News related to Reserve Bank of India
RBI simplifies access to dormant accounts and unclaimed deposits
The Reserve Bank of India has issued new guidelines to make it easier for customers and heirs to reactivate dormant accounts and claim unclaimed deposits. Under RBI norms, if a savings or current account remains inactive for 10 years, or if deposits remain unclaimed for the same period, they are classified as “inoperative” and transferred to the Depositor Education and Awareness (DEA) Fund. Earlier, reactivation required a physical visit to the home branch and lengthy paperwork. The new rules now permit KYC updates at any branch and also allow banks to use Video-based Customer Identification Processes (V-CIP). Banks may additionally use authorised Business Correspondents to assist customers in completing KYC formalities. The move aims to streamline the claim process and offer greater flexibility for users seeking access to forgotten funds, especially elderly or rural customers who faced difficulty accessing their accounts under the earlier process.
Banks reduce lending rates following RBI’s 50 bps repo rate cut
In response to the Reserve Bank of India’s recent 50 basis point cut in the repo rate, several public sector banks have announced reductions in their external benchmark-linked lending rates. Punjab National Bank (PNB) has revised its repo-linked lending rate (RLLR) from 8.85% to 8.35%, effective June 9. Bank of Baroda (BoB) similarly cut its RLLR to 8.15% starting June 7, 2025. UCO Bank, Bank of India (BoI), and Karur Vysya Bank also announced downward revisions. However, these banks have kept their marginal cost of funds-based lending rate (MCLR) unchanged. These rate adjustments are in line with RBI’s monetary policy aimed at boosting credit growth and economic activity amid moderating inflation. The reduced RLLRs are expected to lower EMIs for home, auto, and personal loans, offering relief to retail and small business borrowers. This signals a positive move towards an easing interest rate environment.
RBI to end daily VRR auctions amid surplus liquidity
The Reserve Bank of India (RBI) has announced that it will discontinue its daily variable rate repo (VRR) auctions starting June 11, 2025, citing improved liquidity conditions in the banking system. Introduced on January 16, 2025, the VRR auctions served as a short-term funding mechanism for banks during a liquidity crunch. With the return of surplus liquidity, the RBI deemed the daily auctions unnecessary. VRR operations had allowed banks to borrow funds at variable rates against government securities, helping manage short-term mismatches. The withdrawal of these daily operations indicates a shift in monetary conditions, as the central bank calibrates its liquidity management framework. Market participants are now expected to rely more on the RBI’s standard liquidity adjustment facility (LAF) operations. The move signals RBI’s confidence in the stability of systemic liquidity, offering clarity on the central bank’s evolving stance in response to the macroeconomic environment.
RBI’s record Rs 2.7 lakh crore dividend boosts govt finances: SBI
The Reserve Bank of India’s unprecedented dividend of Rs 2.7 lakh crore for FY25 is expected to significantly bolster the Centre’s fiscal position, according to SBI Research. The payout, which exceeds the Rs 2.56 lakh crore budgeted from the RBI and other public institutions for FY26, gives the government a notable fiscal buffer. SBI’s Ecowrap report forecasts a potential reduction in the fiscal deficit by 20 basis points to 4.2% of GDP or, alternatively, additional spending headroom of Rs 70,000 crore. The dividend represents a 27.4% rise from the Rs 2.11 lakh crore transferred in FY24. This surge is attributed to a revision in the RBI’s contingency risk buffer range to 4.5%–7.5% of its balance sheet, down from the previous 5.5%–6.5% band. The larger-than-expected surplus will provide vital financial flexibility for infrastructure and welfare spending, and may also ease pressure on market borrowings.
RBI seeks government nod to permit rupee lending to neighbouring nations
The Reserve Bank of India (RBI) is looking to internationalise the rupee by allowing Indian banks to extend rupee-denominated loans to overseas borrowers for the first time. According to sources, the central bank has approached the finance ministry seeking approval for this proposal. If cleared, the plan would initially target neighbouring countries such as Nepal, Bangladesh, Sri Lanka, and Bhutan. The move is part of a broader push to increase the global usage and acceptance of the Indian currency in cross-border trade. Currently, trade settlements in rupees are limited, but this initiative could pave the way for enhanced rupee-denominated transactions across South Asia. RBI believes that lending in rupees to non-residents could strengthen regional trade relationships, support economic development in neighbouring economies, and position the rupee as a viable international trade currency. The finance ministry is reviewing the proposal, sent last month.
RBI eases KYC norms to help reclaim dormant accounts and deposits
The Reserve Bank of India (RBI) has relaxed Know Your Customer (KYC) rules to simplify access to dormant bank accounts and unclaimed deposits, many untouched for over a decade. A June 12 circular mandates that banks provide at least three advance KYC update reminders—one via letter—before freezing accounts. Banks must now allow KYC updates at any branch, and offer Aadhaar OTP and video KYC options. Business correspondents can assist with KYC, especially in rural areas. Customers with unchanged information or just an address change can now self-declare without additional documents. RBI also directed banks to conduct KYC update camps and focus outreach in areas with high non-compliance. These reforms aim to protect account holders’ access, especially in government-linked and Jan Dhan accounts. Anand Bajaj of PayNearby welcomed the changes, saying business correspondents using e-KYC can extend services to underserved areas effectively.
RBI Cuts Repo Rate by 50 bps, Lowers CRR by 100 bps to Spur Growth
In a bold move to boost economic momentum, the Reserve Bank of India (RBI) reduced the repo rate by 50 basis points to 5.5% and slashed the cash reserve ratio (CRR) by 100 basis points. The decision, taken by a 5:1 majority in the Monetary Policy Committee (MPC), also saw the policy stance shift from “accommodative” to “neutral.” RBI Governor Sanjay Malhotra cited global uncertainties, weak domestic demand, and benign inflation as reasons for frontloading policy easing. With India’s FY25 growth at 6.5%, still below the 8% aspirational target, the move is expected to spur credit growth and investments. The CRR cut is also aimed at injecting liquidity and improving monetary transmission. Stock markets responded positively, with rate-sensitive sectors rallying. Malhotra stressed that price stability alone is insufficient for sustainable growth, calling for policy levers that stimulate private consumption and investment.
RBI Imposes Rs. 29.6 Lakh Fine on Fino Payments Bank for Norm Breach
The Reserve Bank of India (RBI) has levied a penalty of Rs. 29.6 lakh on Fino Payments Bank for breaching regulatory norms related to end-of-day balance limits in customer accounts. The penalty follows a Statutory Inspection for Supervisory Evaluation (ISE 2024), which reviewed the bank’s operations as of March 31, 2024. The RBI found that the bank exceeded the permissible balance ceiling on several occasions, a violation of the guidelines under the Licensing of Payments Banks framework. After issuing a show-cause notice and reviewing the bank’s responses, the RBI concluded that regulatory breaches had occurred. It clarified that the penalty pertains solely to non-compliance and does not impact customer transactions. The action highlights the central bank’s ongoing commitment to ensuring prudential oversight, particularly in the payments bank segment, which serves as a vital channel for financial inclusion under tightly regulated conditions.
RBI Raises Agency Commission Rates for Government Transactions
The Reserve Bank of India (RBI) has revised the agency commission structure for banks handling government-related transactions, effective April 1, 2025. To incentivise efficiency, the commission for electronic revenue receipt and payment transactions has been increased from Rs. 9 to Rs. 12 per transaction. However, for physical transactions, the rate remains unchanged at Rs. 40. Pension payment commissions for Central and State Governments have also been raised to Rs. 80 from Rs. 75 per transaction. For non-pension-related disbursements, the commission has been hiked to 7 paise per Rs. 100 turnover from 6.5 paise. The RBI clarified that agency commission would not apply to transactions that are pre-funded or where separate compensation arrangements exist with the government. The move is likely aimed at improving the efficiency and accuracy of government transactions managed by agency banks, which play a crucial role in delivering public financial services across the country.
