Context: New support measures are being finalised by the government for exporters against proposed US tariffs and reciprocal duties. The schemes will be finalised within a month’s period under the Rs 2,250 crore Export Promotion Mission announced in the Budget. Objectives of the Schemes Concerns Among Exporters Global Trade Dynamics
The Credit-Deposit (CD) Ratio
Context: HDFC Bank repurchased nearly â‚ą7,000 crore worth of its high-cost bonds in the last six months. Move aimed at lowering its credit-deposit (CD) ratio, which surged to 110% post-merger with Housing Development Finance Corp (HDFC) in July 2023. Bond buyback represents a small fraction of HDFC Bank’s â‚ą4 lakh crore outstanding borrowings (March 2024). The Credit-Deposit (CD) Ratio The Credit-Deposit (CD) ratio measures the proportion of a bank’s total deposits that have been disbursed as loans, reflecting how efficiently a bank uses its deposits to generate income and indicating its liquidity and credit risk. The credit-deposit ratio (CD ratio) is a measure of how much a bank lends out of its total deposits. It’s calculated by dividing the total loans by the total deposits and multiplying by 100. What does the CD ratio indicate? How does the CD ratio affect the bank? How does the Reserve Bank of India (RBI) encourage banks? What is an ideal CD ratio? Some experts say that an ideal CD ratio would be between 65% and 75%
RBI Investigates Unhedged Forex Liabilities in Banking System
Context: RBI is assessing whether lapses in unhedged forex liabilities extend beyond IndusInd Bank to the broader banking system. IndusInd Bank’s Net Worth Erosion Potential Industry-Wide Implications RBI’s investigation could uncover systemic risks related to unhedged forex liabilities. IndusInd Bank’s case highlights risks of internal hedging mechanisms without external counterparties. Tighter oversight and possible regulatory interventions could reshape forex risk management practices in the banking sector.
SEBI Reduces Rights Issue Processing Time
Context: Markets regulator Sebi reduced the processing time for a rights issue of equity shares to 23 days in a bid to make it a preferred route of fundraising. Key Highlights Impact on Fundraising
IRDAI Allows Bond Forwards for Insurers
Context: Insurance companies can now trade in bond forwards for hedging interest rate risks, as per a new IRDAI circular. Move aligns with the Reserve Bank of India’s (RBI) directive, expanding hedging options beyond forward-rate agreements (FRAs), interest rate swaps, and exchange-traded futures. Bond Forwards vs. Forward-Rate Agreements (FRAs) Feature Bond Forwards Forward-Rate Agreements (FRAs) Settlement Type Actual bond delivery at maturity Cash settlement based on yield difference Market Availability Risk Lower risk (bond is pre-contracted) Higher risk (insurers must procure bond separately) Preferred By Insurers? Yes, due to reduced settlement risks Becoming less attractive Industry Reactions Restrictions Implications for the Insurance Sector Source: BS
Unified Lending Interface (ULI)
Context: Bengaluru-based Namma Yatri auto drivers are participating in pilot projects for small-ticket, unsecured loans on the Unified Lending Interface (ULI). UPI mandates are being explored for automated monthly or bi-monthly collections, ensuring better credit behavior. About the Unified Lending Interface (ULI) Current Progress & Future Potential Industry Impact & Future Outlook Source: BS
IndusInd Bank Stock Crashes 27%
Context: IndusInd Bank (IIB) stock slipped 27%, at the NSE, to â‚ą656.80 on March 11 2025, a day after the bank flagged an adverse impact on its net worth due to a discrepancy on accounting for derivatives holdings. IIB estimated the impact to be at 2.35% of the bank’s net worth. Key Highlights CEO’s Tenure and RBI’s Decision Impact on Investor and Market Next Steps Source: BS
Alternative Investment Funds (AIFs)
Context: The new SEBI whole time member, Ananth Narayan, calls for the financial sector to develop a trust based relationship with regulators and to maintain absolute transparency. At a CII event, he spoke about self regulation and proactive reporting of malpractices, especially within the Alternative Investment Funds (AIFs) sector. What Are Alternative Investment Funds (AIFs)? Alternative Investment Funds (AIFs) are privately pooled investment vehicles that differ from traditional investment options such as stocks and mutual funds. These funds are typically preferred by High-Net-Worth Individuals (HNIs) and institutional investors due to the high capital requirement. AIFs operate under the SEBI (Alternative Investment Funds) Regulations, 2012 and can be structured as a company, Limited Liability Partnership (LLP), trust, or other legal entities. Types of AIFs in India SEBI classifies AIFs into three categories based on their investment objectives: Category 1: Growth-Oriented and Impact Investments These funds primarily invest in start-ups, SMEs, and socially responsible businesses. Category 2: Private and Debt-Focused Investments These funds invest in a range of private and debt instruments without leveraging. Category 3: Market-Driven and High-Risk Investments These funds employ aggressive strategies and often invest in listed securities. Who Can Invest in AIFs? AIFs cater to sophisticated investors with substantial capital. Benefits of Investing in AIFs AIFs present a lucrative investment opportunity for HNIs seeking higher returns with controlled risk. However, investors should conduct thorough research and align their financial goals with the right AIF category before investing.
Household Debt in India
Context: The Financial Stability Report (FSR) 2024 released by the Reserve Bank of India (RBI) increasingly expresses concern over household debt and rising consumption loans. The household debt to GDP ratio of India is quite low in comparison with most emerging economies, yet it is steadily increasing from 36.6% in June 2021 to 42.9% in June 2024. Shift from Asset Creation to Consumption Borrowing Is Borrowing Becoming Healthier? Growing Concern Over Consumption Loans Macroeconomic Risks of Rising Consumer Debt What’s Driving the Surge? Key Policy Recommendations
PM Surya Ghar Scheme
PM Surya Ghar Muft Bijli Yojana has installed 10.09 lakh rooftop solar system since its launch in February 2024. The Ministry of New and Renewable Energy (MNRE) has received 47.3 lakh applications so far, the government said. PM Surya Ghar: Muft Bijli Yojana The Indian government launched the PM Surya Ghar: Muft Bijli Yojana, seeking to enhance the solar rooftop capacity and empower the residential households with the ability to generate their electricity. The program is to be implemented by a National programme Implementation Agency and State Implementation Agencies.
