Regulatory Radar for October 2026
Somnath Joins RBI Board; Anand Mahindra Reappointed
S Somnath, former chairman of the Indian Space Research Organisation (ISRO), has been appointed as a part-time, non-official director on the Central Board of the Reserve Bank of India (RBI) for a period of four years with effect from August 20, 2026.
Somnath retired from ISRO in January 2025 after leading India’s space programme. His appointment brings expertise in science, technology and large-scale institutional management to the RBI board.
The government has also reappointed Anand Gopal Mahindra, chairman of Mahindra Group, as a part-time, non-official director on the RBI Central Board for a four-year term from August 20, 2026, or until further orders.
The RBI Central Board includes the Governor, Deputy Governors, government nominees and part-time non-official directors who provide guidance on matters relating to the functioning of the central bank.
Responsible AI Must Expand Financial Inclusion: RBI Deputy Governor
Reserve Bank of India Deputy Governor Shirish Chandra Murmu has urged banks to use artificial intelligence (AI) not only for improving efficiency but also for expanding financial inclusion and strengthening customer trust.
Speaking at the CNBC-TV18 Banking Transformation Summit, Murmu highlighted that AI can help identify deserving borrowers who remain outside the formal credit system by analysing alternative data sources such as cash flows, GST filings, utility payments, mobile usage and geospatial information.
He noted that Indian banks are well-capitalised, profitable and resilient, but success should not be measured only through balance sheet growth. The focus should be on ensuring that financial services reach underserved sections of society.
Murmu cautioned against excessive dependence on algorithms and stressed that human judgment, governance and accountability must remain central to AI-driven decisions. He also emphasised transparency, stating that customers should know when automated systems are used and should have access to human review where decisions significantly affect them.
RBI Appoints Suman Ray as Executive Director
The Reserve Bank of India has appointed Suman Ray as Executive Director with effect from September 1, 2026.
Before his promotion, Ray was serving as Regional Director for Maharashtra. In his new role, he will oversee the Department of Deposit Insurance & Credit Guarantee Corporation and Premises Department.
Ray has over three decades of experience with the RBI and has worked across several important areas, including currency management, financial inclusion, payment and settlement systems, consumer education and protection, and human resources.
He has also served as Secretary to the Western Area Local Board of the RBI.
The appointment reflects the RBI’s continued strengthening of its senior leadership team as the central bank manages responsibilities across monetary policy, banking regulation, financial inclusion, payment systems and consumer protection.
Government Appoints Three Part-Time Directors to RBI Central Board
The central government has appointed Annie George Mathew, Janmejaya Sinha and Syed Akbaruddin as part-time, non-official directors on the Central Board of the Reserve Bank of India for a four-year term beginning August 24, 2026.
Annie George Mathew is a former special secretary in the Department of Expenditure, Ministry of Finance, and a member of the Sixteenth Finance Commission. She has over 30 years of experience in public finance, financial management, government audit and accounts.
Janmejaya Sinha is an economist and management consultant and serves as chairman of Boston Consulting Group (BCG) India. He has also chaired BCG Asia-Pacific and contributed to several regulatory committees.
Syed Akbaruddin, a former Permanent Representative of India to the United Nations and former Ministry of External Affairs spokesperson, currently serves as dean of the Kautilya School of Public Policy in Hyderabad.
With these appointments, the RBI Central Board continues to bring together expertise from public administration, economics, diplomacy and industry.
Fintech a Valuable Partner in Building Future Financial System: RBI Governor
Reserve Bank of India (RBI) Governor Sanjay Malhotra has described fintech companies as “valuable partners” in building the financial system of the future, highlighting their role in improving financial inclusion, enhancing customer experience and enabling faster credit delivery.
Addressing the Global Fintech Festival 2026 in the presence of Prime Minister Narendra Modi, Malhotra said the RBI’s approach towards fintech has been based on continuous engagement with startups, fintech firms and other stakeholders.
“Over the past decade, fintech has fundamentally reshaped the architecture of Indian finance … The Reserve Bank has consistently viewed fintech as a valuable partner in building the financial system of the future,” Malhotra said.
He highlighted initiatives such as the RBI regulatory sandbox and Reserve Bank Innovation Hub as examples of the regulator’s efforts to encourage innovation while maintaining appropriate safeguards.
Malhotra noted that fintech has transformed banking by taking financial services “from the branch to the hand of every citizen”, supporting wider access to digital financial services.
RBI Proposes 60-Day Debit Hold on Suspected Mule Accounts
The Reserve Bank of India (RBI) has proposed allowing banks to temporarily restrict debit transactions in accounts suspected of being involved in money mule activities linked to cyber fraud.
The proposal is part of the Draft Reserve Bank of India (Know Your Customer) Amendment Directions, 2026, aimed at creating a uniform framework for handling suspected cyber-enabled financial fraud cases.
Under the proposed framework, banks may place a temporary debit hold for up to 60 days when transaction-monitoring systems identify suspicious activity involving suspected mule accounts. Customers will be given an opportunity to explain flagged transactions.
The RBI proposal follows a Supreme Court order dated August 4, 2026, directing the central bank to develop a standard operating procedure for such cases.
Banks may use artificial intelligence and machine learning-based monitoring systems to identify unusual transactions, including those inconsistent with a customer’s normal profile or linked to known fraud networks.
The draft proposes that banks may restrict only the suspected amount rather than freezing the entire account. Account-level restrictions would be used only in exceptional circumstances.
RBI Proposes Freezing Only Disputed Amount in Mule Account Cases
The Reserve Bank of India has proposed a targeted approach for handling suspected money mule transactions, allowing banks to temporarily freeze only the disputed transaction amount instead of restricting the entire account.
The proposed framework applies to unusual transfers of Rs. 1,000 or more that may be linked to cyber fraud. Banks will use AI-based transaction monitoring systems to identify suspicious activities such as sudden transfers, transactions disproportionate to customer profiles or links with known fraud networks.
The draft directions, which amend existing KYC instructions, are proposed to come into effect from April 1, 2027, although banks may implement them earlier.
Customers will receive 20 calendar days to establish the legitimacy of a flagged transaction by providing relevant documents, identity proof or details regarding the source of funds.
The move aims to balance fraud prevention with customer protection by avoiding unnecessary freezing of genuine account balances.
RBI Approves LIC’s Plan to Acquire Up to 9.99% Stake in ICICI Bank
The Reserve Bank of India (RBI) has approved the Life Insurance Corporation of India’s (LIC) application to acquire an aggregate holding of up to 9.99 per cent in ICICI Bank’s paid-up share capital.
According to a regulatory filing by ICICI Bank, the acquisition must be completed within one year from the date of the RBI approval letter issued on September 4, 2026. The approval remains subject to compliance with applicable regulatory and statutory requirements.
LIC currently holds a 4.35 per cent stake in ICICI Bank as of June 2026. Regulations restrict LIC’s holding in banks beyond certain limits as the insurer is the promoter of IDBI Bank.
LIC holds a 49.24 per cent stake in IDBI Bank, while the government holds a 45.48 per cent stake.
The insurer also has holdings in several major banks, including State Bank of India, HDFC Bank, Axis Bank, Punjab National Bank and Bank of Baroda.
RBI Weighs Options to Absorb Rs. 9.70 Lakh Crore Liquidity Surplus
The Reserve Bank of India (RBI) is evaluating measures to absorb excess liquidity in the banking system after surplus liquidity rose to around Rs. 9.70 lakh crore following large foreign currency inflows under the concessional swap window.
Senior RBI officials recently met treasury heads of major banks to understand market participants’ views on the current liquidity situation and possible measures to manage the surplus.
The liquidity increase followed the RBI’s concessional swap facility offered to banks between June 8 and August 31, 2026, allowing them to convert fresh dollar-denominated deposits of three to five years into rupee liquidity.
The central bank is considering multiple options, including a temporary cash reserve ratio (CRR) increase, open market operation (OMO) sales of government securities, issuance of bonds or bills under the Market Stabilisation Scheme (MSS), and a schedule of Variable Rate Reverse Repo (VRRR) auctions.
Radhika Rao, Senior Economist & Executive Director, DBS Bank, said, “Given the swap arrangement, these inflows (due to FCNR(B) deposits, ECB and OFCBs) will add to an already abundant rupee liquidity backdrop, which was at a four year high this month, depressing overnight rates.”
She added that while factors such as tax-related outflows, seasonal currency leakage, current account deficit, portfolio outflows and maturity of forward contracts could offset some liquidity, coordinated measures would still be required.
