Banking News for March 2026
Current account deficit, not banking flaw, drives high cost of capital
India’s elevated cost of capital stems primarily from macroeconomic imbalances rather than inefficiencies within the financial system, according to the Economic Survey. The report argues that borrowing costs remain high because domestic savings are insufficient to fund investment needs, forcing reliance on foreign capital and embedding a risk premium into interest rates and equity returns.
Persistent current account deficits raise sovereign and market risk perceptions, which are reflected in domestic financing costs. The Survey notes that improving the current account balance is nearly twice as effective in lowering long-term interest rates as financial deepening measured by private credit-to-GDP ratios. Weak fiscal discipline at the state level, particularly revenue deficits and unconditional transfers, further elevates consolidated sovereign borrowing costs.
High capital costs also influence industrial behaviour, especially in capital-intensive upstream sectors. Firms tend to seek policy protection rather than pursue productivity gains when financing becomes expensive. According to the Survey, the result is a structural cost of capital that functions as a tax on growth, affecting investment decisions and long-term competitiveness across the economy.
Bank of India posts 7.5% rise in Q3 net profit to Rs. 2,705 crore
State-owned Bank of India reported a 7.47 per cent year-on-year rise in net profit to Rs. 2,705 crore for the third quarter of FY26, supported by higher non-interest income. On a sequential basis, profit rose by nearly 6 per cent.
Net interest income grew 6.43 per cent year-on-year to Rs. 6,461 crore, while non-interest income surged 30 per cent to Rs. 2,279 crore. The increase in non-interest income was partly driven by profit from sale and revaluation of investments, which stood at Rs. 473 crore during the quarter.
The bank’s net interest margin improved to 2.57 per cent, up 16 basis points from the previous quarter. Rajneesh Karnatak, Managing Director and Chief Executive Officer, said the bank expects net interest margins to remain around 2.60 per cent despite ongoing pressure on margins across the sector.
The performance reflects stable core income growth alongside improved treasury gains, even as banks continue to navigate interest rate movements and competitive lending conditions.
RBI launches Mission Saksham to strengthen Urban Cooperative Banks
The Reserve Bank of India has announced a series of regulatory measures aimed at strengthening Urban Cooperative Banks (UCBs), including the launch of Mission-SAKSHAM to enhance governance and operational capacity.
Announcing the reforms after the Monetary Policy Committee meeting, Governor Sanjay Malhotra said four targeted measures have been cleared to improve lending flexibility and operational strength of UCBs. The permitted limits for unsecured loans and credit extended to nominal members have been increased to support last-mile credit delivery, while maintaining risk safeguards.
Regulatory conditions related to loan tenor and moratorium requirements for housing loans issued by Tier III and Tier IV UCBs will be removed, enabling smaller cooperative banks to compete more effectively in the home loan segment.
Mission-SAKSHAM (Sahakari Bank Kshamta Nirman) will provide structured training and skill development for over 1.4 lakh participants associated with UCBs, covering managerial, compliance and operational domains. The central bank said the initiative aims to promote sustainable growth and strengthen grassroots credit institutions within the cooperative banking ecosystem.
UCO Bank total business rises 13% to Rs. 5.54 lakh crore in Q3
Public sector lender UCO Bank reported a 13.29 per cent increase in total business to Rs. 5.54 lakh crore for the third quarter of the current financial year, compared with Rs. 4.89 lakh crore in the corresponding period last year.
Total advances rose 16.27 per cent year-on-year to Rs. 2.43 lakh crore. Domestic advances recorded stronger growth of 17.49 per cent, reaching Rs. 2.15 lakh crore from Rs. 1.83 lakh crore a year earlier.
On the deposit side, total deposits grew 10.71 per cent to Rs. 3.10 lakh crore during the quarter ended December. Domestic deposits increased 10.19 per cent to Rs. 2.92 lakh crore.
The growth in advances outpaced deposit mobilisation, reflecting improved credit offtake during the quarter. The Kolkata-headquartered bank’s performance highlights continued expansion in lending activity, particularly in domestic segments, amid broader recovery in credit demand across the banking system.
PSU banks’ combined profit set to cross Rs. 2 lakh crore in FY26
Public sector banks are on track to surpass the Rs. 2 lakh crore combined profit milestone in FY26, Financial Services Secretary M Nagaraju said, citing strong balance sheets, sustained credit growth and improved asset quality.
Speaking in an interview, Nagaraju said the banking system remains resilient, supported by prudent regulatory oversight from the Reserve Bank of India and robust risk management frameworks. He noted that PSBs have already recorded nearly Rs. 1 lakh crore in profits during the first half of the current financial year and are likely to cross Rs. 2 lakh crore by year-end.
PSB profitability has strengthened steadily in recent years. Combined profits rose from Rs. 1.05 lakh crore in FY23 to Rs. 1.41 lakh crore in FY24 and further to Rs. 1.78 lakh crore in FY25. The gains have been driven by better asset quality, stronger capital adequacy, credit expansion and improved return ratios.
Officials said the consistent rise in profitability reflects structural improvements in governance and balance sheet repair undertaken over the past decade.
Indian banks to face no cap on EU branch openings under trade pact
India has permitted European Union banks to open up to 15 branches over four years once the trade agreement comes into force, while Indian banks will face no cap on branch openings within the EU, a commerce ministry official said.
Under the services chapter of the pact, the EU has opened 144 sub-sectors to India, including financial services, while India has opened 102 sub-sectors to accommodate mutual priorities. European banks such as Deutsche Bank, BNP Paribas and Société Générale already have a significant presence in India.
Separately, the Reserve Bank of India and the European Securities and Markets Authority signed a Memorandum of Understanding to facilitate cooperation for recognition of central counterparties. The agreement enables the Clearing Corporation of India Ltd to re-apply for recognition under European regulations, restoring access for EU clearing members to Indian central counterparties.
Officials said the arrangement strengthens cross-border financial integration while maintaining regulatory safeguards on both sides.
Centre approves wage revision for PSU insurers and NABARD employees
The Central Government has approved wage revisions for employees of public sector general insurance companies and the National Bank for Agriculture and Rural Development, along with pension revisions for retirees of the Reserve Bank of India and NABARD.
The wage revision for public sector general insurers will be effective from August 1, 2022, with an overall wage bill increase of 12.41 per cent, including a 14 per cent rise in basic pay and dearness allowance. Around 43,247 employees will benefit. The revision also enhances National Pension System contributions from 10 per cent to 14 per cent for employees who joined after April 2010. Family pension has been revised to a uniform 30 per cent rate, benefiting over 14,600 pensioners.
The total financial outgo for insurers is estimated at Rs. 8,170 crore, including arrears and pension payments. NABARD employees will receive a 20 per cent hike in pay and allowances effective November 1, 2022, benefiting about 3,800 personnel, along with pension revisions aligning certain retirees with ex-RBI standards.
