 | | | Volume XXII | Issue 5 | August 2026
MONETARY & CREDIT INFORMATION REVIEW |  | | | | | |
Note from the Editor Governor Shri Sanjay Malhotra announced the MPC's decision on August 5, 2026, following the third Bi-monthly Meeting for 2026-27, to keep the repo rate unchanged at 5.25 per cent, the SDF rate at 5.00 per cent and the MSF rate and Bank Rate at 5.50 per cent, with the stance retained at neutral. Headline CPI inflation, after remaining below target for sixteen months, increased to 4.4 per cent in June 2026 primarily due to higher food and fuel prices. CPI inflation for 2026-27 is projected at 5.0 per cent and real GDP growth at 6.7 per cent, reaffirming India's position as the world's fastest-growing major economy, while system liquidity averaged a daily surplus of ₹1.0 lakh crore. As per the accompanying Statement on Developmental and Regulatory Policies, licensing of Urban Co-operative Banks resumes on an on-tap basis after a two-decade pause, concentration risk guidelines for Rural Co-operative Banks (last revised in 2008) are being reviewed, and the framework on interest rates on advances is being harmonised for transparency and consumer protection. The 624th Meeting of the Central Board, held on August 21, 2026, at Chennai under the Governor's Chairmanship, reviewed economic conditions and the Reserve Bank's operations including the functioning of its Committees and the Ombudsman Scheme. We remain committed to our goal of sharing accurate information and fostering deeper understanding. The MCIR can be accessed at https://mcir.rbi.org.in as well as by scanning the QR Code. We welcome your feedback at mcir@rbi.org.in. Brij Raj
Editor | I. Monetary Policy Governor's Monetary Policy Statement on August 5, 2026 Governor Shri Sanjay Malhotra announced the Monetary Policy Committee's decision on August 5, 2026, after it met for its third bi-monthly meeting of the financial year 2026-27 on 3rd, 4th, and 5th of August to deliberate and decide on the policy repo rate. After a detailed assessment of the evolving macroeconomic and financial developments and the outlook, the MPC decided unanimously to keep the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 5.25 per cent; consequently, the standing deposit facility (SDF) rate shall remain unchanged at 5.00 per cent and the marginal standing facility (MSF) rate and the Bank Rate at 5.50 per cent. The MPC also decided to continue with the neutral stance. The MPC noted that headline CPI inflation edged up above the target, as expected. The realised inflation for Q1, however, remained marginally lower than projections reflecting limited pass-through of cost pressures. The higher inflation is mostly on account of fuel and food with little signs of generalisation of price pressures so far. Core inflation excluding precious metals continues to be benign. As projected earlier, headline inflation is expected to rise further in the near term and peak in Q3:2026-27, primarily due to food and fuel, before moderating thereafter. The underlying inflation, reflected by core inflation excluding precious metals, which has been benign for some time, is set to align with core inflation towards the end of the financial year. Growth continues to be supported by resilient domestic demand, sustained expansion in manufacturing and services activity, and robust exports, reaffirming India's position as the world's fastest-growing major economy. To sum up, even though headline inflation is projected to increase, it is primarily on account of supply side pressures caused by food and fuel; it is not getting broad-based; core inflation remains moderate and is expected to decline after peaking in Q3. Growth, albeit resilient, is expected to be lower in 2026-27. The outlook, however, is hazy because of the uncertainties regarding south-west monsoon, El Niño, geopolitics and global trade policy. There is a need for greater clarity to emerge, especially regarding inflation, its path and composition before taking any policy action. Any such action would also have to consider the need for recalibration of policy rates in line with the evolving growth-inflation dynamics, especially the normalisation of the underlying inflation from its benign levels seen hitherto. Considering all these factors, the MPC voted to keep the policy rate unchanged. The MPC also decided to retain the neutral stance to respond appropriately to macroeconomic developments. The MPC underscored that it will maintain a close vigil and remain resolute in its commitment to align inflation with the target. To read the full statement, please click here. Statement on Developmental and Regulatory Policies This Statement sets out various developmental and regulatory policy measures relating to regulations: 1. Draft guidelines for licensing of Urban Co-operative Banks (UCBs) A discussion paper on Licensing of UCBs was published for stakeholder feedback on January 13, 2026 following a two decade pause on issuance of fresh licenses. On an analysis of the feedback, it has been decided to resume licensing of UCBs on 'on tap' basis. The draft guidelines will be issued shortly for stakeholder consultation. 2. Review of Guidelines on Concentration Risk Management - Rural Co-operative Banks Prudential norms on Concentration Risk Management of Rural Co-operative Banks (RCBs) are governed by the Credit Monitoring Arrangement (CMA) instructions issued in 2008. As the banking sector in general, and co-operative banking sector in particular, have undergone significant expansion and changes since then, it has been decided to review these instructions, keeping in view the objectives of developing a vibrant co-operative sector while addressing the prudential concerns arising from concentrated lending. Draft Amendment Directions in this regard are being issued for wider stakeholder consultations. 3. Review of Guidelines on Interest Rates on Advances The Reserve Bank proposes to rationalise the regulatory framework on interest rates for all Regulated Entities (REs) on a principle-based basis. The proposed rationalisation aims to: (i) harmonise the guidelines across REs while maintaining proportionality; (ii) address certain operational aspects of the current framework on MCLR and EBLR; and (iii) standardise certain divergent market practices concerning interest charging, including day count convention and benchmark reset dates. These measures seek to ensure uniformity, enhance transparency in loan pricing, strengthen monetary transmission and bolster consumer protection. Draft directions incorporating these proposals will be issued shortly for public comments. Minutes of MPC The 62nd Meeting of the Monetary Policy Committee, constituted under Section 45ZB of the Reserve Bank of India Act, 1934, was held during August 3 to 5, 2026. Accordingly, under Section 45ZL of the Reserve Bank of India Act, 1934, the Reserve Bank published the minutes of the proceedings of the meeting on August 19, 2026, i.e., the fourteenth day after meeting of the MPC. In the light of evolving developments on the global and domestic front, the MPC reviewed in detail the staff's macroeconomic projections that included inputs from survey results and stakeholder consultations. The MPC also reviewed alternative scenarios around various risks to the outlook. To read more, please click here. II. Regulation RBI invites public comments on Draft Guidelines for 'on tap' Licensing of Urban Co-operative Banks The Reserve Bank published draft guidelines for 'on tap' licensing of Urban Co-operative Banks for stakeholder consultation on August 5, 2026. Comments are invited from public / stakeholders till September 05, 2026. Comments may be submitted through the link under the 'Connect 2 Regulate' section available on the Reserve Bank's website. RBI invites comments on the draft "Reserve Bank of India (Non-Banking Financial Companies – Credit Facilities) Amendment Directions, 2026 The Reserve Bank released the draft “Reserve Bank of India (Non-Banking Financial Companies – Credit Facilities) Amendment Directions, 2026” on August 6, 2026. Comments/feedback on the draft Amendment Directions were invited from regulated entities and other interested stakeholders by August 28, 2026. Feedback on the draft Amendment Directions may be submitted through 'Connect 2 Regulate' with subject line "Feedback on draft Reserve Bank of India (Non-Banking Financial Companies – Credit Facilities) Amendment Directions, 2026". RBI Issues Amendment Directions on ‘Conduct of Regulated Entities in Recovery of Loans and Engagement of Recovery Agents’ The Reserve Bank issued the revised draft Amendment Directions on 'Conduct of Regulated Entities in Recovery of Loans and Engagement of Recovery Agents' on May 20, 2026 for seeking feedback from stakeholders. Feedback received on the above revised draft Directions has been examined and the consequent modifications have been suitably incorporated in the final Amendment Directions. A statement on the feedback received is provided in the Annex. Accordingly, the Reserve Bank has issued the following Amendment Directions on August 6, 2026, which shall come into effect from January 1, 2027. i. Reserve Bank of India (Commercial Banks - Responsible Business Conduct) Fourth Amendment Directions, 2026 ii. Reserve Bank of India (Small Finance Banks - Responsible Business Conduct) Fourth Amendment Directions, 2026 iii. Reserve Bank of India (Local Area Banks - Responsible Business Conduct) Fourth Amendment Directions, 2026 iv. Reserve Bank of India (Regional Rural Banks - Responsible Business Conduct) Fourth Amendment Directions, 2026 v. Reserve Bank of India (Urban Co-operative Banks - Responsible Business Conduct) Fourth Amendment Directions, 2026 vi. Reserve Bank of India (Rural Co-operative Banks - Responsible Business Conduct) Fourth Amendment Directions, 2026 vii. Reserve Bank of India (All India Financial Institutions - Responsible Business Conduct) Third Amendment Directions, 2026 viii. Reserve Bank of India (Non-Banking Financial Companies - Responsible Business Conduct) Third Amendment Directions, 2026 ix. Reserve Bank of India (Housing Finance Companies) Third Amendment Directions, 2026 The Amendment Directions include comprehensive instructions to all regulated entities (REs) on conduct related matters in recovery of loans and engagement of recovery agents, which inter alia cover aspects such as fair treatment to borrowers during recovery process, conduct of lender's employees and recovery agents, and due diligence, training, code of conduct for recovery agents, etc. and also conduct of REs while deploying a technology-based mechanism for recovery of loan dues in financed mobile devices of a borrower. To read more, please click here. Review of Guidelines on Concentration Risk Management - Rural Co-operative Banks In pursuance of the announcement made with regard to the captioned subject in the Statement on Developmental and Regulatory Policies dated August 5, 2026, the Reserve Bank of India has today issued the following draft Directions for public comments: III. 624th Meeting of Central Board of the Reserve Bank of India The 624th meeting of the Central Board of Directors of Reserve Bank of India was held today in Chennai under the Chairmanship of Shri Sanjay Malhotra, Governor. The Board in its meeting reviewed the current economic situation, global and domestic challenges including risks to the economic outlook. The Board also reviewed various areas of operations of the Reserve Bank including the functioning of its Committees and the Ombudsman Scheme. Deputy Governors Shri Swaminathan J, Dr. Poonam Gupta, Shri Shirish Chandra Murmu, Shri Rohit Jain and other Directors of the Central Board viz. Smt. Revathy Iyer, Prof. Sachin Chaturvedi, Shri Anand Gopal Mahindra and Shri Somanath Sreedhara Panicker attended the meeting. | i. Draft Reserve Bank of India (Rural Co-operative Banks – Concentration Risk Management) – Directions, 2026 to replace Reserve Bank of India (Rural Co-operative Banks – Concentration Risk Management) –Directions, 2025 ii. Draft Reserve Bank of India (Rural Co-operative Banks – Credit Facilities) – Amendment Directions, 2026 to amend certain provisions of Reserve Bank of India (Rural Co-operative Banks – Credit Facilities) Directions, 2025 2. The above draft Directions prescribe, inter alia, prudential exposure limits for single/group counterparty, enhanced housing loan limits, and prudential exposure limits on unsecured advances. Additionally, it is proposed to allow flexibility to larger Rural Co-operative Banks (RCBs) with deposits above ₹1,000 crore in deciding the tenor and moratorium requirements for housing loans, while increasing the ceilings for these parameters in cases of other RCBs. Further, the prescribed prudential sectoral exposure limits, except for real estate sector, are proposed to be withdrawn. To read more, please click here. RBI invites public comments on the draft Directions on 'Credit Valuation Adjustment (CVA) Framework' Credit Valuation Adjustment (CVA) reflects the adjustment to the default risk-free prices of derivatives to account for potential counterparty default. CVA risk refers to losses resulting from changes in CVA values, driven by shifts in counterparty credit spreads and market risk factors. The CVA capital charge ensures banks hold sufficient capital to cover these risks. The extant CVA framework was issued by the Reserve Bank in 2011, which was based on the Basel Committee on Banking Supervision (BCBS) standards issued in 2010. The BCBS has, since, issued revised CVA guidelines under the final Basel III framework. Accordingly, it has been decided to issue revised instructions on CVA framework permitting banks in India to adopt the basic approach (BA-CVA). Banks may choose to implement either the full or reduced version of BA-CVA. Alternatively, in line with BCBS guidelines, banks with an insignificant volume of non-centrally cleared derivatives may calculate their CVA capital charge as 100 per cent of their counterparty credit risk (CCR) capital charge. The revised instructions: (a) allow eligible banks to choose a simpler approach; (b) clarify the eligibility and recognition of CVA hedges; (c) increase the sensitivity of supervisory risk weights for counterparties by sector and credit quality; and (d) separate systematic and idiosyncratic CVA risk components in the full BA-CVA calculation, addressing imperfect alignment of indirect CVA hedges. These revisions enhance risk sensitivity and improve consistency in the CVA framework. Accordingly, the Reserve Bank has released the Reserve Bank of India (Commercial Banks – Credit Valuation Adjustment Framework) Directions, 2026 on August 7, 2026. The comments on the draft Directions were invited from Regulated Entities, market participants, and other interested parties till August 28, 2026. RBI invites comments on the Draft "Reserve Bank of India (Interest Rates on Loans and Advances) Directions, 2026" In pursuance of the announcement made in the Statement on Developmental and Regulatory Policies dated August 05, 2026, the Reserve Bank of India has issued Draft Reserve Bank of India (Interest Rates on Loans and Advances) Directions, 2026 on August 12, 2026 for public comments. The Reserve Bank has issued various instructions from time to time on interest rates on loans and advances for regulated entities (REs), with the objectives of ensuring effective monetary policy transmission, appropriate pricing of credit risk, and fair and non-discriminatory treatment of borrowers. At present, regulatory framework on interest rate on advances are applicable for Commercial Banks (including Small Finance Banks and Local Area Banks), covering, inter alia, instructions on internal and external benchmark-based lending frameworks for floating rate loans and determination of spreads over such benchmarks. Regulatory instructions on interest rates on loans and advances extended by other REs (i.e., Non-Banking Financial Companies, All India Financial Institutions, Regional Rural Banks, Urban Cooperative Banks, and Rural Cooperative Banks) are largely with regard to conduct related aspects. Further, with respect to Commercial Banks, divergent practices have been observed in certain aspects, including determination of MCLR (internal benchmark) and its components. In addition, the extant guidelines contain very limited regulatory instructions regarding fixed rate loans. Accordingly, it is proposed to issue harmonised Directions for all REs, prescribing a broad, principles-based framework for the determination of interest rates on both fixed rate and floating rate loans, commensurate with the nature, complexity, and scale of the operations of the REs. For the purpose of public consultation / feedback, a draft Direction applicable to all REs is being issued. Upon examination of the feedback received, final Directions will be issued separately for each category of RE. To read more, please click here. RBI invites comments on the draft "Reserve Bank of India (Commercial Banks – Prudential Norms on Capital Adequacy) Eleventh Amendment Directions, 2026" The Reserve Bank of India released the draft Reserve Bank of India (Commercial Banks – Prudential Norms on Capital Adequacy) Eleventh Amendment Directions, 2026, which propose to amend 'Chapter VII: Leverage Ratio framework' of the Reserve Bank of India (Commercial Banks – Prudential Norms on Capital Adequacy) Directions, 2025 on August 7, 2026. The amendment endeavours to implement the latest leverage ratio framework ('Leverage Ratio 2017 Standard') issued by the Basel Committee on Banking Supervision. The comments on the draft Amendment Directions were invited till August 28, 2026. The comments / feedback may be submitted through the link under the 'Connect 2 Regulate' section available on the Reserve Bank's website. IV. Publications RBI Bulletin – August 2026 The Reserve Bank released the August 2026 issue of its monthly Bulletin on August 25, 2026. The Bulletin includes bi-monthly monetary policy statement (August 03-05, 2026), six speeches, one article and current statistics. The article is on the State of the Economy. State of the Economy The global economy is confronting a fragile geopolitical environment and continuing trade-related uncertainties. Nevertheless, the domestic economy has demonstrated notable resilience to the ongoing global headwinds, characterised by buoyant domestic demand, and rising manufacturing and services activity. The south-west monsoon picked up in July after recording a deficit in June. While headline CPI inflation rose fractionally, reflecting food inflation; core inflation remained stable. Liquidity conditions eased, supporting credit growth and ongoing investment activity. Foreign capital inflows rebounded, reinforcing the external sector. V. Data Release & Surveys Important data and surveys released by the Reserve Bank during the month of August 2026 are as follows:
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