For the Year April 1, 2025 to March 31, 2026 I.1 In 2025, the global economy displayed resilience with 3.4 per cent growth (3.3 per cent a year ago) amidst high tariffs, elevated policy uncertainty, rising public debt and geopolitical tensions. These headwinds were largely offset by frontloading of imports, supply-chain realignments, and a surge in artificial intelligence (AI)-related investment. Global financial conditions remained broadly accommodative, barring April and May 2025 reflecting tariff tensions. The outlook1 for the global economy in 2026 points to a moderate expansion at 3.1 per cent, below its long-term average (2000- 19) of 3.7 per cent. The world trade (goods and services combined) volume growth, projected at 2.8 per cent2 in 2026, remains highly sensitive to shifts in the geopolitical landscape and energy prices‑driven inflation risks. The evolving growth-inflation dynamics, particularly the resurgence of supply shock-driven inflation risks in the aftermath of the West Asia conflict, may require central banks to carefully balance the objective of containing inflation against the need to minimise adverse spillovers on growth, warranting cautious calibration of monetary policy paths. I.2 India remained the fastest growing major economy, expanding at 7.6 per cent during 2025-26 (7.1 per cent a year ago)3, supported by strong domestic consumption, sustained investment, proactive policy initiatives and sound macroeconomic fundamentals. Inflation remained distinctly low during major part of the year. The financial sector remained resilient on the back of healthy bank and non-bank balance sheets, improved asset quality and capital buffers, enabling double-digit credit growth. On the fiscal front, consolidation efforts continued along with improvement in expenditure quality and containment of revenue expenditure. A modest current account deficit (CAD) and adequate forex reserves provided resilience to the external sector even as portfolio investment exhibited net outflows. I.3 The domestic economy in 2026-27 is expected to remain resilient, despite challenging external environment characterised by elevated energy and commodity prices, rising logistics costs, volatility in global financial markets and uncertainties surrounding global trade policies. Growth prospects are supported by India’s strong macroeconomic fundamentals, including robust domestic demand, relatively lower dependence on exports as a growth driver, and a stable policy environment. 2. Assessment of 2025-26 Global Economy I.4 Global growth remained resilient at 3.4 per cent in 2025 (3.3 per cent in 2024)4, amidst several headwinds such as prolonged geopolitical tensions, trade-related uncertainty and higher debt levels which were counterbalanced by tailwinds like fiscal and monetary support, accommodative financial conditions and surging investment in technology. Global inflation eased to 4.1 per cent in 2025 from 5.8 per cent in the previous year, reflecting the impact of softening energy prices, normalisation of supply chain constraints, even as core and services inflation remained sticky. The disinflationary process, however, remained uneven across countries with relative stickiness in services inflation in major advanced economies. I.5 World goods and services trade volume grew by 5.1 per cent in 2025, exceeding world GDP growth. Merchandise trade volume expanded by 4.6 per cent (2.7 per cent in 2024)5, driven mainly by frontloading of imports in anticipation of higher tariffs and growth in trade of technology related products exempt from the tariff measures. Global services trade volume, on the other hand, grew at a moderate pace of 5.3 per cent (7.8 per cent in 2024) as the post-pandemic surge in travel services had already played out in the preceding years, alongside a muted growth in transportation services due to lower shipping rates. I.6 Global equity markets remained resilient, supported by AI-related technology stocks. However, concerns about tariff uncertainty, stretched valuations, potential spillovers on other software services, and escalating geopolitical tensions generated episodes of turbulence. The US dollar depreciated during April 2025 - February 2026, but strengthened on safe-haven demand after the outbreak of the West Asia conflict. Sovereign bond yields remained elevated amid fiscal concerns, with the conflict adding further upward pressure. Domestic Economy I.7 Against the backdrop of a steady global growth amidst multiple headwinds, India’s GDP growth is estimated at 7.6 per cent for 2025-26, up from 7.1 per cent in the previous year. On the demand side, private final consumption expenditure and fixed investment served as the key growth drivers. Although the imposition of US tariffs initially triggered concerns, their overall impact remained muted, with net exports exerting a modest drag of 0.1 percentage points on growth. On the supply side, a buoyant services sector and a robust manufacturing performance helped offset subdued agricultural activity. I.8 Growth in gross value added (GVA) in the agriculture and allied sector moderated during 2025-266, reflecting weather-related disruptions in kharif crops, although favourable rabi conditions provided support. Foodgrain and horticulture production reached record levels. Policy efforts focused on reducing import dependence and improving domestic availability of pulses, alongside the launch of the National Mission on High Yielding Seeds to enhance crop productivity. I.9 Industrial sector posted strong growth7 in 2025-26, driven by a robust manufacturing sector. The growth was facilitated by steady industrial credit growth and broad sectoral policies like the production linked incentive (PLI) scheme and the National Manufacturing Mission. Manufacturing sector experienced broad-based expansion, with the key sectors like basic metals, motor vehicles, and other transport equipment registering strong growth. I.10 India ranked third globally8 with installed renewable energy capacity9 exceeding 250 gigawatts (GW). In the clean mobility domain, electric vehicle (EV) sales have surpassed 25 lakh units in 2025-26, driven by initiatives such as the PM Electric Drive Revolution in Innovative Vehicle Enhancement (PM E-DRIVE) scheme. Concurrently, the automotive sector is progressively adopting low-emission alternatives, including compressed natural gas (CNG), hybrid vehicles and E-20 petrol, underscoring the nation’s commitment to sustainable transportation. I.11 The services sector continued to be the primary driver of aggregate supply, contributing to around 69 per cent of real GVA growth.10 Within this sector, robust expansion in segments such as ‘trade, hotels, transport, communication and services related to broadcasting, storage’, as well as ‘financial, real estate, IT, and professional services’, reflects the increasing importance of high-value-added activities. Labour market conditions remained stable during January-December 2025. The share of agriculture sector continued to decline in total employment, while that of other services, manufacturing and trade sectors increased. I.12 The central government achieved its fiscal consolidation goal of reducing the gross fiscal deficit (GFD) below 4.5 per cent of GDP by 2025-26. The GFD stood at 4.4 per cent of GDP11 in 2025-26 (RE), driven by containment of revenue expenditure and higher revenue receipts, mainly from direct taxes and non-tax revenue. States’ revenue receipts moderated12 during April 2025 - February 2026 on account of deceleration in tax revenue growth and a decline in grants from the Centre. Despite the moderation, capital expenditure by state governments recorded robust growth. The Sixteenth Finance Commission (2026-2031) has proposed an allocation of ₹7,91,493 crore in grants for rural and urban local bodies. This includes a substantial 194.3 per cent increase in grants for urban local bodies to address the evolving challenges of urbanisation.13 I.13 Headline inflation moderated to 2.1 per cent in 2025-26 from 4.6 per cent in the previous year, largely driven by muted price pressures in food and a favourable base effect. Inflation in fuel was driven by price hikes of ₹50 and ₹60 per liquified petroleum gas (LPG) cylinder in April 2025 and March 2026, respectively. Inflation excluding food and fuel remained firm on the back of sustained increase in prices of precious metals (gold and silver), whereas inflation excluding food, fuel and precious metals remained benign on the back of goods and services tax (GST) rationalisation undertaken by the government, soft global commodity prices and broadly muted input cost pressures. I.14 During 2025-26, with the growth-inflation dynamics opening policy space, the Monetary Policy Committee (MPC) reduced the policy repo rate by 100 basis points (bps), while maintaining a neutral stance since June 2025. Liquidity conditions remained in surplus, with the average daily net absorption under the liquidity adjustment facility (LAF) rising sharply to ₹1.86 lakh crore from ₹1,605 crore a year ago. The Reserve Bank injected durable liquidity through open market operation (OMO) purchases, USD/INR buy/sell swaps, longer-tenor variable rate repo (VRR) operations, and four tranches of cash reserve ratio (CRR) cuts totalling 100 bps - more than offsetting the leakage from currency in circulation and forex operations. The weighted average call rate (WACR) averaged 7 bps below the policy repo rate during the year. I.15 During the current easing cycle (since February 2025), the transmission of policy repo rate changes to banks’ deposit and lending rates remained robust, supported by conducive liquidity conditions. The proportion of external benchmark-based lending rates (EBLR) linked loans in total outstanding floating rate loans increased, with the concomitant fall in marginal cost of funds-based lending rate (MCLR) linked loans. I.16 Against the backdrop of elevated uncertainty and volatile capital flows, domestic financial markets also witnessed fluctuations during 2025-26. Government security (G-sec) and corporate bond yields exhibited a hardening bias during the year. Corporate bond issuances remained robust, supported by improved corporate balance sheets. The upward pressure on bond yields and risk premia amidst tariff and geopolitical tensions were limited by the monetary policy easing and OMO purchases by the Reserve Bank, as well as continued thrust on fiscal consolidation by the government. Domestic equities rallied in the first half before declining in the second half as escalation in geopolitical tensions in the Middle East and AI-related valuation concerns weighed on investor sentiment. I.17 Indian Rupee (INR) traded with a depreciating bias during the year amidst trade related uncertainties, geopolitical tensions, and foreign portfolio investment (FPI) outflows in the equity segment. Efforts to promote local currency settlement gained traction, while the INR-denominated invoicing and settlements are increasing gradually. Operationally, progress continued in strengthening technological capabilities, including the migration of cross-border payments to the ISO 20022 messaging framework. I.18 India’s merchandise trade14 deficit widened to US$ 333.2 billion during 2025-26 (US$ 282.5 billion a year ago). A strong services trade surplus and a steady flow in private transfer receipts helped contain CAD within a sustainable level of 1.0 per cent of GDP during April-December 2025. I.19 Capital flows witnessed significant volatility during 2025-26. While net foreign direct investment (FDI) inflows rose, other major forms of capital flows such as net foreign portfolio investment (FPI) and net external commercial borrowings (ECBs) fell15 during the year. In terms of external financing needs, net capital flows fell short of financing CAD during April-December 2025. There was a depletion of foreign exchange reserves (on a BoP basis) to the tune of US$ 30.8 billion during the period. India’s foreign exchange reserves (US$ 691.1 billion as at end-March 2026) remained adequate in terms of the standard metrics of reserve adequacy, including import cover of about 11 months and external debt cover of 90.3 per cent, thereby providing buffer against adverse global spillovers. I.20 Bank credit to the commercial sector grew by 15.9 per cent (y-o-y) in 2025-26 (10.9 per cent a year ago). Credit from non-bank sources registered a growth of 13.3 per cent (y-o-y) [15.1 per cent a year ago], underscoring their important role in credit intermediation. Bank credit growth gained momentum across sectors, outpacing deposit growth and leading to a rise in credit-deposit ratio. Profitability of SCBs remained robust along with an improvement in asset quality. The gross non-performing assets (GNPA) ratio declined to a multi-decadal low, while the capital to risk-weighted assets ratio (CRAR) remained comfortably above the regulatory requirements. Stress test results reaffirmed the resilience of banks, indicating their ability to withstand losses under adverse scenarios while maintaining capital buffers well above the regulatory minimum. Further, asset quality and capital adequacy of the non-banking financial companies (NBFCs) remained robust during the year. The credit and deposit growth of the urban co-operative banks (UCBs) improved during April-December 2025, alongside robust capital buffers and increased profitability. I.21 The regulatory endeavour during the year16 has been anchored around two broad objectives: first, harmonisation and consolidation of extant instructions across regulated entities (REs); and second, putting in place clear prudential and conduct-related guardrails for evolving credit intermediation models and instruments. More than 11,000 circulars/instructions were consolidated into 244 master directions (MDs). These MDs have been organised around 30 functions/areas of regulatory instructions across 11 types of REs. I.22 On the supervisory front, the Reserve Bank continued its endeavour to build a resilient and sound financial system. The supervisory initiatives17, inter alia, include: (a) close engagement with government agencies and various stakeholders to address the rising prevalence of cyber-enabled frauds and money mule activities; (b) successfully implementing cyber range initiative to enhance cyber resilience across the banking sector; (c) conducting sectoral know your customer (KYC)/anti-money laundering (AML) risk assessment of the NBFC segment; and (d) strengthening cross-border supervision through enhanced cooperation frameworks and capacity-building initiatives. In its endeavour to strengthen supervision and reduce compliance burden, the Reserve Bank has released 64 draft master directions across nine functional areas, consolidating all existing supervisory instructions, for public comments. I.23 During 2025-26, the Reserve Bank undertook several innovative initiatives. Multiple Central Bank Digital Currency (CBDC) pilots were launched under direct benefit transfer (DBT) schemes of the Centre and State governments, leveraging the programmability capability of CBDCs. In Gujarat, Puducherry and Chandigarh, public distribution system (PDS) beneficiaries were credited food subsidy through programmable CBDC, redeemable for eligible commodities at fair price shops/ identified merchants. On asset tokenisation, the Reserve Bank developed the Unified Markets Interface (UMI), a multi-layer platform to facilitate tokenisation of financial assets while leveraging wholesale CBDC to enhance settlement efficiencies. A pilot on tokenisation of certificates of deposit (CDs) was initiated on UMI. On cross-border payments, the Reserve Bank signed memorandum of understanding (MoU) on digital asset collaboration with the Monetary Authority of Singapore (MAS). Bilateral discussions with MAS and the Central Bank of the UAE (CBUAE) were held for operationalising a cross-border CBDC pilot. The Reserve Bank also joined multilateral BIS-Innovation Hub-led initiatives, viz., Project Rialto, and Phase 2 of Project Mandala, which are focused on enhancing cross-border payments through CBDCs. I.24 The Report of the Framework for Responsible and Ethical Enablement of Artificial Intelligence (FREE-AI) Committee sets out the framework to guide the use of AI in the financial sector, aiming to harness its potential while safeguarding against associated risks. The Reserve Bank is undertaking an assessment of the Committee’s report and recommendations, which will help in shaping the formulation of more specific guidance for the entities in the financial sector. Further, the Government launched ‘Bharat Gen’ in June 2025, India’s first government-funded sovereign multilingual and multimodal large language model (LLM), aimed at developing AI systems tailored to Indian languages, governance and public service applications. The India AI Impact Summit 2026, held in February 2026, concluded with the adoption of the New Delhi Declaration on AI Impact, along with forward-looking commitments and strategic partnerships, marking a significant milestone in global cooperation on AI. I.25 The Reserve Bank of India - Digital Payments Index (RBI-DPI) grew by 11 per cent (y-o-y) during 2025-26, reflecting rapid adoption and deepening of digital payments across the country. Within the retail segment, the Unified Payments Interface (UPI) volume increased by 30 per cent (42 per cent in 2024-25), surpassing 200 billion transactions. Efforts are underway to further expand UPI’s international footprint by linking UPI with fast payment systems of other countries for enabling cross-border remittances and merchant payments. The regulatory measures during the year on digital payments and settlement focused on customer centricity, strengthening the resilience of the payment systems, combating frauds and bringing in further efficiency. The measures, inter-alia, include strengthening Aadhaar enabled payment system (AePS), consolidation of directions on payment aggregators, authentication mechanisms for digital payment transactions, and implementation of continuous clearing and settlement on realisation in Cheque Truncation System (CTS). I.26 The Reserve Bank’s Financial Inclusion Index (FI-Index), that measures the extent of financial inclusion in the country, increased from 64.2 in March 2024 to 67.0 in March 202518, with improvements witnessed across all three sub-indices, viz., access, usage and quality. The Financial Literacy Week (FLW) 2026 was observed on the theme ‘KYC - Your First Step to Safe Banking’, to spread awareness among the public on various aspects relating to KYC. The National Strategy for Financial Inclusion (NSFI): 2025-30 was released in December 2025 to further deepen and strengthen the financial inclusion ecosystem. I.27 During the year, the Reserve Bank made concerted efforts towards enhancing customer protection and extended the coverage of RBI Ombudsman to the customers of rural co-operative banks. The Reserve Bank - Integrated Ombudsman Scheme, 2026 and Master Direction on ‘Internal Ombudsman for Regulated Entities’ were issued to further strengthen the Ombudsman framework and enhance efficiency in resolution of complaints at the level of the regulated entities. Further, a campaign was launched to cover re-KYC of all accounts where it had fallen due and was leveraged for grievance redressal and promoting awareness on unclaimed deposits. I.28 A comprehensive review of citizen’s charter of the Reserve Bank, including rationalisation of timelines for various services, was undertaken during the year. The revised citizen’s charter came into effect from July 1, 2025, reaffirming the Reserve Bank’s commitment to improve accessibility, responsiveness, and transparency in service delivery. 3. Prospects for 2026-27 Global Economy I.29 Geopolitical risk has re-emerged as the dominant drag on global growth in 2026. The adverse impact of outbreak of the conflict in West Asia in end-February 2026 is reflected in the forecasts of global growth and inflation. In IMF’s baseline scenario19, the global economy is projected to grow by 3.1 per cent in 2026 (as against the earlier projection of 3.3 per cent in January 2026), while global merchandise and services trade volume is expected to decelerate to 2.8 per cent in 202620. Further intensification of the conflict, its prolongation or widening geographical spread, if any, remain the key downside risks to the global economic outlook. I.30 With continued geopolitical tensions, inflation faces upside risks. The surging energy prices and disruptions in key shipping routes could intensify supply-side pressures. In IMF’s baseline scenario, the global inflation is projected higher at 4.4 per cent in 2026 than the earlier projection of 3.8 per cent in January 2026. Financial markets may exhibit higher volatility with tighter macroeconomic conditions and broader risk-off sentiment. Elevated valuations in technology sectors may undergo reassessment, raising the risk of corrections in equity markets. With increased protectionism and debt sustainability concerns, the escalating geopolitical risk calls for coordinated policy actions across fiscal, monetary and multilateral fronts. Domestic Economy I.31 Against the backdrop of a moderate global growth, the outlook for the Indian economy in 2026-27 remains positive, supported by strong macroeconomic fundamentals, although a prolonged West Asia conflict may pose downside risk. The healthy balance sheets of the corporate and banking sectors along with the government’s continued thrust on capital expenditure bode well for India’s strong growth trajectory. Moreover, implementation of various trade agreements with the key trading partners would provide further momentum to India’s growth. I.32 The outlook for the agriculture sector in 2026-27 remains contingent upon the progress and distribution of the south-west monsoon. The likelihood of El Niño conditions poses downside risks to agriculture output. However, the rain-inducing positive Indian Ocean Dipole (IOD) conditions are likely to emerge towards the latter part of the monsoon season, which may partly offset adverse impacts. Moreover, while the monsoon remains critical for Indian agriculture, the sensitivity of agricultural production to rainfall variability has moderated over time with rising irrigation intensity, improved crop management practices, and technological advancements. While the ongoing geopolitical tensions are likely to exert pressure on the availability and prices of key inputs, particularly fertilisers, the government’s continued efforts in ensuring adequate availability of fertiliser and other key inputs through diversified sources and buffer management are expected to mitigate these potential concerns. Initiatives announced in the Union Budget 2026-27, focusing on diversification, targeted promotion of high-value crop cultivation across regions, enhancing commercial viability of fisheries and aquaculture, and a greater push towards technology adoption with the proposed launch of Bharat-VISTAAR21 would support strong and sustainable growth in the agriculture and allied sectors. I.33 To reinforce India’s manufacturing ambitions, the Union Budget 2026-27 has earmarked seven strategic and frontier sectors - electronics, semiconductors, biopharma, rare earths, chemicals, textiles, and capital goods - for a focused policy push. Complementing this, measures such as PLI and PM E-DRIVE to strengthen energy security are expected to catalyse green tech manufacturing and reduce critical import dependence, while investments in freight corridors, waterways, coastal shipping and last-mile connectivity would deepen regional integration and support industrial expansion. Labour market conditions are expected to improve further, supported by the full-scale implementation of the four labour codes, strengthening domestic demand and productivity. Considering these factors, and on the assumption that the adverse impact of the West Asia conflict would remain contained in the near-term, real GDP growth for 2026-27 is projected22 at 6.9 per cent with risks tilted to the downside. I.34 Despite uncertainty around globally coordinated action against climate change, India remains focused on its mitigation and adaptation measures, guided by its Nationally Determined Contributions (NDCs) which have been updated for the period 2031-35. The updated quantitative targets include achieving 60 per cent of the installed electric capacity from non-fossil sources, reducing the emission intensity of GDP by 47 per cent (from 2005 levels), and creating carbon sink of 3.5-4.0 billion tonnes of CO₂ equivalent by 2035 (from 2005 levels). I.35 The central government’s thrust on growth-inducing capital spending23 is expected to continue. On the receipts side, direct taxes are budgeted at 6.9 per cent of GDP in 2026-27, highest in more than a decade. GFD is projected at 4.3 per cent of GDP in 2026-27, reflecting the Centre’s continued fiscal consolidation efforts in recent years. The Union Government has set up an Economic Stabilisation Fund (ESF) to provide fiscal space against global headwinds. Fiscal outlook for states remains positive for 2026-27 with their consolidated GFD budgeted at 3.0 per cent of gross state domestic product (GSDP)24. The gross transfers to states have been budgeted to increase by 12.2 per cent in 2026-27, largely on account of transfers under the centrally sponsored schemes and special assistance to states for capital investment. I.36 Inflation in 2026-27 is likely to remain aligned with the target on the back of adequate foodgrain stocks, sufficient reservoir levels and stable agricultural prospects despite possible El Niño conditions and above-normal summer temperature. However, the evolving upside risks to inflation may emanate from multiple other factors such as spike in global fuel and commodity prices amid geopolitical tensions, potential spillovers to input and wage costs, and volatility in exchange rate. Considering all these factors, CPI inflation for 2026-27 is projected25 at 4.6 per cent with risks tilted to the upside. I.37 With the growth-inflation outlook remaining delicately poised amid heightened geopolitical risks, the MPC in its April 2026 meeting unanimously decided to keep the policy repo rate unchanged at 5.25 per cent, while remaining vigilant and closely monitoring incoming information and assessing the balance of risks. The MPC also decided to continue with the neutral stance, retaining the flexibility to respond judiciously to incoming information. Further, in its second review, the central government in consultation with the Reserve Bank retained the inflation target of 4 per cent with a tolerance band of +/- 2 per cent for the period beginning April 1, 2026, and ending on March 31, 2031. I.38 Domestic bond yields could face upward pressure if the global monetary easing cycle stalls or reverses in response to persistent oil price shocks amid fragile conditions in the Middle East. However, the government’s commitment to fiscal consolidation, along with the liquidity injection measures by the Reserve Bank, is expected to contain the upward pressure on yields. Equity market dynamics would be conditioned by evolving geopolitical developments, global financial market volatility and foreign portfolio investment flows; a deterioration in risk sentiment alongside strengthening of the US dollar could trigger capital outflows. At the same time, ongoing efforts to expand local currency settlement framework are expected to further advance INR-based cross-border transactions. I.39 While ongoing geopolitical conflicts and policy uncertainty pose downside risks to India’s merchandise exports, implementation of trade agreements with several trade partners and a sharp focus on scaling domestic manufacturing in strategic and frontier sectors would strengthen export competitiveness and reduce critical import dependence. Flagship initiatives under the Union Budget 2026-27 towards this direction include biopharma SHAKTI26, India Semiconductor Mission 2.0, expansion of the electronics components manufacturing scheme, development of rare earth corridors, establishment of chemical parks, and targeted support for capital goods and container manufacturing. Further, the establishment of an Infrastructure Risk Guarantee Fund is expected to work towards de-risking physical/digital infrastructure investments while strengthening India’s position as a global hub for digital services. I.40 Robust outlook for India’s services trade balance, in particular software and business services, and inward remittances from non-gulf countries is expected to support current account balance during 2026-27. The Union Budget 2026-27 announcements pertaining to tax holiday27 and safe harbour28 for foreign companies for developing data centres in India, and infrastructural investments to the tune of US$ 250 billion committed till 2047 in the India AI Summit 2026 augur well for attracting FDI. Additionally, measures such as liberalising FDI norms in the space sector by permitting up to 100 per cent FDI in satellite manufacturing and components, and enhanced limits in launch vehicles and satellite operations, are expected to attract global capital and technology to the sector. In case of FPI, flows would be conditional upon global risk appetite. However, finalisation of the ongoing bilateral and regional trade agreements is expected to boost India’s trade and investment opportunities, facilitating capital inflows during 2026-27. I.41 The AI Impact Summit 2026 marked a major milestone in global cooperation on AI. The declaration, endorsed by 92 countries and international organisations, reflects a broad-based global consensus on leveraging AI for economic growth. Globally, India has been ranked third for AI competitiveness and ecosystem vibrancy.29 In March 2024, the government had launched the IndiaAI mission with an outlay of INR 10,372 crore. More than 38,000 graphics processing units (GPUs) for common compute facility were onboarded. Encouraged by the government’s initiatives, the private sector is also increasingly investing in AI. India’s cumulative private investment in AI reached around US$ 11 billion during 2013 to 2024.30 According to fDi Markets, India ranked fifth in global greenfield announcements in AI-related sub-sectors such as data processing, and semiconductors and allied components in 2024-25. Additionally, the pre-event roadshow in Paris held in May 2026 for Bharat Innovates 2026 brought together businesses and innovation groups from India and abroad, aiming to connect Indian start-ups with global investors, companies and research groups. I.42 The Indian banking system is expected to remain resilient, supported by prudent regulatory reforms, stable credit growth and adequate capital buffers. However, lingering geopolitical tensions and supply chain disruptions may pose near-term risks to corporate earnings and the performance of loan portfolios. Elevated sovereign yields may also exert pressure on financial institutions’ investment portfolios. Nonetheless, on balance, supported by sound fundamentals and healthy balance sheets, the domestic financial system has sufficient buffers to withstand adverse shocks. I.43 In the regulatory space31, the Reserve Bank’s agenda would be anchored around two priorities: customer protection and strengthening credit ecosystem. On customer protection, the focus is on strengthening the KYC framework, extending video-based identification to NRI customers, and reviewing responsible business conduct directions. On the credit side, review of directions on interest rates, credit risk management and market mechanisms for transfer and distribution of credit risk has been proposed, along with a new framework for shared loan arrangements. Further, to enable the Boards of the banks to utilise their time effectively, and to facilitate a more focused and qualitative engagement on matters of strategy and risk governance, the Reserve Bank would rationalise the requirements emanating out of its instructions for placing matters before the Boards. I.44 The supervisory agenda32 of the Reserve Bank during 2026-27 would focus on early identification of emerging risks, strengthening root-cause analysis, and enhancing consistency in supervisory practices across regulated entities. This would involve reviewing the risk-based approach for KYC/AML supervision of SCBs, strengthening data-driven supervision through micro-data analytics, and development of supervisory data quality index (sDQI) for Tier 3 and Tier 4 UCBs. The Reserve Bank will also examine implementation of risk-based supervision framework for select NBFCs and UCBs. I.45 The Reserve Bank plans to expand the CBDC pilot to cover new use cases under DBT schemes and the domestic retail space, while exploring additional pilots on tokenisation of financial assets and widening participant coverage. On cross-border payments, the Reserve Bank intends to operationalise bilateral CBDC pilots with select use cases and deepen engagement in multilateral projects. The Unified Lending Interface (ULI) will be scaled up through onboarding of more data service providers and lenders, and MuleHunter.aiTM 33 will be expanded across more banks with new features such as a Mule Registry. I.46 Building upon the remarkable growth of digital payments in India and anchored in the theme, ‘Shaping India’s Payment Frontier’, the Reserve Bank’s Payments Vision 2028 document focuses on user empowerment, safeguards against fraud, efficiency of cross-border payment frameworks and promoting ease of doing business, among others. Through its various initiatives, the Vision Document would serve as a roadmap up to December 2028, ensuring that India’s payment systems remain safe, resilient, inclusive and innovative. Accordingly, for 2026-27, the Reserve Bank is exploring the full-scale implementation of the Digital Payments Intelligence Platform (DPIP), and introduction of the ‘switch-on’ and ‘switch-off’ facility for all digital payment modes. Further, the Reserve Bank would also focus on enhancing digital safety by broadening the scope of existing instructions on limiting liability of customers to cover other categories of fraudulent electronic banking transactions and introducing a compensation mechanism for small value fraudulent electronic banking transactions. I.47 A revised framework for computation of the FI-Index would be put in place, alongside focus on implementation of action points envisaged under National Strategy for Financial Inclusion (NSFI): 2025-30. Further, the Reserve Bank is targeting to widen digital financial inclusion by enabling every eligible account holder in all districts with at least one digital payment mode among UPI, cards, internet/mobile banking, unstructured supplementary service data (USSD) or AePS. I.48 To enhance the efficacy of the internal grievance redressal mechanism, the Reserve Bank shall be focusing on issuing comprehensive instructions on grievance mechanism at the level of regulated entities. Further, the complaint management system of the Reserve Bank is being upgraded to improve its efficacy for resolution of complaints. 4. Conclusion I.49 The Indian economy exhibited resilience in 2025-26, amidst several external headwinds, supported by strong private consumption, sustained investment and sound macroeconomic fundamentals. Going forward, India’s growth outlook remains positive, though the West Asia conflict and the attendant risks of elevated energy prices, supply chain disruptions, financial market volatility, uncertainty surrounding global trade policies and weather-related disruptions could pose headwinds to growth and inflation in the short run. However, healthy corporate and bank balance sheets, government’s continued thrust on capital expenditure and the implementation of trade agreements with the key partners are expected to sustain investment and growth momentum. Nevertheless, in a highly uncertain global environment, continuous assessment of the evolving developments is warranted to frame the appropriate policy response on an ongoing basis.
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