Inquisitive Mind

Reserve Bank of India (RBI) has updated the guidelines on conduct of government business by agency banks and payment of agency commission. Why agency banks are paid commission? RBI carries out the general banking business of the Central and State Governments through its own offices and through the offices of the agency banks appointed under Section 45 of the RBI Act, 1934, by mutual agreement.  RBI pays agency commission to the agency banks for the government business handled by them.  Which government transactions are eligible for agency commission? Transactions relating to the following government business undertaken by agency banks are eligible for agency commission paid by RBI – Revenue receipts and payments on behalf of the Central / State Governments. Pension payments in respect of Central / State Governments. Which government transactions are not eligible for agency commission? The following transactions are not eligible for agency commission – Short term / long term bo...

Reserve Bank of India (RBI) has recently issued guidelines on stripping / reconstitution in State Government Securities. This is in addition to stripping / reconstitution already permitted in eligible Central Government dated securities. What is Separate Trading of Registered Interest and Principal of Securities (STRIPS)? Separate Trading of Registered Interest and Principal of Securities (STRIPS) are created by way of separating the cash flows associated with a regular Government Security i.e. each semi-annual coupon payment and the final principal payment to be received from the issuer, into separate securities. For example, when ₹100 of the 8.60% GS 2028 is stripped, each cash flow of coupon (₹4.30 each half year) will become a coupon STRIP (maturing on the respective coupon dates) and the principal payment (₹100 at maturity) will become a principal STRIP (maturing on the redemption date of the security). These cash flows are traded separately as independent securities in the second...

Reserve Bank of India (RBI) has issued directions on lending against the collateral of gold and silver. To whom are the directions applicable? The directions are applicable to the following regulated entities (REs) – Commercial Banks (including Small Finance Banks, Local Area Banks and Regional Rural Banks, but excluding Payments Banks). Primary (Urban) Co-operative Banks (UCBs) & Rural Co-operative Banks (RCBs), i.e., State Co-operative Banks (StCBs) and Central Co-operative Banks (CCBs). Non-Banking Financial Companies (NBFCs), including Housing Finance Companies (HFCs). Which loans are covered under the directions? The directions shall apply to all loans offered by an RE for the purpose of consumption or income generation (including farm credit) where eligible gold or silver collateral is accepted as a collateral security. What is eligible collateral? Eligible collateral means the collateral of jewellery, ornaments or coins made of gold or silver. A lender shall not grant any ad...

The bi-monthly monetary policy of Reserve Bank of India (RBI) was announced on June 06, 2025. Here are some of the highlights of the monetary policy announcement. Rates   Change Rate Policy repo rate Reduced by 0.50% 5.50% Standing deposit facility (SDF) rate 5.25% Marginal standing facility (MSF) rate 5.75% Bank rate 5.75% Monetary policy stance Monetary policy stance was changed from ‘accommodative’ to ‘neutral’. Domestic Economy  The Indian economy presents a picture of strength, stability, and opportunity. The 5x3x3 matrix of fundamentals provides the necessary core strength to cushion the Indian economy against global spillovers and propel it to grow at a faster pace.  First, strength comes from the strong balance sheets of the 5 major sectors - corporates, banks, households, government, and the external sector.  Second, there is stability on all 3 fronts – price, financial, and political – providing policy and economic certainty.  Third, the Indian ec...