Reserve Bank Updates for August 2026
RBI Imposes Rs. 66 Lakh Penalty on Bank of Baroda, GIC Housing Finance
The Reserve Bank of India (RBI) has imposed a total penalty of Rs. 66.7 lakh on Bank of Baroda and GIC Housing Finance for violations related to regulatory compliance.
Bank of Baroda has been fined Rs. 63.6 lakh for non-compliance with provisions of the Fair Practices Code for Lenders and Know Your Customer (KYC) guidelines. The penalty followed a supervisory inspection conducted by the RBI based on the bank’s financial position as of March 31, 2025.
The regulator found that the public sector lender had charged interest above the contracted rate in certain loan accounts. It also failed to upload KYC records of some customers to the Central KYC Records Registry within the prescribed timeline.
Separately, GIC Housing Finance Ltd has been penalised Rs. 3.1 lakh for violations of KYC norms. The inspection of the housing finance company was carried out by the National Housing Bank with reference to its financial position as of March 31, 2025.
RBI Strengthens Customer Protection Framework for Digital Banking Frauds
The Reserve Bank of India has introduced enhanced customer protection measures for fraudulent electronic banking transactions, including compensation provisions for eligible small-value fraud cases and stricter obligations on banks.
Under the revised framework, banks will be required to compensate individual customers, including sole proprietors, for eligible losses arising from fraudulent electronic transactions. Customers suffering losses up to Rs. 50,000 may receive 85% of the net loss amount, subject to a maximum compensation of Rs. 25,000, once during their lifetime and subject to prescribed conditions.
The RBI has placed the responsibility of establishing customer liability on banks. Lenders will have to examine complaints, classify transactions appropriately and provide provisional credit through a “shadow reversal” mechanism after receiving fraud notifications, while investigations are underway.
Banks must also send instant SMS alerts for electronic transactions above Rs. 500 and provide round-the-clock channels for reporting fraudulent activities. Customers using electronic banking services will be required to provide mobile numbers and, where available, email addresses, which banks must verify periodically.
The measures are part of the RBI’s Responsible Business Conduct framework aimed at improving accountability and strengthening consumer confidence in digital banking services.
National Investment Fund Gets Additional Rs. 30,000 Crore Commitment
The Union Cabinet has approved an additional investment commitment of Rs. 30,000 crore towards new funds being established by the National Investment and Infrastructure Fund (NIIF). The move aims to help NIIF attract further private and institutional capital for infrastructure development.
The additional commitment will support the creation of a second infrastructure-focused fund along with new fund strategies and successor bilateral and strategic investment vehicles. The government said the initiative will encourage investments across sectors such as transport, energy, digital infrastructure, urban infrastructure and electric mobility.
NIIF, India’s sovereign-backed investment platform, currently manages capital commitments of around Rs. 40,000 crore across multiple funds and investment strategies. The fund has returned nearly Rs. 12,000 crore to investors through portfolio exits.
Among its existing platforms, NIIF’s infrastructure fund, with a corpus of Rs. 16,000 crore, is one of India’s largest domestic infrastructure funds and has created investment platforms in transportation and digital infrastructure sectors.
Its other funds focus on areas including private markets, growth equity, climate investments, financial services, manufacturing, affordable housing, healthcare and technology ventures. The fresh commitment is expected to strengthen NIIF’s role in mobilising private capital for India’s long-term development priorities.
RBI Approves Mahesh Pai as South Indian Bank CEO
The Reserve Bank of India (RBI) has approved the appointment of Mahesh Muralidhar Pai as Managing Director and Chief Executive Officer of South Indian Bank for a three-year term starting October 1, 2026.
South Indian Bank informed the stock exchanges that the proposal for Pai’s appointment will be placed before the Board of Directors at its meeting scheduled on July 16, 2026. The bank will subsequently seek shareholder approval as required under applicable provisions of the Companies Act, 2013 and SEBI regulations.
Pai, currently Chief General Manager at Canara Bank, heads the lender’s Digital Banking and Innovation division. He has nearly three decades of experience across banking functions, including governance, strategy, treasury, foreign exchange, retail banking, agriculture and MSME lending.
During his career at Canara Bank, Pai has handled several strategic initiatives, including the establishment of the gold loan vertical and leadership of a major banking zone. He has also served in Canara Bank’s New York office and held positions in various financial sector organisations.
The appointment follows the tenure of P R Seshadri, who has been serving as South Indian Bank’s MD and CEO since October 2023.
RBI Appoints Ravi Shankar as Executive Director
The Reserve Bank of India has appointed Ravi Shankar as Executive Director with effect from July 1, 2026. Before his elevation, Shankar was serving as Adviser-In-Charge of the Department of Statistics and Information Management at the central bank.
A career central banker with more than three decades of experience, Shankar has worked across several important areas, including corporate and banking statistics, government securities markets, settlement systems, debt management and economic surveys.
He has also contributed to various committees and working groups related to macroeconomic statistics and policy matters during his tenure at the RBI.
As Executive Director, Shankar will continue to oversee the Department of Statistics and Information Management, which plays a key role in data collection, analysis and statistical support for policy formulation.
RBI Settles Over 150 FEMA Cases Through Compounding Process
The Reserve Bank of India has accelerated the settlement of Foreign Exchange Management Act (FEMA) cases by relying on compounding of offences and closure of proceedings after receiving no-objection certificates from the Enforcement Directorate (ED).
More than 150 FEMA-related cases have been closed by the RBI over the past 15 months following NOCs issued by the ED. Many of these matters had remained pending for several years.
Among the recent cases, Apollo Hospitals and its directors settled alleged FEMA violations involving around Rs. 850 crore. The company paid over Rs. 17 crore, while its directors paid Rs. 18 lakh each, following which the RBI discontinued the proceedings.
Since January, the RBI has compounded 45 cases based on ED approvals. Other entities that settled FEMA matters include Myntra, which paid Rs. 2.8 lakh for delays related to filing an annual performance report, Kakinada Seaports Ltd, which paid Rs. 21.7 lakh, and Genpact India Pvt Ltd, which paid Rs. 4.7 lakh.
Under the compounding mechanism, entities facing FEMA violations can approach the RBI for settlement. Proceedings are closed after obtaining the required approvals and payment of the prescribed penalty.
RBI’s Updated Ombudsman Scheme Introduces New Complaint Resolution Framework
The Reserve Bank of India’s revised Integrated Ombudsman Scheme has come into effect, introducing updated rules for resolving customer complaints against banks, select NBFCs, prepaid payment instrument issuers and credit information companies.
The new framework replaces the 2021 scheme and aims to provide a faster, free and customer-friendly mechanism for addressing service-related complaints. Cases filed under the earlier scheme will continue to be processed according to the previous rules.
The scheme continues with the “One Nation, One Ombudsman” approach, allowing customers to approach the RBI Ombudsman irrespective of their location or the location of the regulated entity. Customers must first raise their complaint with the concerned entity and can approach the Ombudsman if there is no response within 30 days or if the response is unsatisfactory.
The revised framework expands the role of deputy ombudsmen and sets clearer eligibility conditions for complaints. The Ombudsman can facilitate settlements or issue directions for corrective action and compensation where service deficiencies are established.
The scheme allows compensation of up to Rs. 30 lakh for consequential losses and up to Rs. 3 lakh for losses related to time, expenses, harassment and mental distress. Appeals against awards can be filed before the Appellate Authority within prescribed timelines.
The RBI has also issued FAQs to improve understanding of the revised framework among customers and regulated entities.
Government Plans Unified Command Centre to Address AI Risks
The government is considering setting up a unified command centre to coordinate responses to cybersecurity risks emerging from advanced artificial intelligence systems and general-purpose AI models.
The proposed centre is expected to operate under the Ministry of Electronics and Information Technology (MeitY) and will focus on developing coordinated strategies to address emerging AI-related threats.
Officials said the initiative is being discussed in view of the growing capabilities of powerful AI models that can perform multiple tasks without separate training for each function. While these technologies offer significant benefits, they also create new challenges related to cybersecurity, misuse and system vulnerabilities.
The proposed command centre will coordinate with various central and state government departments to strengthen preparedness and ensure timely implementation of cybersecurity measures.
It will also support policy responses, monitor emerging risks and help government agencies adopt appropriate security measures as AI technologies continue to evolve.
The move reflects increasing attention towards AI governance and the need for coordinated risk management frameworks to address technology-driven threats.
