Source: Financial Express Context: The Central Bank of India has entered into a co-lending partnership with IIFL Finance to expand credit access and offer loans at competitive interest rates under the guidelines of the Reserve Bank of India. What is the Co-Lending Arrangement? Co-lending is a model where banks and non-banking financial companies (NBFCs) jointly provide loans to borrowers by combining their strengths: This framework operates under the Co-Lending Arrangements (CLA) guidelines issued by RBI, revised in November 2025. Key Features of the Partnership
Fixed Tenures May Be Introduced for Upper-Layer NBFC Chiefs
Source: Business Standard Context: The government and the Reserve Bank of India are considering introducing fixed tenures for top executives of upper-layer non-banking financial companies (NBFCs) as part of governance reforms. RBI’s Scale-Based Regulation (SBR) The proposal aligns with RBI’s four-tier Scale-Based Regulation framework for NBFCs, which aims to strengthen oversight and reduce regulatory arbitrage between banks and NBFCs. The four layers are: Proposed Governance Changes Existing RBI Rules for Banks
Fiscal Health Index (FHI) 2026
Source: Mint Context: The NITI Aayog released the second annual edition of the Fiscal Health Index, assessing the fiscal performance of Indian states for FY 2023–24. What is the Fiscal Health Index? The Fiscal Health Index (FHI) is a framework designed to evaluate and compare the fiscal health of Indian states.Unlike simple deficit measures, it provides a multi-dimensional assessment of fiscal sustainability, revenue strength, and debt management. Core Pillars of the Index The FHI evaluates states based on five key pillars: State Rankings (FY 2023–24) Top Performing States Bottom Performing States Key Findings of the Report 1. Expanded Coverage 2. Strong Performance by Odisha 3. Fiscal Stress in Some States States like Punjab, Kerala, and West Bengal face challenges due to: 4. Shift Toward Capital Expenditure 5. Macro-Fiscal Importance Key Fiscal Challenges 1. High Committed Expenditure 2. Weak Own Revenue Mobilisation 3. Fiscal Deficit Breaches 4. Rising Interest Burden 5. Geographic Constraints
RBI Caps Bank Dividend Payout at 75% of Profit After Tax
Source: Business Standard Context: The Reserve Bank of India has issued revised guidelines on dividend declaration by banks, linking payouts to capital adequacy and asset quality. The new framework caps dividend payouts at 75% of Profit After Tax (PAT) and will come into effect from FY27. Key Provisions of the New Norms 1. Dividend Cap 2. Link with Capital Adequacy 3. Adjusted PAT Calculation Adjusted PAT =PAT – 50% of Net Non-Performing Assets (NPAs) as on March 31 of the financial year. This adjusted figure determines the maximum dividend that can be paid. Additional Conditions Before declaring dividends, banks must ensure: Restrictions on Dividend Sources Dividends cannot be paid from certain income sources, including: Norms for Foreign Banks Foreign banks operating in India in branch mode may remit profits to their head offices without prior approval if: Any excess remittance must be returned
FDI Policy Relaxation under Press Note 3
Source: Indian Express Context: The Union Cabinet has approved changes to Press Note 3 (2020), easing restrictions on Foreign Direct Investment (FDI) from countries sharing a land border with India, including China. The move aims to boost investment flows and strengthen India’s integration with global supply chains. What is Press Note 3? Press Note 3, issued in April 2020 by the Department for Promotion of Industry and Internal Trade, mandates that FDI from countries sharing land borders with India must receive prior government approval, irrespective of sector or investment size. Why was Press Note 3 introduced? Key Changes in the Revised Framework
No Minimum Balance Penalty for Jan Dhan Accounts
Source: BS Context: The Union Finance Minister Nirmala Sitharaman informed Parliament that Basic Savings Bank Deposit Accounts (BSBDAs), including those opened under Pradhan Mantri Jan Dhan Yojana, are not subject to penalties for failing to maintain a minimum balance. Key Points: What is a BSBD Account? A Basic Savings Bank Deposit Account (BSBDA) is a no-frills savings bank account introduced by the Reserve Bank of India to promote financial inclusion by providing basic banking services to all sections of society, especially low-income and unbanked individuals. Purpose of BSBDA Accounts:
Bank of Baroda Raises ₹10,000 Crore Through Green Infrastructure Bonds
Context: In March 2026, Bank of Baroda raised ₹10,000 crore through Series-I long-term Green Infrastructure Bonds, becoming the first bank in India to issue domestic green bonds specifically for infrastructure financing. What is a Green Bond? A green bond is a fixed-income financial instrument used to raise funds for projects that have environmental or climate benefits. The money raised through these bonds is specifically earmarked for environmentally sustainable activities. Financial Terms About the Green Bond Issuance Credit Ratings The bonds received ‘AAA’ (Stable) ratings from: These ratings indicate high safety and strong credit quality. Use of Funds The funds raised will finance projects under BoB’s Green Financing Framework, including:
RBI Conducts ₹50,000 Crore OMO Purchase
Source: The Hindu Context:The Reserve Bank of India (RBI) conducted Open Market Operations (OMO) to purchase ₹50,000 crore worth of Government Securities (G-Secs) to ease liquidity in the banking system amid global economic uncertainty and rising oil prices. What is an Open Market Operation (OMO)? Open Market Operations are a monetary policy tool used by the RBI to regulate liquidity in the economy by buying or selling government securities in the open market. Purpose of the OMO Purchase The latest OMO purchase was undertaken to:
RBI Allows NBFCs and ARCs to Include Quarterly Profits in Capital Base
Source: Financial Express Context: The Reserve Bank of India has clarified regulatory norms allowing Non-Banking Financial Companies (NBFCs) and Asset Reconstruction Companies (ARCs) to include quarterly profits in their capital base, resolving long-standing ambiguity in capital calculation. What Has Changed? Earlier, most NBFCs and ARCs relied only on audited annual financial statements (typically as of March 31) to calculate: Due to regulatory uncertainty, quarterly profits were generally not included in capital calculations, limiting their ability to expand lending and investment activities during the year. Under the revised RBI directions: Conditions for Recognising Quarterly Profits To ensure prudential safeguards, the RBI has imposed strict conditions: Why the Change Matters The reform is expected to:
RBI Tightens Banks’ Dividend Payout Norms
Source: Financial Express Context: The Reserve Bank of India has issued final guidelines tightening dividend distribution by banks, linking payouts to capital strength and asset quality to ensure financial stability. Key Provisions of the New Guidelines Capital Adequacy Conditions Banks must meet the following requirements before declaring dividends: For foreign banks operating in India in branch mode, dividend remittance is allowed only if they have positive net profit. RBI’s Position on Industry Requests The RBI rejected several suggestions from banks:
