In a significant move to boost economic activity, the Reserve Bank of India (RBI) has reduced the key repo rate by 50 basis points to 5.5%, following a unanimous decision at the Monetary Policy Committee (MPC) meeting held from June 4–6, chaired by RBI Governor Sanjay Malhotra. This marks the second consecutive rate cut in two months, aimed at making borrowing cheaper as inflation continues to ease.

IndusInd Bank faced a major setback as its shares plummeted 27.17% on Tuesday, following revelations of a ?2,100 crore discrepancy in its derivatives portfolio. Despite management's assurances of strong reserves and capital adequacy, investor confidence remained shaken.

CEO & MD Sumant Kathpalia acknowledged that the issue was identified around September-October 2023, with a preliminary update shared with the RBI last week. An external agency has been appointed to validate internal findings, with a final report expected by early April. The discrepancy, accumulated over 5-7 years before April 1, 2024, had gone unnoticed despite multiple audits, including those by the RBI.

Following the RBI's September 2023 directive to halt internal derivative trades from April 1, 2024, the bank initiated a review of its internal trade book, which led to the discovery of discrepancies. "We started observing gaps in October and engaged an external agency. By March-end or early April, we expect clarity," Kathpalia stated.

The bank disclosed that the accounting lapse could impact 2.35% of its net worth as of December 2024. However, Kathpalia reassured stakeholders, asserting that IndusInd Bank’s profitability remains robust enough to absorb the one-time impact.

Investor concerns were further fueled by the RBI’s decision to extend Kathpalia’s tenure as CEO by just one year, instead of the three years proposed by the board. Addressing this, he remarked, “The RBI was aware of the issue, and it likely influenced their decision. This is a leadership test for the bank, but I believe our growth agenda will stay on track.”

On Tuesday, the bank’s stock hit a one-year low of ?649, a steep decline from ?900 the previous day, reflecting deep market unease over the unfolding situation.

To address potential liquidity stress, the Reserve Bank of India (RBI) announced a 50-basis-point reduction in the Cash Reserve Ratio (CRR) on Friday, bringing it down to 4%. The move is set to release ?1.16 lakh crore into the banking system, offering relief amid tightening liquidity conditions.

RBI Governor Shaktikanta Das stated that while system liquidity remains in surplus, factors such as tax outflows, increased currency circulation, and volatile capital flows could strain liquidity in the months ahead. To counter this, the CRR cut will be implemented in two phases of 25 basis points each, effective from December 14 and December 28, 2024. This adjustment restores the CRR to pre-tightening levels seen before April 2022.

Das emphasized that this measure aligns with the RBI's neutral policy stance, aimed at maintaining orderly money market conditions and ensuring adequate liquidity for the economy's productive needs. The decision also underscores the RBI's proactive approach to liquidity management as it navigates evolving economic conditions.

Despite the CRR reduction, the Monetary Policy Committee (MPC) has opted to maintain the repo rate at 6.5% for the 11th consecutive time. The standing deposit facility (SDF) rate and marginal standing facility (MSF) rate remain at 6.25% and 6.75%, respectively, with the Bank Rate also unchanged.

The MPC reiterated its commitment to a neutral monetary policy stance, focused on achieving a durable alignment of inflation with the target while supporting growth. Das highlighted that system liquidity benefited from higher government spending during October and November, even amid increased currency circulation during the festive season and capital outflows.

The RBI reaffirmed its commitment to nimble liquidity management to ensure market stability and sustained economic growth, signaling readiness to adapt as necessary to changing economic dynamics.

Reserve Bank of India (RBI) Governor Shaktikanta Das voiced strong concerns over cryptocurrencies, warning of their potential to destabilize financial and monetary systems. Speaking at the Peterson Institute for International Economics, Das argued that cryptocurrencies pose severe risks, threatening central banks’ ability to control money supply and manage inflation.

“I believe cryptocurrencies shouldn’t dominate our financial system due to the immense risks to financial and monetary stability,” Das said. He elaborated on how widespread use of private digital currencies could undermine central banks' roles in maintaining economic stability, explaining that if the RBI lost control of money supply, it would severely impact tools for controlling inflation and liquidity in crises. He stressed the need for an international consensus on cryptocurrency regulation due to their global, cross-border transactions.

Das also highlighted India’s proactive stance on this issue, noting that under its G20 presidency, India advocated for developing an international approach to address cryptocurrency risks. “India was among the first to raise concerns about cryptocurrencies,” he said, mentioning that there’s been some progress in building this global consensus but that more work remains.

Addressing the fundamental nature of cryptocurrencies, Das emphasized that private digital currencies share qualities with government-issued currency, yet they are designed to bypass regulated financial systems. He questioned whether authorities are comfortable allowing private entities to operate currencies with no government backing. “Issuing currency is a sovereign function,” he said, adding that a private currency system could destabilize the established monetary system.

Das underscored that a parallel system dominated by cryptocurrencies could fragment economic control, leading to systemic risks. In India’s case, he said, the RBI has been vocal about these dangers, calling for careful and cautious regulatory frameworks. While acknowledging that individual countries may make their own choices on regulation, he advised a strong, cautious approach globally to protect financial and economic stability.

Reserve Bank of India (RBI) Governor Shaktikanta Das emphasized the central bank's ongoing efforts to strengthen the country's financial sector by leveraging digital public infrastructure (DPI) and emerging technologies. Speaking at the RBI@90 Global Conference on 'Digital Public Infrastructure and Emerging Technologies,' Das highlighted key initiatives, including the Unified Lending Interface (ULI) and Central Bank Digital Currency (CBDC).

Das noted that India’s Unified Payments Interface (UPI) has become a robust, cost-effective real-time payment system, attracting global interest. He suggested that UPI could evolve into a more efficient alternative for cross-border remittances, starting with small-value personal transactions. This comes at a time when remittances to India are projected to grow steadily, reaching USD 129 billion by 2025.

The Governor expressed optimism about the RBI's future, particularly as it approaches its 100th anniversary. He stressed that the central bank is continuously working on policies and systems to make the financial sector more resilient, nimble, and customer-focused. He also pointed out that DPI has been instrumental in enabling India to achieve rapid financial inclusion, a process that would have otherwise taken decades.

Das discussed the importance of AI in the financial sector, highlighting its potential to deliver personalized services and streamline operations. However, he also cautioned against the challenges, particularly concerning data privacy, ethical governance, and the risk of misinformation. He emphasized the need for careful adoption of AI, especially in critical areas like loan sanctioning, to ensure fairness and prevent bias.

Looking ahead, Das mentioned the potential of CBDC and fast payment systems to enhance cross-border payments. He underscored the importance of interoperability as a key design element to maximize efficiency in these initiatives, which could transform global financial transactions.

In closing, Das envisioned a revolutionary step forward in India's digital infrastructure, driven by the "new trinity" of JAM (Jan Dhan-Aadhaar-Mobile), UPI, and ULI.

The Financial Services Institutions Bureau (FSIB) has selected Challa Sreenivasulu Setty, the senior-most managing director, as the next Chairman of State Bank of India (SBI), the country's largest lender. Setty, who took on the role of managing director in January 2020, currently oversees International Banking, Global Markets, and Technology.

Setty will succeed Dinesh Kumar Khara, who is set to retire on August 28 upon reaching the age limit of 63. The FSIB, responsible for selecting directors of state-owned banks, interviewed three candidates for the position on June 29, 2024.

"Based on their performance, experience, and other parameters, the Bureau recommends Challa Sreenivasulu Setty for the position of Chairman in SBI," the FSIB stated.

Traditionally, the chairman is chosen from the serving managing directors of SBI, with the senior-most typically assuming the role. The Appointments Committee of the Cabinet, led by Prime Minister Narendra Modi, will make the final decision on the FSIB's recommendation.

Setty, who has headed various government task forces and committees, previously managed SBI's retail and digital banking. A Bachelor of Science in Agriculture and Certified Associate of the Indian Institute of Bankers, Setty began his SBI career in 1988 as a Probationary Officer.

His extensive experience spans corporate credit, retail, digital, and international banking, as well as roles in developed markets. He has held significant positions including Deputy Managing Director of Stressed Assets Resolution Group, Chief General Manager, and General Manager in Corporate Accounts Group.

In a moment of pride for every Indian, a homegrown Indian company will for the first time rank among the world's most valuable banks after completing a merger, marking a new challenger to the largest American and Chinese lenders occupying the coveted top spots.

The titie-upf HDFC Bank Ltd. and Housing Development Finance Corp. creates a lender that ranks fourth in equity market capitalisation, behind JPMorgan Chase & Co., Industrial and Commercial Bank of China Ltd. and Bank of America Corp., according to data compiled by Bloomberg. It's valued at about $172 billion.

With the merger likely effective July 1, the new HDFC Bank entity will have around 120 million customers - that's greater than the population of Germany. It'll also increase its branch network to over 8,300 and boast of total headcount of more than 177,000 employees.

The 2,000 banknotes were introduced in November 2016 under Section 24(1) of the RBI Act, 1934 -- which allows the central bank to issue notes of any denomination not exceeding 10,000 -- primarily to meet the currency requirement of the economy "in an expeditious manner" after the big demonetisation exercise, in which the legal tender status of all Rs 500 and ? 1,000 banknotes in circulation at that time was withdrawn, the Reserve Bank of India has said.

"With fulfillment of that objective and availability of banknotes in other denominations in adequate quantities, the printing of Rs 2000 banknotes was stopped in 2018-19," RBI said.

RBI Governor Shaktikanta Das today said the exercise is part of the "currency management system" of the central bank, and "there's no reason to rush to banks" as people have four months to change or deposit Rs 2,000 notes.

RBI Governor said the bank expects most notes to come back. "We will decide what to do next after September 30. But it will continue as legal tender," he said and assured the people, even those living in foreign countries, that the RBI will be sensitive to all their problems.