Annual Report

The Reserve Bank continued its endeavour to build a resilient and sound financial system during the year. Various measures were undertaken for enhancing cyber resilience along with a greater focus on fostering innovation and usage of advanced and technology-enabled supervisory tools. Sustained efforts were also made for further improving grievance redressal framework.

VI.1 The domestic financial system remained stable and robust during the year. The Reserve Bank continued with its efforts to promote responsible innovation and leverage on technology for an effective and efficient supervision along with a focus on enhancing cyber security. The regulatory framework was fine-tuned as per the evolving requirements of the Indian economy while adapting to international best practices.

VI.2 This chapter discusses the regulatory and supervisory measures undertaken during 2025-26 to strengthen the financial system and preserve financial stability. The Department of Regulation (DoR) undertook major exercise to consolidate the existing regulatory instructions. The FinTech Department expanded the scope and coverage of Central Bank Digital Currency (CBDC) pilots, Unified Lending Interface (ULI) and MuleHunter.ai^TM, while the Department of Supervision (DoS) initiated measures to enhance cyber mapping of financial systems. The Consumer Education and Protection Department (CEPD) continued with its efforts towards augmenting consumer awareness and strengthening grievance redress mechanism.

VI.3 The rest of this chapter is divided into five sections. Section 2 deals with the mandate and functions of the Financial Stability Department (FSD). Section 3 dwells upon regulatory measures undertaken by the DoR along with activities of the FinTech Department. Section 4 covers supervisory measures undertaken by the DoS and enforcement actions carried out by the Enforcement Department (EFD). Section 5 highlights the role played by CEPD and Deposit Insurance and Credit Guarantee Corporation (DICGC) in protecting consumer interests, spreading awareness and upholding consumer confidence. The agenda of these departments for 2026-27 are covered in their respective sections. Concluding observations are set out in the last section.

2. FINANCIAL STABILITY DEPARTMENT

VI.4 The FSD monitors risks to macrofinancial stability and assesses the resilience of the financial system by undertaking macroprudential surveillance. It works as the secretariat to the Sub-Committee of the Financial Stability and Development Council (FSDC-SC), an inter-regulatory institutional forum which looks into the matter of financial stability, financial sector development and inter-regulatory coordination. The FSD brings out half-yearly Financial Stability Report (FSR), which presents the FSDC-SC’s collective assessment of key macrofinancial risks to financial stability in India.

Agenda for 2025-26

VI.5 The Department had set out the following goals for 2025-26:

• To enhance the stress testing framework further, a liquidity stress test framework for non-bank financial companies (NBFCs) will be developed in-house. Further, the extension of macro stress test to the urban cooperative banks (UCBs) sector (Tier 3 and Tier 4) will be explored. In addition to extending the stress testing framework, the Department also plans to assess the impact of climate transition risk on major carbon intensive sectors and its impact on balance sheets of banks having exposure to emission intensive sectors (Paragraph VI.6 – VI.7); and

• ‘Growth-at-Risk’ model will be developed for understanding how financial conditions and the level of financial vulnerabilities contribute to the possibility of future episodes of weak economic growth by linking current macrofinancial conditions to the distribution of future growth (Paragraph VI.7).

Implementation Status

VI.6 Liquidity stress test framework for NBFCs is at an advanced stage of development. The Department has explored the feasibility of developing a macro stress test framework for the UCBs sector (Tier 3 and Tier 4), in line with that of scheduled commercial banks (SCBs).

VI.7 Climate transition risks of major carbon intensive sectors have been assessed using data on Scope 1 emissions¹ of listed companies. Using hypothetical stress scenarios, the impact of such risks on financial performance of firms and consequent spillover on banks have been assessed. The Department has also developed a model using the IMF’s ‘Growth-at-Risk’ framework to estimate the impact of financial vulnerabilities on India’s GDP growth.

Agenda for 2026-27

VI.8 In the year ahead, the Department will focus on the following:

• Review and improve the current framework of financial network and contagion analysis; and

• Assess climate risks using hypothetical stress scenarios for key sectors.

3. REGULATION OF FINANCIAL INTERMEDIARIES

Department of Regulation

VI.9 The Department of Regulation is the nodal Department for regulation of commercial banks, cooperative banks, NBFCs, credit information companies (CICs) and all-India financial institutions (AIFIs)². It aims at, inter alia, ensuring a healthy and competitive financial system while dispensing cost effective and inclusive financial services.

Agenda for 2025-26

VI.10 The Department had set out the following goals for 2025-26:

• Issuance of harmonised regulations on ‘Income Recognition, Asset Classification and Provisioning Pertaining to Advances’ to regulated entities (REs) [Paragraph VI.11];

• Comprehensive review of all non-fund based (NFB) contingent facilities issued by lending institutions (Paragraph VI.12);

• A draft regulatory framework for all forms of co-lending arrangements among REs was issued for public comments on April 9, 2025. Final guidelines would be issued post examination of the comments received (Paragraph VI.13);

• Framework for Securitisation of Stressed Assets: Discussion Paper was issued in January 2023, on which suggestions were received from the various stakeholders. Based on the same, the draft framework has been issued for public comments on April 9, 2025 and final guidelines are proposed to be issued post examination of the same (Paragraph VI.14);

• Draft guidelines on Expected Credit Loss (ECL) framework (Paragraph VI.11);

• Final Phase of Basel III Implementation:
  
  (a) Issuance of draft guidelines on standardised approach for credit risk;
  
  (b) Issuance of final guidelines on market risk; and (c) Updating Pillar 3 disclosure requirements in alignment with the Basel III framework of Basel Committee on Banking Supervision (BCBS) [Paragraphs VI.15 and VI.16];

• Issuance of guidelines on standardised approach to counterparty credit risk (SA-CCR) [Paragraph VI.17];

• Regulatory principles on model risk management (Paragraph VI.18);

• Issuance of prudential guidelines on climate risk for banks. This includes issuance of final guidelines on disclosure of climate related financial risks and guidance on climate scenario analysis and stress testing (Paragraph VI.19);

• Operationalisation of the data repository - Reserve Bank - Climate Risk Information System (RB-CRIS) [Paragraph VI.19];

• Issuance of principles for effective management and supervision of climate related financial risks (Paragraph VI.19);

• Review of the framework for acceptance of green deposits (Paragraph VI.19);

• Guidelines on sustainability linked loans (Paragraph VI.19);

• Suitable guidelines to address mis-selling of financial products and services by REs (their own as well as third-party) [Paragraph VI.20];

• Issuance of ‘Frequently Asked Questions (FAQs)’ on the Master Direction on Know Your Customer (KYC) [Paragraph VI.21];

• Review of regulations on internet and mobile banking for all banks (Paragraph VI.22);

• Differentiated regulatory framework for Type I - NBFCs, i.e, NBFCs without public funds and customer interface (Paragraph VI.23);

• Development of a platform namely ‘Regulatory Application Management System’ (RAMS) to undertake an end-to-end digital transformation of its internal processing of regulatory applications to ensure a lifecycle approach to regulation of any regulated entity (Paragraph VI.24); and

• Consolidation of existing guidelines on regulatory matters into entity-wise Master Directions (Paragraph VI.25).

Implementation Status

VI.11 The final Reserve Bank of India (Commercial Banks - Asset Classification, Provisioning and Income Recognition) Directions, 2026 incorporating ECL framework for provisioning were issued on April 27, 2026. These Directions, inter alia, provide for introduction of a staging framework for asset classification, adoption of a forward-looking provisioning approach and adoption of effective interest rate (EIR) method. These are intended to further strengthen credit risk management practices, improve comparability across regulated entities, and align the regulatory framework more closely with internationally accepted financial reporting principles.

VI.12 Comprehensive guidelines on NFB credit facilities such as guarantees, letters of credit and co-acceptances were issued on August 6, 2025. The guidelines explicitly recognised electronic guarantees, introduced prudential safeguards, including specific limits on the issuance of guarantees by co-operative banks, regional rural banks (RRBs) and local area banks (LABs). The guidelines expand the list of regulated entities permitted to issue partial credit enhancement (PCE) and rationalise the capital requirements for PCE.

VI.13 The extant guidelines on co-lending were limited to priority sector loans. Accordingly, revised Directions on co-lending, expanding the framework to all loans, were issued on August 6, 2025. The Directions clearly delineated roles and responsibilities of originating and partner RE, stipulated reduction in minimum share of individual loans to be retained by REs under co-lending agreement (CLA) from 20 per cent to 10 per cent; and extended first-loss default guarantee cover up to 5 per cent.

VI.14 The public comments received on the draft framework on securitisation of stressed assets were examined in detail. Further consultations with specific identified stakeholders are underway.

VI.15 Draft Directions on the capital charge for credit risk - standardised approach under the Basel III standards were issued on October 7, 2025, and final directions after examining the feedback were released on April 27, 2026. Major changes proposed, inter alia, include introduction of more granular and risk-sensitive approaches for risk-weighting, lower risk weight for unrated MSMEs, with an expanded coverage of MSMEs and realignment of the credit conversion factors for non-market off-balance sheet exposures. The revised standards shall be effective from April 1, 2027.

VI.16 Market risk guidelines are under finalisation based on the feedback received on the draft guidelines and the impact analysis of proposed guidelines. Draft guidelines on Pillar 3 disclosure requirements in alignment with the Basel III framework have been issued for public comments on May 19, 2026.

VI.17 The draft SA-CCR guidelines are under finalisation, with a detailed impact study of the guidelines already completed.

VI.18 The draft Directions on model risk management, applicable to all models including those using artificial intelligence (AI)/machine learning (ML), while also duly incorporating recommendations of the Framework for Responsible and Ethical Enablement of Artificial Intelligence (FREE-AI) Committee, are under final stages of completion.

VI.19 A suite of climate related initiatives, including disclosure norms, scenario analysis, stress testing guidance, RB-CRIS data repository, among others, are at advanced stages of implementation in sync with the progress in the broader ecosystem capacity and maturity.

VI.20 The draft Amendment Directions on ‘Advertising, Marketing and Sales of Financial Products and Services by Regulated Entities’ addressing the issues related to mis-selling of financial products and services have been issued on February 11, 2026 for public consultation.

VI.21 The FAQs on the Master Direction on Know Your Customer (KYC) were issued on June 9, 2025. The same have now been appropriately subsumed in the KYC Directions, 2025.

VI.22 The draft Directions on ‘Digital Banking Channels Authorisations, 2025’ were issued on July 21, 2025 which updated the prudential as well as technological criteria for all digital banking channels, including mobile banking and internet banking. Based on the detailed examination of the stakeholders’ views, entity-wise final Master Directions (MDs) were subsequently issued on November 28, 2025, effective January 1, 2026.

VI.23 The regulatory framework applicable to NBFCs not accessing public funds and not having customer interface (including ‘Type I NBFCs’) has been reviewed comprehensively and draft Amendment Directions were issued for public comments on February 10, 2026 proposing, inter alia, exemption from registration requirement to these NBFCs with asset size of less than ₹1,000 crore, subject to the specified conditions, and other related aspects. Based on the detailed examination of the public comments/feedback, the final Amendment Directions were issued on April 29, 2026.

VI.24 The RAMS project is being implemented across the Department in three phases. The requirement gathering and technical development for Phase I has been completed and is ready for deployment. Concurrently, the requirement gathering for Phase II has been initiated.

VI.25 Under the ‘Consolidation of Regulations’ exercise, more than 11,000 instructions were consolidated into 244 MDs (237 plus seven new MDs on ‘Digital Banking Channels Authorisation’ for seven types of REs) on an ‘as-is’ basis, across 11 types of REs, and were cohesively organised across various regulatory areas (Box VI.1). These MDs will serve as the sole library of regulations administered by the Department. The consolidation exercise is expected to reduce the compliance cost for REs and serve as a major step towards ease of doing business.

Major Developments³

Basel III Framework on Liquidity Standards - Liquidity Coverage Ratio (LCR) Norms

VI.26 To strengthen banks’ short-term liquidity resilience and further align with Basel III Liquidity Standards, LCR guidelines were amended vide circular dated April 21, 2025, effective April 1, 2026. Key changes include: (i) 2.5 per cent additional run-off factor for retail deposits and unsecured wholesale funding from non-financial small business customers with internet and mobile banking access; (ii) haircuts on the market values of government securities (G-secs) classified as level 1 high quality liquid assets (HQLA) to match margin requirements under the liquidity adjustment facility (LAF) and marginal standing facility (MSF); and (iii) clarifying that other legal entities (OLE) category shall consist of all deposit and other funding from banks/insurance companies and financial institutions and entities in the business of financial services.

Framework for Formulation of Regulations and Regulatory Review Mechanism

VI.27 The Framework for Formulation of Regulations, issued on May 7, 2025, lays down broad principles for formulation, amendment and review of regulations by the Reserve Bank, ensuring a standardised, transparent and consultative approach. Additionally, an institutional mechanism has been operationalised with effect from October 1, 2025 through creation of a Regulatory Review Cell and an external Advisory Group on Regulation (AGR) to ensure periodic, structured review of regulations leveraging stakeholder engagement and industry expertise. Further, ‘Connect 2 Regulate’ platform was also launched to broaden the involvement of stakeholders in policy formulation and review, with the objective of making the process more consultative.

Reserve Bank of India (Digital Lending) Directions, 2025

VI.28 Final consolidated directions on digital lending were issued on May 8, 2025 to streamline existing instructions and strengthen consumer protection. The framework introduces two key reforms: (i) mandatory display of comprehensive digital view of all matched loan offers with standardised disclosures as also the name(s) of the unmatched lender(s); and (ii) operationalisation of a public directory of digital lending apps (DLAs) to enable borrower verification and curb unauthorised lending applications.

Lending Against Gold and Silver Collateral

VI.29 Final Directions were issued on June 6, 2025 to address prudential and conduct-related gaps across REs and improving credit availability to borrowers requiring small value loans. The framework revises the loan-to-value (LTV) ratios (85 per cent for loans up to ₹2.5 lakh, and at 80 per cent for loans above ₹2.5 lakh but up to ₹5 lakh, with continuation of previous limit of 75 per cent for loans above ₹5 lakh) and removes restriction on co-operative banks and RRBs for bullet repayment of loans against gold collateral.

Review of Reserve Bank of India (Know Your Customer) Directions, 2025

VI.30 To ease the processes of ‘KYC’ and ‘updation of KYC’ for customers as well as REs, instructions were issued on June 12, 2025 and August 14, 2025. Key reforms include: (i) Central KYC Record Registry (CKYCR) as first reference point for KYC; (ii) use of business correspondents (BCs) for KYC updation; (iii) No denial of services to public, especially the economically/socially disadvantaged, including the persons with disabilities (PwDs); (iv) all transactions allowed for low-risk individual customers and updation of KYC within one year from the due date or June 30, 2026, whichever is later; and (v) mandatory intimations for periodic updation of KYC.

Reserve Bank of India (Project Finance) Directions, 2025

VI.31 Final directions were issued on June 19, 2025 establishing a principle-based regime for resolution of stress in project finance. Key measures included permitting deferment of date of commencement of commercial operations (DCCO) [up to 2 years for non-infra and 3 years for infra] without asset classification downgrade, and risk mitigation requirements such as mandatory common loan agreements, minimum land availability prior to disbursal, and enhanced lender participation.

Investment in Alternate Investment Fund (AIF)

VI.32 Final guidelines to cap individual contribution of an RE to 10 per cent of the corpus (20 per cent collectively across REs) were issued on July 29, 2025. Certain flexibility has been provided to REs to invest in AIFs with downstream investment in debtor companies.

Pre-payment Charges on Loans

VI.33 Final instructions were issued on July 2, 2025 removing pre-payment charges on specified floating rate loans to individuals and MSEs (subject to thresholds), and addressing restrictive contractual practices.

Settlement of Claims in Respect of Deceased Customers of Banks

VI.34 Final instructions were issued on September 26, 2025 establishing a harmonised framework with standardised documentation to ease claim settlement for nominees and legal heirs in respect of deposit accounts, safe deposit locker and articles in safe custody of a deceased customer.

Reserve Bank of India (Interest Rate on Advances) Amendment Directions, 2025

VI.35 The framework governing floating rate loans was amended on September 29, 2025 to allow banks to reduce the spread components, excluding the credit risk premium, at a shorter periodicity than once in three years for customer retention, on justifiable grounds, in a non-discriminatory manner, and in terms of the bank’s policy. Further, REs may, at their option, provide a choice to the borrowers to switch over to a fixed rate at the time of reset, as per their Board approved policy.

Scheme for Facilitating Accelerated Payout - Inoperative Accounts and Unclaimed Deposits

VI.36 To encourage the banks to actively pursue customers/depositors for re-activation of their inoperative accounts and return of their unclaimed amounts lying with Depositor Education and Awareness (DEA) Fund, the Reserve Bank launched a ‘Scheme for Facilitating Accelerated Payout - Inoperative Accounts and Unclaimed Deposits’. The Scheme aims to reduce both the stock of existing unclaimed deposits and fresh accretion of flows to the DEA Fund. It will run for a period of one year, viz., October 1, 2025 to September 30, 2026.

Reserve Bank of India (Trade Relief Measures) Directions, 2025

VI.37 To mitigate the impact of trade disruptions on exports arising from global headwinds, trade relief measures were issued on November 14, 2025, providing relief to eligible borrowers. These measures, inter alia, include: (a) moratorium on payment of all instalments (principal and/or interest) falling due in term loan between September 1, 2025 and December 31, 2025; (b) deferment of recovery of interest applied in respect of all working capital facilities during the period; and (c) application of interest on accrual but simple interest basis during the moratorium/deferment period.

Gold Metal Loans

VI.38 Revised instructions were issued on December 4, 2025. The scope of eligible borrowers was expanded to include a wider category of jewellers (i.e., entities who either manufacture and/or sell jewellery in domestic and/or export markets), and repayment tenor for non-exporters was extended up to 270 days, aligned with working capital cycles (revised upward from earlier 180 days).

Repeal of Guidelines on Enhancing Credit Supply for Large Borrowers through Market Mechanism

VI.39 Existing guidelines were repealed on December 4, 2025, effective January 1, 2026, as the broader objective of reducing bank dependence of large borrowers had been largely achieved. Banks are now required to internally monitor risks from highly leveraged large exposures.

Business Authorisation for Co-operative Banks

VI.40 Final Directions on business authorisation for co-operative banks were issued on December 4, 2025 striking a balanced approach, empowering co-operative banks with enhanced operational autonomy while embedding robust safeguards. The calibrated relaxation of authorisation norms intends to facilitate expanding credit outreach, leveraging technology-driven solutions, and supporting localised development priorities.

Review of Guidelines on Basic Savings Bank Deposit (BSBD) Accounts

VI.41 Revised final guidelines were issued on December 4, 2025 enhancing benefits in a BSBD account, including expanded free services, digital banking access, simplified conversion, and removal of restrictions on holding other accounts.

Maintenance of Cash Credit Accounts, Current Accounts and Overdraft Accounts

VI.42 Revised instructions were issued on December 11, 2025 to strengthen credit discipline and facilitate better monitoring of transactions and utilisation of funds with no restrictions placed on opening of cash credit accounts. Banks having minimum 10 per cent share (either in banking system’s aggregate exposure to a borrower or banking system’s aggregate fund-based exposure to a borrower) can maintain current accounts and overdraft accounts without restrictions. Banks not meeting the criteria can maintain collection accounts.

Lending to Related Parties

VI.43 Revised Directions were issued on January 5, 2026 strengthening governance and conflict management. Key reforms include overall responsibility on the Board, mandatory recusal of interested parties, and introduction of the concept of ‘Reciprocally Related Person’ to address quid pro quo lending risks.

Ceiling on Continuous Tenure of Director of Cooperative Banks

VI.44 Draft amendment Directions pertaining to governance of UCBs and rural cooperative banks (RCBs) were issued on January 8, 2026, which prescribe a mandatory three-year cooling-off period after 10 years of continuous tenure before a Director can re-join the same bank’s Board. This measure reinforces corporate governance in the sector while still permitting Directors to serve on other banks’ Boards during the cooling-off period if otherwise eligible.

Relief Measures in Areas Affected by Natural Calamities

VI.45 Revised draft Directions were issued on January 27, 2026 on exposures affected by natural calamities. These guidelines empowers REs to design and implement resolution plans with dedicated windows prescribed for invoking the resolution framework. Restructured exposures retain ‘Standard’ classification, accrual-based income recognition, and lower additional provisioning compared to other restructured assets. Final Directions were issued on April 29, 2026.

Review of Lending Norms for UCBs

VI.46 Draft Directions were issued on February 10, 2026 which after examination of public feedback was updated in final Directions issued on April 29, 2026. The Directions rationalised the definition of unsecured advances, enhanced loan limits for unsecured advances (individual as well as bank level⁴), specified certain disclosure requirements and deregulated the tenor and moratorium requirements for housing loans for Tier 3 and Tier 4 UCBs, among others.

Reserve Bank of India (Capital Market Exposure) Amendment Directions, 2026

VI.47 Revised framework was issued on March 30, 2026 (effective July 1, 2026). Key changes include rationalised limits for lending against securities to individuals, updated norms for exposures to capital market intermediaries, and permitting financing by commercial banks (excluding SFBs) for acquisition of control in companies, subject to prudential safeguards.

Review of Framework of Limiting Customer Liability in Digital Transactions

VI.48 Instructions on limiting liability of customers in unauthorised electronic banking transactions were reviewed and draft instructions were issued on March 6, 2026, which, inter alia, propose to enhance the scope of existing instructions on limiting liability of customers to cover other categories of fraudulent electronic banking transactions, reduce the time taken by banks to process complaints related to fraudulent electronic banking transactions, and introduce a compensation mechanism for small value fraudulent electronic banking transactions.

Review of Guidelines on Declaration of Dividend

VI.49 The Reserve Bank issued the revised instructions on declaration of dividend by commercial banks on March 10, 2026. These guidelines are aimed at enabling the banks with higher net profits, lower net non-performing assets and higher cushion in terms of capital adequacy to be eligible to declare higher dividends.

Agenda for 2026-27

VI.50 During 2026-27, the Department will focus on the following key deliverables:

• Strengthening of Central KYC Records Registry (CKYCR) Framework: Implementation of customer identification procedure confidence level (CCL) framework by REs;

• Extending video-based customer identification process (V-CIP) for onboarding non-resident Indian customers from offshore locations;

• Review of Directions on responsible business conduct;

• Review of Directions on interest rates on advances;

• Review of Directions on credit risk management;

• Review of market mechanisms for credit risk distribution; and

• Framework for shared loan arrangements.

FinTech Department

VI.51 The FinTech Department is entrusted with the responsibility of fostering innovation in the FinTech ecosystem, while remaining vigilant and addressing the associated risks.

Agenda for 2025-26

VI.52 The Department had set out the following goals for 2025-26:

• Expanding the scope and coverage of CBDC and introducing new use cases and features (Paragraph VI.53 - VI.55);

• Introducing business-to-customer (B2C) functionality in Unified Lending Interface (ULI) [Paragraph VI.56];

• Scaling up ‘MuleHunter.ai^TM’ (Paragraph VI.57); and

• Preparing a framework for responsible and ethical adoption of AI in financial sector (Paragraph VI.58).

Implementation Status

VI.53 User level programmability was introduced in the retail segment of CBDC, enabling individual users to send programmable money to other individuals. Bharat Interface for Money (BHIM) has also been enabled to discover existing CBDC wallets. At the institutional level, multiple government agencies commenced pilots in various direct benefit transfer (DBT) schemes leveraging programmability feature of CBDC to ensure productive utilisation of public funds.

VI.54 In case of offline CBDC, both proximity based (Near Field Communication) and non-proximity based (SMS) solutions are being tested. In the wholesale segment, the existing pilots on secondary market trades settlement of G-Secs and inter-bank borrowing segment were expanded. Further, the Reserve Bank is actively engaging in developing cross-border CBDC arrangements with other countries on a bilateral and multilateral basis.

VI.55 To foster innovation in CBDC and tokenisation space, the Reserve Bank announced the launch of RBI CBDC and Asset Tokenisation (CAT) Sandbox and Unified Markets Interface (UMI) during the Global Fintech Festival 2025. CAT Sandbox will enable entities to access test environments for developing, testing and demonstrating innovative CBDC and tokenisation use cases, applications, and value-added solutions. Under UMI, certificates of deposit (CDs) were the first instrument to be issued in tokenised form and settled through wholesale CBDC.

VI.56 In addition to expanding the scope of ULI, the platform usage was enhanced through onboarding of more lenders and data service providers. The development of a B2C (customer-facing) application is also underway.

VI.57 MuleHunter.ai^TM leverages a diverse set of behavioural and transactional features derived from real-world fraud patterns developed based on ecosystem level learnings, to assign a confidence score (i.e., probability) to each bank account, indicating its likelihood of being a mule. As on March 31, 2026, it has been implemented in 26 banks. Implementation is underway in four more banks, with plan to further scale it to more banks. The course of action, post assigning the confidence score of a suspected mule account by MuleHunter.ai^TM, rests with the individual banks, based on their internal assessments and conduct of enhanced due diligence procedures.

VI.58 To encourage the responsible and ethical adoption of AI in the financial sector, the Framework for Responsible and Ethical Enablement of Artificial Intelligence (FREE-AI) Committee was constituted by the Reserve Bank on December 26, 2024, which submitted its report on August 13, 2025 (Box VI.2). The Department is undertaking an assessment of the Committee’s report and recommendations, which will help in formulation of more specific guidance for the entities in the financial sector.

Box VI.2 FREE-AI in the Financial Sector – Key Recommendations The report of the 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. At the core of the framework are seven sutras which articulate the foundational principles for AI development, deployment, and governance (Chart). The framework is structured around six strategic pillars – (i) infrastructure; (ii) policy; (iii) capacity to enable innovation; (iv) governance; (v) protection; and (vi) assurance to address risk. Using the sutras as guidance, the Committee has called for a dual focus approach – fostering innovation while ensuring effective risk mitigation. Across these six pillars, the Committee has set out 26 recommendations, 13 each on innovation enablement and risk mitigation. Some of the key recommendations are as follows. Innovation Enablement Establishing a high-quality financial sector data infrastructure as digital public infrastructure to broaden access to data and computing resources. Setting up an AI innovation sandbox to allow stakeholders to build and test AI-driven solutions in a secure and controlled environment. Developing indigenous, sector-specific AI models and making them available as a public good. Regulators to create a comprehensive AI policy framework for the financial sector. The Reserve Bank should consider issuing a consolidated AI guidance that can serve as a single reference point for REs and the wider FinTech ecosystem. Strengthening institutional capacity across all levels including boards, employees, and other stakeholders. Sharing of best practices within the sector, and a more flexible, risk-proportionate compliance approach for low-risk AI applications to support inclusion and drive innovation. Risk Mitigation Regulated entities should establish a Board-approved AI policy and strengthen their existing governance structures across the entire AI lifecycle. Expand product approval processes, consumer-protection frameworks, and internal audits to cover AI-specific considerations. Enhance cybersecurity controls and incident-reporting mechanisms to address AI-driven vulnerabilities. Organisations to ensure transparency by informing consumers whenever they are interacting with AI systems, thereby supporting accountability and safer adoption of AI technologies. Together, the seven sutras, six pillars, and 26 actionable recommendations articulate the Committee’s vision of a financial ecosystem in which the encouragement of innovation is in harmony with the mitigation of risk. Source: RBI.

Major Initiatives

Fourth Edition of HaRBInger

VI.59 The Reserve Bank launched the fourth edition of its Global Hackathon – ‘HaRBInger – Innovation for Transformation’ on October 23, 2025, with the theme ‘Secure Banking: Powered by Identity, Integrity and Inclusivity’, covering three problem statements – ‘Tokenised KYC’, ‘Offline CBDC (e₹)’ and ‘Enhancing Trust’. A total of 496 proposals were received, including 34 from teams from 15 other countries. The evaluation process was carried out in multiple stages comprising preliminary screening (Phase I), shortlisting for the solution development phase (Phase II) and final evaluation (Phase III). The winners were selected by an independent jury during April 17-18, 2026 based on parameters such as innovation, solution comprehensiveness, product readiness, scalability and security.

Regulatory Sandbox (RS)

VI.60 The Reserve Bank has been operating the RS framework since 2019, under which five cohorts⁵ have been completed as on March 31, 2026 (Table VI.1). Further, the ‘On-Tap’⁶ application facility under the RS, which was earlier available only for closed themes, has now been expanded to accept ‘Theme Neutral’ applications for testing any product or service falling within regulatory domain of the Reserve Bank.

Account Aggregator (AA) Framework

VI.61 In order to enhance the scope and quality of data shared through the AA framework, a comprehensive review of schema for deposit, term deposit, and recurring deposit accounts maintained with banks was undertaken. Accordingly, an upgraded Financial Information (FI) Schema version 2.0 was released on January 23, 2025. The FI Schema 2.0 expanded the scope of the FI with addition of new fields (such as account type, currency, CKYC registration status, etc.), defining data type to be provided for each field, and providing clarification on the mandatory and optional data fields. It was ensured that all the financial information providers (FI-Ps) providing such information implement the updated schema within a stipulated timeline to avoid any disruption to the AA ecosystem.

Engagements and Interactions with the FinTech Ecosystem

VI.62 FinTech Department continued regular engagement with FinTech ecosystem through two structured monthly platforms, ‘Finteract’ and ‘Finquiry’. ‘Finteract’ sessions are conducted across various cities and regions for a dedicated discussion with the local Fintech entities, whereas ‘Finquiry’ provides a forum at the FinTech Department, Reserve Bank, Mumbai for FinTechs to seek clarity or discuss any matter of relevance. During 2025-26, four editions of ‘Finteract’ and 10 editions of ‘Finquiry’ have been convened, with about 450 and 1,100 participants, respectively.

Global Fintech Fest (GFF) 2025

VI.63 The Reserve Bank set up RBI Innovation Pavilion during the sixth edition of the GFF 2025, held during October 7-9, 2025 in Mumbai, showcasing the Reserve Bank’s ongoing innovation initiatives such as ULI, CBDC, Regulatory Sandbox, MuleHunter.ai^TM, FinTech Repository and the FREE-AI framework. Additionally, the Reserve Bank in collaboration with RBIH, organised the ‘FinTech Showcase’ to foster collaboration and facilitate market adoption of innovative solutions by banks and financial institutions. This session also featured 14 startups associated with the Reserve Bank’s initiatives such as Regulatory Sandbox, HaRBInger and FinTech repository.

VI.64 During the GFF 2025, the Reserve Bank collaborated with the Ministry of External Affairs, Government of India, which hosted ‘India FinTech Connect’ on October 7, 2025. The event brought together embassies, Indian missions, and global stakeholders to engage with India’s export-ready FinTech innovations. The showcase also featured select startups from HaRBInger initiative, spotlighting solutions that strengthen inclusion, trust and cross-border collaboration. During the connect, 19 Indian FinTechs pitched their products to more than 50 Indian embassies which participated virtually. Additionally, a central bankers’ roundtable was also convened on the theme ‘Harnessing Emerging Tech in Finance’ on October 8, 2025 with participation from senior representatives from BIS Innovation Hub, Singapore; European Central Bank; and central banks of Denmark, Eastern Caribbean, Estonia, France, Mauritius, Singapore, Sri Lanka and Thailand.

Singapore FinTech Festival (SFF) 2025

VI.65 SFF is a flagship global FinTech event organised with the support of the Monetary Authority of Singapore, the Global Finance and Technology Network (GFTN), and other partners. The Reserve Bank in collaboration with the Securities and Exchange Board of India (SEBI), the International Financial Services Centres Authority (IFSCA), and the Insurance Regulatory and Development Authority of India (IRDAI), set up ‘India Innovation Pavilion’ during the 10th edition of the SFF) held during November 12-14, 2025. Each regulator showcased key innovations from its respective domains, highlighting India’s position as one of the most dynamic and rapidly growing FinTech ecosystems.

Projects Undertaken Through Reserve Bank Innovation Hub (RBIH)

VI.66 Apart from MuleHunter.ai^TM, other important projects undertaken through RBIH, a wholly owned subsidiary of the Reserve Bank, are:

(a) Unified Lending Interface (ULI) is an enterprise-grade open architecture platform, central to the operations of credit ecosystem. It ensures digital access to information from diverse data sources available on the platform, and acts as a pivotal Digital Public Infrastructure (DPI) in the lending space. As on March 31, 2026, ULI surpassed 9.6 crore application programming interface (API) hits across 12 loan journeys, and has onboarded 117 lenders, including all public sector banks, private banks, small finance banks, RRBs, district central cooperative banks (DCCBs) and NBFCs and making available 134 data services⁷. These datasets enable frictionless formal credit access for vulnerable sections of society, fostering inclusive financial growth. The universe of lenders and data/service providers, including state governments for digital land records is continuously being scaled up.

(b) Digital Payment Intelligence Platform (DPIP) is a collaborative, technology-driven framework envisaged to strengthen fraud risk management in the digital payment ecosystem. In the first phase of DPIP, a smart registry is being developed based on suspicious / fraudulent transactions reported by banks, which will prevent onboarding of non-bona fide actors. In the second phase, an AI/ML based model will be developed using past transactions data to provide banks a real-time transaction-wise risk score for deciding their suitable course of action. Seven banks have been onboarded to DPIP pilot Phase I as on March 31, 2026.

(c) RBIH also operates FinTech and Emerging Technologies (EmTech) repositories that capture essential information about FinTech entities and function as a sector-wide repository for monitoring FinTech evolution. To make the repositories user friendly and offer different functionalities, various upgrades were made, including mobile view and ‘Connect Feature’, wherein FinTechs can connect with ecosystem players such as banks, investors, and incubators, and vice versa, in a consent-based framework. As on March 31, 2026, the number of FinTechs and REs onboarded on FinTech and EmTech repositories are 693 (950 registrations received) and 33 (86 registrations received), respectively.

Agenda for 2026-27

VI.67 In 2026-27, the Department will focus on the following goals:

• Expanding the CBDC pilot to serve new use cases in direct benefit transfer schemes and business applications in the domestic space;

• Providing a framework for testing of innovative products/services leveraging CBDC under the CBDC and Asset Tokenisation (CAT) sandbox;

• Exploring additional pilots on tokenisation of financial assets along with settlement using CBDC and enlarging the scope to include more participants in the pilot (Utkarsh 2029);

• Exploring a bilateral/multilateral cross-border CBDC pilot with select use cases and engaging in multilateral projects on cross-border payments on technical and governance standards;

• Scaling up the Unified Lending Interface (ULI) through onboarding more data service providers and lenders (Utkarsh 2029);

• Expansion of MuleHunter.ai^TM with implementation at more banks;

• Explore integration of smart registry with MuleHunter.ai^TM and its implementation across banks;

• Conducting the 5th edition of Global Hackathon - HaRBInger;

• Publication of standards to enhance customer protection and user experience within the account aggregator framework;

• Initiate steps for developing an AI Innovation Sandbox for financial sector to enable safe, controlled experimentation of AI solutions; and

• Establish principle-based framework for:
  
  (i) the use of AI in the financial sector
  
  (ii) the use of Quantum in the financial sector (Utkarsh 2029).

4. SUPERVISION OF FINANCIAL INTERMEDIARIES

Department of Supervision

VI.68 The Department of Supervision is entrusted with the responsibility of supervising all SCBs (excluding RRBs), LABs, payments banks (PBs), SFBs, CICs, AIFIs, UCBs, NBFCs [excluding housing finance corporations (HFCs)], and asset reconstruction companies (ARCs).

Commercial Banks

VI.69 The Department took several measures to further strengthen both onsite and off-site supervision of the SCBs, LABs, PBs, and SFBs during the year.

Agenda for 2025-26

VI.70 The Department had set the following goals for 2025-26:

• Strengthening of liquidity stress tests of SCBs by developing a cash flow analysis to ensure banks remain resilient during episodes of stress. The process would evaluate the potential impact of extreme but plausible scenarios on a bank’s liquidity position, ensuring it can meet obligations even during crises. It would provide forward-looking perspective and assess how stable banks’ liquidity positions remain under adverse conditions. By identifying vulnerabilities and ensuring adequate liquidity buffers, stress testing would aid in ensuring resilience of banks, protect depositors’ interest and prevent systemic risks (Paragraph VI.71);

• Further strengthening the supervisory framework for PBs and SFBs (Paragraph VI.72);

• Digital services are important channels for servicing customers and ensuring resilience of these channels is of paramount importance. A framework will be devised with specific parameters for operational resilience of digital channels in REs (Paragraph VI.73);

• Issuance of guidelines on digital forensic readiness (Paragraph VI.74); and

• To provide a near-real-time view and analytics on the uptime of select digital services for the benefit of customers of banks, a dynamic online dashboard would be developed, and the banks would be onboarded in a phased manner (Paragraph VI.75).

Implementation Status

VI.71 Liquidity risk stress testing framework for banks underwent comprehensive enhancement from a reverse liquidity stress testing model to a forward-looking model, which predicts ‘survival horizon’/ ‘days to failure’ for entities based on analysis of cash inflows and outflows. Consistent with the LCR framework, the model applies common scenarios with varying run-off rates and asset haircuts on individual banks to assess their ability to meet short-term obligations during crises. Reflecting lessons from the 2023 global banking turmoil⁸, survival horizons of respective banks are also mapped with the extent of insured deposits and concentration of funding. Entities with high level of funding concentration, low insured deposits, and short survival horizon would be prioritised for supervisory intervention. The model is being implemented semi-annually and presented before the Board for Financial Supervision.

VI.72 Separate supervisory rating model for SFBs has been developed for implementation from supervisory cycle 2026-27, while the model for ARCs has been reviewed. The need for development of a supervisory rating model for PBs is being examined.

VI.73 Work on a Service Availability and Resilience Framework for digital banking channels is under progress. The framework is proposed to specify key resilience-related parameters for digital services offered by REs and shall be issued for public consultation prior to finalisation.

VI.74 A set of baseline requirements on ‘Digital Forensic Readiness’ is under advanced stage of finalisation.

VI.75 The online dashboard for real-time monitoring of banks’ service availability across select digital services is currently being evaluated under a pilot phase through Indian Banks’ Association (IBA), involving 10 banks.

Other Initiatives

Fraud Analysis

VI.76 An assessment of bank group-wise fraud cases over the last three years indicates that although the number of frauds for public and private sectors banks have reduced, the amount involved has increased over the years (Table VI.2). While number of frauds was highest under card/internet/digital payments category during 2023-24 and 2024-25, advances category accounted for the largest share in 2025-26. In value terms, frauds were concentrated in the advances category across the three years (Table VI.3).

Thematic Studies

VI.77 Thematic Studies were conducted in the areas of: (a) credit card operations; (b) business correspondents; (c) efficacy of the transaction monitoring systems in major banks and on the level of outsourcing in the area/operations relating to KYC/AML/CFT⁹; (d) top-up housing loans; (e) implementation of Internal Ombudsman Scheme; and (f) adoption of AI in supervised entities (SEs).

Cyber Risk

VI.78 In order to enhance cyber resilience across the SEs, the Reserve Bank has operationalised the Cyber Range initiative through a ‘state-of-the-art’ platform deployed at Institute for Development and Research in Banking Technology (IDBRT). The platform facilitates cyber drill exercises based on simulated scenarios, including incidents observed or reported across SEs, thereby strengthening sectoral preparedness, response capabilities, and resilience against emerging cyber threats.

Agenda for 2026-27

VI.79 The Department has set out the following goals for 2026-27:

• Initiate micro-data analytics project for cyber risk;

• Review of risk-based approach for KYC/AML supervision;

• Alignment of incident reporting module of DAKSH¹⁰ with Financial Stability Board (FSB)’s Format of Incident Reporting Exchange (FIRE);

• Onboarding additional set of banks under Phase 2 of the pilot for monitoring service availability across select digital banking services through a real-time online dashboard;

• Issuance of guidelines on Digital Forensic Readiness;

• Thematic review to assess the cyber risks emanating from usage of AI tools/systems by SEs; and

• Undertake a structured mapping of existing sector-specific cybersecurity requirements and review them, as appropriate, in the light of the forthcoming Financial Sector Cybersecurity Strategy.

Urban Cooperative Banks (UCBs)

VI.80 The Department continued to monitor the performance of UCBs during the year and undertook measures for a safe and well-managed urban cooperative banking sector.

Agenda for 2025-26

VI.81 The Department had set out the following goals for supervision of UCBs in 2025-26:

• Review of Risk-Based Approach (RBA) for KYC/AML supervision of select UCBs (Utkarsh 2.0) [Paragraph VI.82];

• Examining the migration of UCBs to risk-based supervision (Paragraph VI.83); and

• Issuance of updated guidelines on cyber security framework (Paragraph VI.84).

Implementation Status

VI.82 Comprehensive review of RBA for KYC/AML supervision of select UCBs was completed, with revised framework covering UCBs accounting for around 60 per cent of total deposits of the sector. Off-site risk assessment and risk profiling are more focused now, covering significant areas of inherent KYC and money laundering/terrorism financing risks, including emerging segment-wide risks.

VI.83 The Department has initiated the process for development of Risk-Based Supervisory Framework for UCBs.

VI.84 Draft updated guidelines on cyber security framework for UCBs have been formulated and shall be issued for public consultation before finalisation.

Agenda for 2026-27

VI.85 The Department has identified the following goals for supervision of UCBs in 2026-27:

• Developing a supervisory data quality index (sDQI) for Tier 3 and Tier 4 UCBs (Utkarsh 2029);

• Augmenting the capacity building of staff in the UCB sector, through in-person workshops and e-learning mode under Mission SAKSHAM (Sahakari Bank Kshamata Nirman) [Utkarsh 2029];

• Cyber mapping exercise for UCBs under cyber security framework level 2, 3, and 4 (Utkarsh 2029);

• Migration of select UCBs to risk-based supervision (Utkarsh 2029);

• Enhancing coverage of gap assessment/information technology (IT) examination for UCBs (Utkarsh 2029); and

• Issuance of updated guidelines on cyber security framework for UCBs.

Non-Banking Financial Companies (NBFCs)

VI.86 The Department continued to closely monitor the NBFCs (excluding HFCs) and ARCs registered with the Reserve Bank.

Agenda for 2025-26

VI.87 The Department had set the following goals for supervision of NBFCs in 2025-26:

• Review of RBA for KYC/AML supervision of select NBFCs (Utkarsh 2.0) [Paragraph VI.88];

• As a thematic assessment, assessing adherence by REs to pricing guidelines prescribed vide extant regulations to ensure that the customers of such loans are not being charged exorbitant interest rates (Paragraph VI.89); and

• Migration of select NBFCs to risk-based supervision (Paragraph VI.90).

Implementation Status

VI.88 The revised KYC/AML supervisory framework for NBFCs increased the coverage of NBFCs. Off-site risk assessment model has been recalibrated to identify the potential risks in a more structured manner, considering varied business models and heterogenous nature of the sector.

VI.89 During supervisory examinations, the Reserve Bank undertook sample based examination of the pricing mechanisms and frameworks of SEs with specific focus on interest rates, processing fees charged to borrowers, and accuracy of annual percentage rate disclosed in the key fact statement. Non-compliance or discrepancies were identified and documented in the supervisory reports. Compliance to supervisory observations is being assessed as part of continuous supervisory assessment of NBFCs.

VI.90 The Department has initiated the process for development of Risk-Based Supervisory Framework for select NBFCs.

Agenda for 2026-27

VI.91 The Department has identified the following goals for supervision of NBFCs in 2026-27:

• Review of credit risk and liquidity risk stress testing framework for NBFCs;

• Cyber mapping exercise for Upper and Middle Layer NBFCs (Utkarsh 2029);

• Migration of select NBFCs to risk-based supervision (Utkarsh 2029); and

• Enhancing coverage of gap assessment/IT examination for NBFCs (Utkarsh 2029).

Supervisory Measures for All Supervised Entities (SEs)

VI.92 A unified DoS has been operationalised since 2019, in which the supervision of banks, UCBs and NBFCs is being undertaken in a holistic manner under one umbrella Department.

Agenda for 2025-26

VI.93 The Department had set out the following supervisory goals for 2025-26:

• Review and issuance of updated/harmonised regulatory instructions on Statutory Audit and Concurrent Audit in REs (Paragraph VI.94);

• Conducting detailed thematic reviews on select areas of cyber risks (Paragraph VI.95);

• Enhancing cyber resilience and capabilities of SEs through implementing recommendations of the inter-regulatory working group on uniformity in baseline cyber security guidelines of financial entities (Paragraph VI.96);

• Enhancing cyber mapping of financial systems and conducting cross-sectoral and market-wide cyber crisis simulation exercises in a phased manner (Paragraph VI.97); and

• Enhancing the existing framework for supervision of NBFCs in Base Layer (Paragraph VI.98).

Implementation Status

VI.94 The existing instructions on appointment of statutory auditors and concurrent audit system in REs have been reviewed and draft guidelines are under formulation for public consultation.

VI.95 During the year, following thematic studies in the areas of cyber risks were carried out: (i) payment system reconciliation processes in SCBs; (ii) manpower adequacy in IT/cybersecurity across the three lines of defence; (iii) Security Operations Centre (SOC) operations; (iv) transaction monitoring and customer data protection; (v) security of customer data across systems in SEs; and (vi) vulnerability management.

VI.96 Majority of the recommendations of the inter-regulatory working group on uniformity in baseline cyber security guidelines for financial entities have already been implemented.

VI.97 The cyber mapping exercise was undertaken with the objective of evaluating cyber risk exposure and interdependencies across commercial banks and information and communication technology (ICT) service providers using comprehensive questionnaires covering all major banks, capturing critical domains such as security tools, AI applications, account aggregators, and threat intelligence platforms. This initiative provides a foundational understanding of systemic cyber risks. The discussions with stakeholders are being undertaken for future risk mitigation exercises/strategies for conducting cross-sectoral and market-wide crisis simulation exercises.

VI.98 A structured framework for supervision of NBFCs in Base Layer has been developed and is scheduled to be implemented from supervisory cycle 2026-27.

VI.99 The Reserve Bank has been consistently making efforts towards countering cyber-enabled frauds and safeguarding customers’ interests (Box VI.3).

Other Initiatives

Overseas Inspection

VI.100 A framework for inspection of overseas branches and subsidiaries of Indian banks was devised to ensure comprehensive supervisory coverage. Under this framework, 15 overseas branches were inspected during the year (as at end-March 2026) and major concerns were taken up with the host supervisory authorities in respective jurisdictions for their timely remediation.

Supervisory Colleges

VI.101 The Department has established supervisory colleges for select Indian banks having cross-border operations, which serve as multilateral forums and meetings are held biennially for supervisory coordination among home and host authorities. The Reserve Bank participated in 12 supervisory college meetings for select large internationally active banks, hosted by respective overseas supervisory authorities.

Bilateral Visit

VI.102 High-level bilateral exchanges were undertaken with Central Bank of Russia (CBR) and Monetary Authority of Singapore (MAS) for supervisory cooperation and exchange of best practices on key emerging topics related to stress testing, supervision of financial conglomerates and group risk assessment, climate risk, and micro-credit concerns. The Reserve Bank supervisors also participated in a seminar on ‘Risk Analysis and Stress Test’ hosted by CBR in September 2025 and held discussions with CBR counterparts to gain insights on operational resilience, IT governance, third party risk management, data security, and AI/ML. Moreover, discussions were held with Office of the Superintendent of Financial Institutions (OFSI), Canada and European Central Bank (ECB) in January 2026 regarding strengthening of home-host cooperation, supervisory priorities, and other related matters.

Publication of Supervisory Data Quality Index (sDQI)¹¹ Scores

VI.103 The Department initiated publication of sDQI scores on quarterly basis from June 2025, as envisaged under the Utkarsh 2.0. The sDQI scores for quarter ending March, June, September, and December 2025 were published on the Bank’s website in June 2025, September 2025, January 2026, and March 2026, respectively. The individual scores were shared with respective SEs for their reference.

Agenda for 2026-27

VI.104 The Department has identified the following goals for supervision of all SEs in 2026-27:

• Augment supervisory capabilities by leveraging SupTech/AI and ML: Development of proof-of-concept, either inhouse or by engaging external consultants, for analysing/categorising the root cause of complaints of select SCBs (Utkarsh 2029);

• Develop comprehensive supervisory manuals for Senior Supervisory Managers;

• Develop a framework for assessment of business model of SEs to further improve the supervisory framework; and

• Review of Directions issued by the Department to different type of SEs.

Enforcement Department

VI.105 The Enforcement Department was set up with a view to separate enforcement action from supervisory process and to put in place a structured, rule-based approach to identify and process violations by the REs of the applicable statutes, directions issued, and conditions imposed thereunder by the Reserve Bank, and enforce the same consistently across the Reserve Bank. The objective of enforcement is to ensure compliance by the REs with the rules and regulations, within the overarching principles of financial stability, public interest and consumer protection.

Agenda for 2025-26

VI.106 The Department had set out the following goal for 2025-26:

• Review the standard operating procedure (SOP) for enforcement action based on the experience gained (Utkarsh 2.0) [Paragraph VI.107].

Implementation Status

VI.107 The review of SOP for enforcement action was carried out based on experience gained.

Major Developments

VI.108 During 2025-26, the Department undertook enforcement action against REs and imposed 241 penalties aggregating to ₹26.33 crore for contraventions/non-compliance with various provisions of statutes and Directions issued by the Reserve Bank from time to time (Table VI.4).

VI.109 For the penalties imposed during 2025-26, 342 show cause notices totaling to 698 charges were issued to different REs, of which 382 charges resulted in enforcement action (by imposition of monetary penalty) and no enforcement action was taken in respect of 316 charges.

Agenda for 2026-27

VI.110 During 2026-27, the Department proposes to achieve the following goal:

• Creation of an e-learning module on enforcement function to facilitate uniform dissemination of knowledge.

5. CONSUMER EDUCATION AND PROTECTION

Consumer Education and Protection Department

VI.111 The Consumer Education and Protection Department formulates policy frameworks to embed robust grievance resolution systems within REs; monitors the operational efficacy of internal grievance mechanisms at REs; administers the implementation of the Reserve Bank-Integrated Ombudsman Scheme (RB-IOS), 2021 through a nationwide network of 24 ombudsman offices; oversees the performance of consumer education and protection cells (CEPCs) at regional offices; and fosters public awareness regarding secure banking practices, existing regulatory standards for customer service and protection, and avenues for addressing consumer grievances.

Agenda for 2025-26

VI.112 The Department had proposed the following goals for 2025-26:

• Review of RB-IOS, 2021, including consumer education and protection cells, centralised receipt and processing centre, and contact centre (Utkarsh 2.0) [Paragraph VI.113];

• Issuance of Master Direction on grievance redressal framework in REs (Paragraph VI.114); and

• Improve the complaint management system (CMS) to better support the lodging of complaints and ensure greater consistency in decisions and outcomes (Utkarsh 2.0) [Paragraph VI.115];

Implementation Status

VI.113 Based on the operational experience, stakeholder feedback, and global best practices, the Reserve Bank had undertaken a comprehensive review of the RB-IOS, 2021. Accordingly, the RB-IOS, 2026 was issued on January 16, 2026.

VI.114 To consolidate the instructions relating to grievance redress mechanism, the Reserve Bank is in the process of issuing the Master Direction on internal grievance redress mechanism in REs.

VI.115 For the development of the next generation CMS 2.0, the Reserve Bank is working on developing a holistic solution which will leverage technological advancements for enhancing user-centricity, delivering improvements in accessibility and use. CMS 2.0 will also incorporate business process optimisation, as warranted, along with the use of advanced technological tools for facilitating a better outcome.

Major Developments

VI.116 With a view to facilitating faster and meaningful resolution of customer grievances at the level of the REs, the Internal Ombudsman Directions were issued on January 14, 2026, specific to each category of regulated entity.

VI.117 To enable the customers of rural co-operative banks to access the mechanism of Reserve Bank Ombudsman, central and state co-operative banks were brought under the ambit of the RB-IOS, 2021, effective November 1, 2025.

VI.118 As part of customer centric measure, the Reserve Bank initiated a special two-month campaign, beginning January 1, 2026, aimed to resolve all grievances pending for more than a month with the Reserve Bank Ombudsman.

Agenda for 2026-27

VI.119 During 2026-27, the Department has identified the following goal to focus on:

• Development of complaint management system 2.0 (Utkarsh 2029).

Deposit Insurance and Credit Guarantee Corporation (DICGC)

VI.120 The DICGC, a wholly owned subsidiary of the Reserve Bank established under the DICGC Act, 1961, administers the deposit insurance scheme in India. The objective of the scheme is to protect depositors of banks and preserve public confidence in the banking system, thereby contributing to financial stability. The deposit insurance scheme is mandatory for all banks (commercial and cooperative) that are licensed by the Reserve Bank. The number of registered insured banks stood at 1,950 as on March 31, 2026, comprising 124 commercial banks (including 11 SFBs, six PBs, 28 RRBs and two LABs) and 1,826 co-operative banks (1,440 UCBs, 34 StCBs and 352 DCCBs).

VI.121 The current coverage limit of deposit insurance is ₹5 lakh per depositor of a bank for deposit accounts held ‘in the same capacity and in the same right’. As on September 30, 2025, the number of fully insured deposit accounts under the coverage limit was 291.4 crore (286.9 crore a year ago) which constituted 97.5 per cent (97.7 per cent a year ago) of the total number of accounts. In terms of value, the total insured deposits were ₹1,04,09,023 crore (₹96,74,623 crore in the previous year) which was 41.1 per cent (42.6 per cent in the previous year) of assessable deposits¹². The reserve ratio (i.e., deposit insurance fund/insured deposits) as on September 30, 2025 stood at 2.37 per cent (2.21 per cent in the previous year). Currently, the coverage limit is 2.4 times the GDP per capita in 2025-26.

VI.122 The DICGC levied banks a flat rate premium of 0.12 per cent per annum during 2025-26 on the total assessable deposits for providing deposit insurance. During 2025-26, deposit insurance premium received was ₹29,947 crore, recording a y-o-y growth of 11.9 per cent over ₹26,764 crore as on March 31, 2025.

VI.123 The Reserve Bank has introduced a ‘Risk Based Premium (RBP) Framework’ for deposit insurance, in terms of the provision under Section 15(1) of the DICGC Act, 1961, which provides for differential premium rates for different categories of insured banks. Effective April 1, 2026, the framework, inter alia, provides for a two-tier risk based rating methodology for Tier 1 banks (SCBs other than RRBs) and Tier 2 banks (RRBs, rural co-operative banks and UCBs). It also extends benefits of vintage discount, signifying longer contribution to DICGC’s deposit insurance fund (DIF) without any major stress events or claim payouts from DICGC. Accordingly, better managed banks shall pay lower premium than the present premium rate of 12 paise per ₹100 of assessable deposits per annum.

VI.124 The DICGC maintains DIF for the settlement of claims of depositors of banks taken into liquidation/amalgamation or put under all-inclusive Directions. The Fund has been built up through transfer of its surplus, i.e., excess of income (mainly comprising premium received from insured banks, interest income from investments and cash recovery out of liquidation of assets of failed banks) over expenditure (payment of claims of depositors and related expenses) each year, net of taxes. During 2025-26, the total claims settled by the Corporation amounted to ₹1,988 crore, all of which were towards 72 UCBs liquidated/placed under all-inclusive Directions. The size of the DIF stood at ₹2,61,823 crore as on March 31, 2026, recording a y-o-y growth of 14.4 per cent over ₹2,28,933 crore as on March 31, 2025.

6. CONCLUSION

VI.125 The Reserve Bank undertook several measures to safeguard the financial system by further strengthening the regulatory and supervisory framework of banking and non-banking sectors, in line with global best practices. Going forward, concerted efforts would be made, inter alia, towards enhancing stress testing frameworks, strengthening cyber resilience and risk surveillance, advancing responsible and ethical innovation in the financial sector, and reinforcing consumer protection and grievance redress mechanism.

¹ Emissions that occur from sources that are controlled or owned by an organisation.

² Export-Import (EXIM) Bank, National Bank for Agriculture and Rural Development (NABARD), National Housing Bank (NHB), Small Industries Development Bank of India (SIDBI) and National Bank for Financing Infrastructure and Development (NaBFID).

³ This sub section highlights the major circulars/guidelines issued by the DoR. Annex of this Report provides a comprehensive department-wise chronology of policy announcements during April 2025-March 2026.

⁴ Aggregate ceiling for such advances by UCBs was revised to 20 per cent of total loans and advances from the ceiling of 10 per cent of total assets.

⁵ ‘Retail Payments’, ‘Cross-border Payments’, ‘MSME Lending’, ‘Prevention and Mitigation of Financial Frauds’ and ‘Theme Neutral’.

⁶ The Reserve Bank, vide press release dated April 9, 2025, allowed ‘Theme Neutral’ applications as part of the ‘On-Tap’ facility under the RS.

⁷ These services include digital land records of 10 states, other diverse data from central ministries and state governments, including Udyam and Udyam Assist from the Ministry of Micro, Small and Medium Enterprises, National Rural Livelihood Mission data from the Ministry of Rural Development, Goods and Services Tax Network (GSTN) datasets from the Department of Revenue, and digital dairy records from cooperatives.

⁸ The banking turmoil of March-May 2023 highlighted that entities with high level of uninsured deposits coupled with high concentration of funding are vulnerable during period of liquidity stress.

⁹ Know Your Customer (KYC)/Anti-Money Laundering (AML)/Combating the Financing of Terrorism (CFT).

¹⁰ Reserve Bank’s advanced supervisory monitoring system.

¹¹ sDQI is a comprehensive and quantitative measure to assess the quality of data submitted by the reporting entities through supervisory returns. The index measures data quality across four dimensions, i.e., accuracy, completeness, timeliness and consistency.

¹² Assessable deposits include all bank deposits except (i) deposits of foreign governments; (ii) deposits of central/state governments; (iii) inter-bank deposits; (iv) deposits received outside India; and (v) deposits specifically exempted by the corporation with prior approval of the Reserve Bank.

Index