | REVISED from ₹25 lakh |
PSL Amendment Directions 2026 (January 19, 2026)
- ANBC computation revised
- Healthcare infrastructure loan limit raised to ₹12 crore (Tier II–VI centres)
- NCDC (National Co-operative Development Corporation) loans now eligible for PSL
- Startups: Loans up to ₹50 crore qualify for PSL
- Solar pumps and Compressed Bio-Gas (CBG) plants — new eligible categories
- External auditor certification required for PSL compliance
PART III: NRI ACCOUNTS & DEPOSITS
Feature | NRE Account | NRO Account | FCNR(B) Account |
Currency | Indian Rupee (INR) | Indian Rupee (INR) | Foreign Currency (USD/EUR/GBP etc.) |
Repatriation | Freely repatriable | Up to USD 1 million/year | Freely repatriable |
Tax on Interest | EXEMPT from Income Tax | Taxable — TDS at 30% | EXEMPT from Income Tax |
Deposit Period | No fixed term for SB | No fixed term for SB | Min 1 year, Max 5 years |
Exchange Risk | Borne by depositor | Borne by depositor | Borne by bank |
KEY UPDATE 2025: LRS limit continues at USD 2,50,000 per financial year. TCS at 20% on LRS remittances above ₹7 lakh (except education loans: 0.5%; medical/education self-funded: 5%).
NOTE: LIBOR has been REPLACED by SOFR (USD), SONIA (GBP), EURIBOR (EUR) from June 30, 2023. FCNR(B) interest rates are now SOFR/SONIA/EURIBOR-linked.
PART IV: EXTERNAL COMMERCIAL BORROWINGS (ECB) — 2026 FRAMEWORK
FEMA ECB Regulations 2026 (effective February 16, 2026)
- New definitions: arm’s length basis, benchmark rate, control (aligned with Companies Act 2013)
- Minimum Average Maturity Period (MAMP): 3 years for most ECBs
- Call/put options cannot be exercised before completion of MAMP
- Strengthened end-use monitoring norms
- Automatic route limit: USD 750 million or equivalent per financial year
Prohibited End-Uses of ECB
- Investment in real estate (except affordable housing)
- Investment in capital markets or equity
- On-lending for speculative activities
- Purchase of land
- Repayment of domestic Rupee loans (with some exceptions)
FEMA Export Realisation Period — KEY 2026 UPDATE
Export realisation period EXTENDED from 9 months to 15 MONTHS (FEMA 23(R)(7)/2025-RB, November 2025; confirmed in FEMA Export-Import Regulations 2026, January 13, 2026).
- For goods stored in overseas warehouses: period linked to date of sale (not date of shipment)
- SEZ units: 12 months from date of export (unchanged)
- IFSC exporters: Can retain export proceeds for up to 3 months (extended from 1 month — October 2025)
PART V: KYC, AML & CUSTOMER SERVICE GUIDELINES (2025-2026)
KYC Master Direction 2025 — Periodic Updation
Customer Risk Category | Periodic Full KYC | Positive Confirmation |
High Risk | Every 2 YEARS | Every 2 years |
Medium Risk | Every 8 YEARS | Every 2 years |
Low Risk | Every 10 YEARS | Every 3 years |
- V-CIP (Video-based Customer Identification Process) — formally recognised for KYC
- BC-led KYC — Business Correspondents can conduct Aadhaar-based e-KYC
- PMLA Amendment 2023: Record keeping period increased to 10 YEARS (from 5 years) — Section 12 PMLA
- Officially Valid Documents (OVDs): Passport, Aadhaar, Voter ID, Driving Licence, NREGA Card, PAN
Small Accounts / BSBD Accounts — Key Features
- No minimum balance requirement
- Free ATM-cum-debit card
- Maximum of 4 free withdrawals per month (including ATM)
- Small Account (simplified KYC): Maximum credit ₹1 lakh/year; balance ₹50,000 at any time; debit ₹10,000/month
- Foreign remittances CAN be credited to Small Accounts within annual credit ceiling
- Holders cannot have another savings account in same bank; existing accounts must be closed within 30 days
RBI Integrated Ombudsman Scheme 2021
- Replaces three earlier schemes — ‘One Nation, One Ombudsman’
- Coverage: All RBI-regulated entities — banks, NBFCs, payment system operators
- Complaint filing: Online at https://cms.rbi.org.in or RBI Toll-Free: 14448
- Award limit: Up to ₹20 lakh (plus ₹1 lakh for loss of time and harassment)
- No fee for filing complaints
Cheque Truncation System (CTS) — Current Status
- CTS is now the ONLY cheque clearing mechanism across India (non-CTS cheques phased out)
- Settlement: T+1 (next working day) for CTS-2010 standard cheques
- Positive Pay System (PPS): Mandatory for cheques of ₹5 lakh and above (from January 1, 2021)
- Cheque validity: 3 months from date (effective April 1, 2012)
- Re-presentation: Within 24 hours (excluding holidays) with SMS/email notification
- Cheque return charges: Payable only where customer is at fault
PART VI: DIGITAL PAYMENTS & PAYMENT SYSTEMS (2025-2026)
System | Type | Settlement | Key Limit |
RTGS | Real-Time Gross Settlement | Immediate (24x7) | Min ₹2 lakh; No upper limit |
NEFT | Electronic Fund Transfer | Half-hourly batches (24x7) | No minimum; No upper limit |
IMPS | Immediate Payment Service | Immediate (24x7) | Up to ₹5 lakh per transaction |
UPI | Unified Payments Interface | Immediate (24x7) | Generally ₹1 lakh; ₹5 lakh for specific categories |
NACH | National Automated Clearing House | Next day/same day | Bulk/recurring payments (replaced ECS) |
CBDC (e-Rupee) | Central Bank Digital Currency | Pilot ongoing | RBI-issued digital currency |
KEY UPDATE: RTGS and NEFT are now 24x7x365. UPI transactions crossed 17 billion/month in 2025-26. RBI introduced UPI One World for foreign visitors. ECS has been fully REPLACED by NACH.
ATM Guidelines (Current)
- Free transactions: 5/month at own bank ATMs; 3/month (metros) / 5/month (non-metros) at other bank ATMs
- Charge beyond free limit: Max ₹21 per financial transaction (from January 1, 2022)
- Cash withdrawal dispute resolution: Within 7 working days (else ₹100/day penalty to customer)
- Cardless cash withdrawal via UPI QR at ATMs — permitted
- Talking ATMs with Braille keypads: At least one-third of new ATMs
PART VII: NPA MANAGEMENT, SARFAESI & IBC (2024-2026)
NPA Classification Norms
Category | Definition | Provisioning |
Standard Asset | Performing — no overdue beyond 90 days | 0.25% to 1% (sector-specific) |
Sub-Standard NPA | NPA for up to 12 months | 15% (secured); 25% (unsecured) |
Doubtful NPA — D1 | Sub-standard for up to 12 months | 25% (secured); 100% (unsecured) |
Doubtful NPA — D2 | Sub-standard for 12–36 months | 40% (secured); 100% (unsecured) |
Doubtful NPA — D3 | Sub-standard for more than 36 months | 100% |
Loss Asset | Loss identified — uncollectible | 100% |
SARFAESI Act — Latest Judgments (2024-2026)
- Celir LLP v. Bafna Motors (2024) 2 SCC 1: Right of redemption under Section 13(8) EXTINGUISHES on date of valid publication of auction notice (NOT on sale deed execution)
- M. Rajendran v. M/s KPK Oils (2025 INSC 1137): Reaffirmed Celir LLP — urged legislative clarification on Rules 8/9
- 2025 INSC 1144: Section 13(8) 2016 Amendment is NOT retrospective — applies from September 1, 2016
- SBI v. Tanya Energy (2025 SCC OnLine SC 1979): OTS is a CONCESSION not a right — courts cannot compel banks to grant OTS
- Chaitanya Mandal v. Auxilo Finserve (2026 INSC 408): SARFAESI debt recovery cannot be indefinitely stalled — school ordered closed
- DRAT 2026 — Gupta Trading Co. v. Bank of India: Failure to give mandatory 30-day notice before auction vitiates the entire auction sale
- DRAT 2026 — PNB v. Birendra Kachhap: Forfeiture of 25% auction deposit on default is valid
IBC Amendment Act 2026 — Key Changes
Passed by Lok Sabha (March 30, 2026) and Rajya Sabha (April 1, 2026) — most significant reform since IBC’s enactment in 2016:
Amendment | Key Change |
14-Day Admission Timeline | NCLT must admit/reject Section 7/9/10 within 14 days — record reasons for delay |
CIIRP (New Track) | Creditor-Initiated Insolvency Resolution — DIP model — 150 days (+45 days extension) |
Section 10 (amended) | Corporate debtor CANNOT nominate IRP — prevents bias/undue influence |
Section 28A (new) | Guarantor assets can be transferred as part of CIRP of principal debtor — CoC approval needed |
Section 30 (amended) | Dissenting FC must receive lower of: liquidation value OR plan entitlement |
Section 21 (amended) | CoC gets supervisory power over liquidator during liquidation proceedings |
Section 64A (new) | Penalty for frivolous proceedings before Adjudicating Authority (NCLT) |
Section 3(31) (clarified) | Security interest EXCLUDES interests created merely by operation of law (resolves tax dues dispute) |
Cross-Border Insolvency | Groundwork for India’s first comprehensive cross-border insolvency framework |
Group Insolvency | Framework for coordinated resolution of group companies |
IBC STATISTICS (FY2023-24): Total CIRPs admitted: 7,058 | Resolved by plan: 978 | Liquidation ordered: 2,531 | Average CIRP duration: 716 days (vs. 330-day limit) | Debt recovered through plans: ₹3.16 lakh crore | Total resolved (direct + pre-admission): over ₹26 lakh crore
PART VIII: BANKING REGULATION ACT — KEY PROVISIONS
Section | Provision |
Section 5(b) | Definition of ‘Banking’ |
Section 6 | Forms of business permitted for banks |
Section 11 | Minimum paid-up capital — ₹10 lakh for bank with branches in more than one state |
Section 12 | Subscribed capital ≥ 50% of authorised; Paid-up ≥ 50% of subscribed |
Section 15 | Dividends only after writing off all capitalised expenses |
Section 17 | Statutory Reserve: Transfer of 20% of net profits before declaring dividend |
Section 22 | Licensing of banks by RBI |
Section 35 | RBI inspection powers over banks |
Section 36AB | RBI power to appoint additional directors to bank boards |
Section 44A | Amalgamation of banking companies with RBI approval |
Domestic Systemically Important Banks (D-SIBs) — 2024-25
D-SIB | Bucket | Additional CET1 Surcharge |
State Bank of India | Bucket 4 (Highest) | 0.80% |
HDFC Bank | Bucket 3 | 0.40% |
ICICI Bank | Bucket 1 | 0.20% |
PART IX: KEY BANKING DEFINITIONS & MSME
Term | Definition / Current Provision |
NPA | Asset where interest/principal overdue for more than 90 days |
SMA | SMA-0: 1–30 days; SMA-1: 31–60 days; SMA-2: 61–90 days (before NPA) |
ANBC | Adjusted Net Bank Credit — used for PSL target calculation |
CRAR Minimum | 9% + 2.5% CCB = 11.5% effective minimum for SCBs |
Wilful Defaulter | Borrower who defaults despite capacity; diverts/siphons funds; or disposes assets |
LIBOR Replacement | SOFR (USD), SONIA (GBP), EURIBOR (EUR) — LIBOR discontinued June 30, 2023 |
MSME Micro (post-2020) | Investment ≤ ₹1 crore AND Turnover ≤ ₹5 crore |
MSME Small (post-2020) | Investment ≤ ₹10 crore AND Turnover ≤ ₹50 crore |
MSME Medium (post-2020) | Investment ≤ ₹50 crore AND Turnover ≤ ₹250 crore |
D-SIB | Domestic Systemically Important Bank — currently SBI (Bucket 4), HDFC Bank (Bucket 3), ICICI Bank (Bucket 1) |