In its latest Monetary Policy Committee (MPC) meeting, the RBI introduced progressive measures that promise to elevate operational standards across India’s financial sector while prioritising consumer protection and stakeholder benefits.

One of the standout decisions is RBI’s move to eliminate pre-payment penalties on floating-rate term loans sanctioned to individual borrowers for non-business purposes. This directive, also proposed for extension to micro and small enterprises (MSEs), is a clear step towards promoting responsible lending. It reduces the financial burden on borrowers, allowing greater flexibility in managing loan repayment without punitive fees. This policy could significantly ease repayment pressure on borrowers while encouraging prudent lending practices among banks and non-banking financial companies.

Strengthening the urban cooperative bank (UCB) sector is another notable focus. RBI’s proposal to launch a discussion paper on capital-raising avenues offers a promising path forward. UCBs have long faced challenges in accessing sufficient capital, and by opening the door to stakeholder feedback, RBI is embracing a consultative approach.

Climate risk

A transformative inclusion to RBI’s agenda is the proposed Reserve Bank Climate Risk Information System (RB-CRIS). By equipping regulated entities with access to reliable, high-quality climate data, RBI is not only filling a critical data gap but also setting a precedent for proactive climate risk management in the financial sector. This aligns RBI’s operations with global sustainable practices, helping financial institutions identify and mitigate potential risks posed by environmental factors — a move that will benefit investors, banks, and the economy at large as India advances its green finance ambitions.

Further, RBI’s adjustments to transaction limits on UPI123Pay and UPI Light wallet offer a tangible upgrade in financial inclusivity. By raising these limits, RBI has effectively expanded the utility of these services, enabling greater flexibility for consumers while supporting India’s broader digital financial ecosystem.

The extension of the beneficiary name lookup facility to Real Time Gross Settlement (RTGS) and National Electronic Funds Transfer (NEFT) systems is another strategic enhancement to operational efficiency. This simple yet effective feature allows senders to verify recipient account names before finalising transactions, reducing errors and minimising the potential for fraud.

In sum, RBI’s new policies signal a substantial stride toward modernising the banking ecosystem.

Valiachi and Soundarya are Assistant Professors of Management at Sathyabama Institute of Science and Technology, Chennai, and Uzma is the Dean of the School of Management at the same institute. Views are personal

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