Annual Report of the RBI for the Year 2024-25

Report of the Central Board of Directors on the working of the Reserve Bank of India for the year ended March 31, 2025 submitted to the Central Government in terms of Section 53(2) of the Reserve Bank of India Act, 1934 RESERVE BANK OF INDIA ANNUAL REPORT 2024-25CENTRAL BOARD / LOCAL BOARDS GOVERNOR Sanjay Malhotra DEPUTY GOVERNORS MEMBERS OF LOCAL BOARDS M. Rajeshwar Rao T. Rabi Sankar WESTERN AREA Swaminathan J. Poonam Gupta DIRECTORS NOMINATED UNDER SECTION 8 (1) (b) OF THE RBI ACT, 1934 EASTERN AREA Revathy Iyer Sachin Chaturvedi Sachin Chaturvedi DIRECTORS NOMINATED UNDER SECTION 8 (1) (c) OF THE RBI ACT, 1934 Satish Kashinath Marathe NORTHERN AREA Swaminathan Gurumurthy Revathy Iyer Anand Gopal Mahindra Venu Srinivasan Pankaj Ramanbhai Patel Ravindra H. Dholakia SOUTHERN AREA DIRECTORS NOMINATED UNDER SECTION 8 (1) (d) OF THE RBI ACT, 1934 Ajay Seth Nagaraju Maddirala (Position as on May 26, 2025)PRINCIPAL OFFICERS (As on May 26, 2025) EXECUTIVE DIRECTORS ....................................................................... S. C. Murmu ....................................................................... Vivek Deep ....................................................................... Jayant Kumar Dash ....................................................................... Rohit Jain ....................................................................... Radha Shyam Ratho ....................................................................... Ajay Kumar ....................................................................... Rajiv Ranjan ....................................................................... Neeraj Nigam ....................................................................... P. Vasudevan ....................................................................... R. Lakshmi Kanth Rao ....................................................................... Arnab Kumar Chowdhury ....................................................................... Charulatha S. Kar ....................................................................... Aviral Jain ....................................................................... Ajit Ratnakar Joshi ....................................................................... Indranil Bhattacharyya ....................................................................... Sudha Balakrishnan (Chief Financial Officer) CENTRAL OFFICE Central Vigilance Cell ................................................................................ N. Sara Rajendra Kumar, Chief General Manager & CVO Consumer Education and Protection Department ..................................... Neena Rohit Jain, Chief General Manager Corporate Strategy and Budget Department ............................................. Rajesh Kumar Moria, Chief General Manager Department of Regulation.......................................................................... Usha Janakiraman, Chief General Manager-in-Charge Department of Supervision ........................................................................ T. K. Rajan, Chief General Manager-in-Charge Department of Communication .................................................................. Puneet Pancholy, Chief General Manager Department of Currency Management ...................................................... Sanjeev Prakash, Chief General Manager-in-Charge Department of Economic and Policy Research ........................................ Rekha Misra, Adviser-in-Charge Department of External Investments and Operations................................ Sundar Murthi, Chief General Manager-in-Charge Department of Government and Bank Accounts ....................................... Sangeeta Lalwani, Chief General Manager-in-Charge Department of Information Technology ...................................................... Shailendra Trivedi, Chief General Manager-in-Charge Department of Payment and Settlement Systems..................................... Gunveer Singh, Chief General Manager-in-Charge Department of Statistics and Information Management ............................ Anujit Mitra, Adviser-in-Charge Enforcement Department .......................................................................... Minal A. Jain, Chief General Manager-in-Charge Financial Inclusion and Development Department .................................... Nisha Nambiar, Chief General Manager-in-Charge Financial Markets Operations Department ................................................ Seshsayee G., Chief General Manager Financial Markets Regulation Department ................................................ Dimple Bhandia, Chief General Manager FinTech Department .................................................................................. Suvendu Pati, Chief General Manager Foreign Exchange Department.................................................................. Aditya Gaiha, Chief General Manager-in-Charge Financial Stability Department ................................................................... Kaya Tripathi, Chief General Manager Human Resource Management Department ............................................. Vandana Khare, Chief General Manager-in-Charge Inspection Department ............................................................................. G. P. Borah, Principal Chief General Manager Internal Debt Management Department .................................................... Rakesh Tripathy, Chief General Manager International Department ........................................................................... Yogesh K. Dayal, Chief General Manager-in-Charge Legal Department ...................................................................................... Unnikrishnan A., Principal Legal Adviser Monetary Policy Department ..................................................................... Anupam Prakash, Adviser-in-Charge Premises Department ................................................................................ K. Nikhila, Chief General Manager-in-Charge Rajbhasha Department.............................................................................. N. Sara Rajendra Kumar, Chief General Manager Risk Monitoring Department ...................................................................... Manoranjan Dash, Chief General Manager-in-Charge Secretary’s Department ............................................................................. Yarasi Jayakumar, Chief General Manager & Secretary COLLEGES PRINCIPALS College of Agricultural Banking, Pune ....................................................... Jaikish Reserve Bank Staff College, Chennai ....................................................... Mala Sinha OFFICES REGIONAL DIRECTORS Chennai ........................................................................................................................... Uma Sankar Kolkata ............................................................................................................................. Sudhanshu Prasad Mumbai ............................................................................................................................ Suman Ray New Delhi ........................................................................................................................ Rohit Parshotam Das BRANCHES Ahmedabad ............................................................................................... Rajesh Kumar Andhra Pradesh......................................................................................... A. O. Basheer Bengaluru .................................................................................................. Sonali Sengupta Bhopal ....................................................................................................... Rekha Chandanaveli Bhubaneswar............................................................................................. Sarada Prasan Mohanty Chandigarh ................................................................................................ Vivek Srivastava Dehradun ................................................................................................... Arvind Kumar Gangtok ..................................................................................................... Thotngam Jamang Guwahati ................................................................................................... Sushmita Phukan Hyderabad ................................................................................................. Chinmoy Kumar Jaipur ......................................................................................................... Navin Nambiar Jammu ....................................................................................................... Chandrashekhar Azad Kanpur ....................................................................................................... Ishan Shukla Lucknow .................................................................................................... Pankaj Kumar Nagpur ....................................................................................................... Sachin Y. Shende Panaji......................................................................................................... Prabhakar Jha Patna ......................................................................................................... Sujit Kumar Arvind Raipur ........................................................................................................ Reeny Ajith Ranchi ....................................................................................................... Prem Ranjan Prasad Singh Shimla........................................................................................................ Anupam Kishore Thiruvananthapuram ................................................................................. Thomas Mathew OFFICERS-IN-CHARGE (O-i-C) Agartala ........................................................................................................................... Surendra Nidar, General Manager (O-i-C) Aizawl ............................................................................................................................... Tongkhopao Lhungdim, General Manager (O-i-C) Belapur ............................................................................................................................ Chandini Moolchandani, Chief General Manager Imphal .............................................................................................................................. Neredumalli Sridhar, General Manager (O-i-C) Kochi ................................................................................................................................. T. Venkateswara Rao, Chief General Manager Kohima ............................................................................................................................. Sibo Nekhini, General Manager (O-i-C) Itanagar ........................................................................................................................... Abhijit Majumdar, General Manager (O-i-C) Shillong ............................................................................................................................ Olden Nongpluh, General Manager (O-i-C) Srinagar ........................................................................................................................... Anoop Kumar Sharma, Assistant General ManagerCONTENTS Page No. PART ONE: THE ECONOMY - REVIEW AND PROSPECTS .................................................. 1 I. ASSESSMENT AND PROSPECTS ............................................................................ 1 Assessment of 2024-25 ............................................................................................... 2 Prospects for 2025-26 .................................................................................................. 10 II. ECONOMIC REVIEW ................................................................................................... 17 The Real Economy ........................................................................................................ 18 Price Situation ............................................................................................................... 33 Money and Credit ......................................................................................................... 44 Financial Markets .......................................................................................................... 54 Government Finances ................................................................................................... 64 External Sector .............................................................................................................. 70 PART TWO: THE WORKING AND OPERATIONS OF THE RESERVE BANK OF INDIA .... 86 III. MONETARY POLICY OPERATIONS .......................................................................... 86 Monetary Policy ............................................................................................................ 87 The Operating Framework: Liquidity Management ...................................................... 90 Monetary Policy Transmission ..................................................................................... 96 Sectoral Lending Rates ................................................................................................ 98 IV. CREDIT DELIVERY AND FINANCIAL INCLUSION ................................................... 101 Credit Delivery ............................................................................................................... 103 Financial Inclusion ......................................................................................................... 104 Financial Literacy .......................................................................................................... 106 V. FINANCIAL MARKETS AND FOREIGN EXCHANGE MANAGEMENT ..................... 108 Financial Markets Regulation Department .................................................................... 108 Financial Markets Operations Department .................................................................... 111 Foreign Exchange Department ..................................................................................... 112 VI. REGULATION, SUPERVISION AND FINANCIAL STABILITY ................................... 119 Financial Stability Department ...................................................................................... 120 Department of Regulation ............................................................................................. 121 FinTech Department .................................................................................................... 132 iCONTENTS Page No. Department of Supervision ........................................................................................... 135 Enforcement Department ............................................................................................. 143 Consumer Education and Protection Department ......................................................... 144 Deposit Insurance and Credit Guarantee Corporation .................................................. 146 VII. PUBLIC DEBT MANAGEMENT ................................................................................... 148 Debt Management of the Central Government ............................................................. 149 Debt Management of State Governments ..................................................................... 152 VIII. CURRENCY MANAGEMENT ....................................................................................... 156 Developments in Currency in Circulation ...................................................................... 158 Currency Management Infrastructure ........................................................................... 159 Expenditure on Security Printing ................................................................................... 161 Bharatiya Reserve Bank Note Mudran Private Limited ................................................ 162 IX. PAYMENT AND SETTLEMENT SYSTEMS AND INFORMATION TECHNOLOGY ... 164 Department of Payment and Settlement Systems ........................................................ 164 Department of Information Technology ......................................................................... 173 X. COMMUNICATION, INTERNATIONAL RELATIONS, RESEARCH AND STATISTICS .................................................................................. 179 Communication Processes ........................................................................................... 180 International Relations .................................................................................................. 183 Government and Bank Accounts .................................................................................. 187 Managing Foreign Exchange Reserves ........................................................................ 189 Economic and Policy Research .................................................................................... 192 Statistics and Information Management ........................................................................ 195 Legal Issues .................................................................................................................. 198 XI. GOVERNANCE, HUMAN RESOURCES AND ORGANISATIONAL MANAGEMENT ............................................................................................................ 200 Governance Structure ................................................................................................... 201 Human Resource Development Initiatives .................................................................... 202 Enterprise-Wide Risk Management .............................................................................. 208 iiCONTENTS Page No. Internal Audit/Inspection ................................................................................................ 212 Corporate Strategy and Budget Management .............................................................. 213 Rajbhasha ..................................................................................................................... 215 Premises Department ................................................................................................... 216 Annex ........................................................................................................................... 219 XII. THE RESERVE BANK’S ACCOUNTS FOR 2024-25 ................................................. 223 Balance Sheet as on March 31, 2025 ........................................................................... 226 Income Statement for the year ended March 31, 2025 ................................................. 227 Schedules forming part of Balance Sheet and Income Statement ................................ 228 Statement of Significant Accounting Policies for the year ended March 31, 2025 ........ 231 Notes to Accounts ......................................................................................................... 236 Annex I: Chronology of Major Policy Announcements - April 2024 to March 2025 ........ 252 Annex II: R egulatory Measures Undertaken Post Public Consultations - April 2022 to March 2025 ............................................................................................................ 266 Annex III: C ustomer Centric Measures - April 2022 to March 2025 .................................... 270 Appendix Tables ..................................................................................................................... 281 iiiCONTENTS Page No. BOXES II.2.1 : R&D Expenditure as a Driver of India’s Productivity Growth ........................................ 30 II.3.1 : Food Inflation Persistence and Shifting Household Consumption Pattern .................... 35 II.4.1 : Drivers of Firm Demand for Credit ................................................................................ 50 II.5.1 : What Drives the Money Market Term Spread? ............................................................. 56 II.7.1 : India’s Outward FDI Trends: Insights from the Gravity Model ....................................... 81 III.1 : Liquidity Management Challenges from Forex Market Operations ............................... 93 VI.1 : Reserve Bank - Climate Risk Information System (RB-CRIS) ...................................... 126 VI.2 : Exploring Supervisory Dimensions Through Cross-border Cooperation ...................... 141 VII.1 : Review of Financial Accommodation Facilities for the State Governments .................. 153 VIII.1 : Sustainable Use of Banknote Shreds/Briquettes .......................................................... 157 IX.1 : Project Nexus: A Multilateral Approach for Inter-linking Fast Payment Systems (FPS) ............................................................................................................................. 168 X.1 : Podcasts by Central Banks - A Distinct Digital Communication Tool ............................ 183 X.2 : Framework on Currency Swap Arrangement for SAARC Countries, 2024-27 .............. 184 X.3 : Initiatives for Ushering in Efficiency in Government Transactions ................................ 188 X.4 : Reserve Management in an Era of Uncertainty ............................................................ 189 X.5 : Local Currency Settlement in the Changing Global Financial Order ............................. 191 XI.1 : Economic Capital Framework (ECF) of the Reserve Bank of India – Internal Review ............................................................................................................. 208 XI.2 : ERM in the Reserve Bank - Reflections from More Than a Decade of Implementation .............................................................................................................. 210 XI.3 : Audit Management System (AMS) ................................................................................ 213 ivCONTENTS Page No. APPENDIX TABLES 1. Macroeconomic and Financial Indicators ...................................................................... 281 2. Growth Rates and Composition of Real Gross Domestic Product (At 2011-12 prices) 283 3. Gross Savings ............................................................................................................... 284 4. Inflation, Money and Credit ........................................................................................... 285 5. Capital Market – Primary and Secondary ..................................................................... 286 6. Key Fiscal Indicators .................................................................................................... 287 7. Combined Receipts and Disbursements of the Central and State Governments ......... 288 8. India’s Overall Balance of Payments ........................................................................... 289 9. Foreign Direct Investment Flows to India: Country-wise and Industry-wise .................. 290 vSELECT ABBREVIATIONS ACC - Asian Consultative Council ASTRA - Advanced Security Threat and Risk Assessment ACU - Asian Currency Union AD - Authorised Dealer ATBs - Auction Treasury Bills AD Cat-I - Authorised Dealer Category-I ATM - Automated Teller Machine ADF - Asset Development Fund AUM - Assets Under Management AED - (United) Arab Emirates Dirham B2B - Business-to-Business AEs - Advanced Economies B2C - Business-to-Customer AePS - Aadhaar Enabled Payment BAs - Business Areas System BBAs - Bilateral Borrowing Agreements AFA - Additional Factor of BBPOUs - Bharat Bill Payment Operating Authentication Units AFS - Available for Sale BBPS - Bharat Bill Payment System AI - Artificial Intelligence BCs - Business Correspondents AIFIs - All India Financial Institutions BCBS - Basel Committee on Banking AML - Anti-Money Laundering Supervision AML-CFT - Anti-Money Laundering- BC-ICT - Business Correspondents - Combating the Financing of Terrorism Information and Communication Technology AMRMS - Audit Management and Risk Monitoring System BCM - Business Continuity Management AMS - Audit Management System BCP - Basel Core Principles/Business ANBC - Adjusted Net Bank Credit Continuity Plan AO - Auditee Office BE - Budget Estimates AP - Authorised Person BFS - Board for Financial Supervision APBS - Aadhaar Payment Bridge System BG - Bank Guarantee API - Application Programming BHIM - Bharat Interface for Money Interface BIS - Bank for International APR - Annual Percentage Rate Settlements/Bureau of Indian ARCs - Asset Reconstruction Standards Companies BISIH - Bank for International ARE - Available Realised Equity Settlements Innovation Hub ARIMA - Autoregressive Integrated BoE - Bank of England Moving Average BoG - Board of Governors ARMS - Audit and Risk Management BoJ - Bank of Japan Sub-Committee BoP - Balance of Payments ASISO - Automated Sweep-in and Sweep-out bps - Basis Points viSELECT ABBREVIATIONS BPSS - Board for Regulation and CDMs - Cash Deposit Machines Supervision of Payment and CEO - Chief Executive Officer Settlement Systems CEOBSE - Credit Equivalent of Off-Balance BQR - Bharat Quick Response Sheet Exposure BRBNMPL - Bharatiya Reserve Bank Note CEPD - Consumer Education and Mudran Private Limited Protection Department BRICS - Brazil, Russia, India, China and CERT-IN - Computer Emergency Response South Africa Team - India BSBDA - Basic Savings Bank Deposit CF - Contingency Fund Account CFLs - Centres for Financial Literacy B-SC - Building Sub-Committee CFO - Chief Financial Officer BSR - Basic Statistical Return CGA - Controller General of Accounts CA - Concurrent Audit CGFS - Committee on the Global CAB - College of Agricultural Banking Financial System CAD - Current Account Deficit/ CGTMSE - Credit Guarantee Fund Trust for Cybersecurity Awareness Drive Micro and Small Enterprises CAFRAL - Centre for Advanced Financial CiC - Currency in Circulation Research and Learning CICs - Credit Information Companies CAG - Comptroller and Auditor General CII - Critical Information Infrastructure CaMS - Case Management System CIMS - Centralised Information CAS - Central Accounts Section Management System CBDC - Central Bank Digital Currency CIN - Corporate Identification Number CBDC-R - Central Bank Digital Currency- CIs - Credit Institutions Retail CMBs - Cash Management Bills CBDC-W - Central Bank Digital Currency- Wholesale CME - Capital Market Exposures CBP - Capacity Building Programme CMIE - Centre for Monitoring Indian Economy CBUAE - Central Bank of the United Arab Emirates CMS - Complaint Management System CCB - Committee of the Central Board CODs - Central Office Departments CCIL - Clearing Corporation of India COR - Certificate of Registration Limited CoS - College of Supervisors CCIR - Comprehensive Credit CPFIR - Central Payments Fraud Information Repository Information Registry CCP - Central Counterparty CPHS - Consumer Pyramids Household CCS - Consumer Confidence Survey Survey CDs - Certificates of Deposit CPI - Consumer Price Index CD - Credit to Deposit CPI-AL - CPI for Agricultural Labourers viiSELECT ABBREVIATIONS CPI-IW - CPI for Industrial Workers DCW - Development Centre Workshop CPI-RL - CPI for Rural Labourers DDs - Demand Drafts CPs - Commercial Papers DEAF - Depositor Education Awareness Fund CPS - Centralised Payment System DEIO - Department of External CPTS - Credit Proposal Tracking System Investments and Operations CRA - Contingent Reserve DEPR - Department of Economic and Arrangement Policy Research CRAR - Capital to Risk-Weighted Assets Ratio DevSecOps - Development, Security and Operations CRB - Contingent Risk Buffer DGBA - Department of Government and CRDC - Currency Research and Bank Accounts Development Centre DGF - Data Governance Framework CRILC - Central Repository of Information on Large Credits DGFT - Directorate General of Foreign Trade CRR - Cash Reserve Ratio DGI - Data Gaps Initiative CSAA - Control Self-Assessment Audit DICGC - Deposit Insurance and Credit CSAP - Cyber Security Augmentation Guarantee Corporation Plan DIF - Deposit Insurance Fund CSBD - Corporate Strategy and Budget Department DIPP - Department of Industrial Policy and Promotion CSF - Consolidated Sinking Fund DIS - Deposit Insurance System CSGL - Constituent Subsidiary General Ledger DISCOM - Distribution Companies CSP - Cloud Service Provider DIT - Department of Information Technology CSS - Centrally Sponsored Schemes DLAs - Digital Lending Apps CTS - Cheque Truncation System DLG - Default Loss Guarantee CU - Capacity Utilisation DLT - Distributed Ledger Technology CUG - Closed User Group DMS - Date-Wise Monthly Statement CVC - Central Vigilance Commission DMT - Domestic Money Transfer CVO - Chief Vigilance Officer DoC - Department of Communication CVPS - Currency Verification and Processing Systems DoR - Department of Regulation CwP - Currency with the Public DoS - Department of Supervision DBIE - Database on Indian Economy DPI - Digital Payments Index/Digital DBT - Direct Benefit Transfer Public Infrastructure DCCBs - District Central Cooperative DPIIT - Department for Promotion of Banks Industry and Internal Trade DCM - Department of Currency DPSS - Department of Payment and Management Settlement Systems viiiSELECT ABBREVIATIONS DQE - Data Query Engine ERP - Enterprise Resource Planning DQI - Data Quality Index e₹ - Digital Rupee DR - Disaster Recovery e₹-R - Digital Rupee - Retail DSIM - Department of Statistics and e₹-W - Digital Rupee - Wholesale Information Management ES - Expected Shortfall EA - Effectiveness Assessment ESG - Environmental, Social and e-BAAT - Electronic Banking Awareness Governance and Training ETCD - Exchange Traded Currency EBITDA - Earnings Before Interest, Taxes, Derivatives Depreciation and Amortisation ETP - Electronic Trading Platform EBLR - External Benchmark-based EU - European Union Lending Rate EWS - Early Warning Signals/ EBR - Element Based Repository Economically Weaker Section ECB - European Central Bank/External FACE - Fintech Association for Commercial Borrowings Consumer Empowerment ECCTI - Enterprise Computing and FACT - Financial Awareness and Cybersecurity Training Institute Consumer Training ECF - Economic Capital Framework FAE - First Advance Estimates ECL - Expected Credit Loss FAR - Fully Accessible Route ECLGS - Emergency Credit Line FATF - Financial Action Task Force Guarantee Scheme FBIL - Financial Benchmarks India ECS - Electronic Clearing Service Private Limited EDC - Executive Directors’ Committee FBs - Foreign Banks EDDPE - Expanding and Deepening of FC - Finance Commission/Financial Digital Payment Ecosystem Conglomerate EEFC - Exchange Earner’s Foreign FCA - Foreign Currency Assets Currency FCB - Foreign Central Bank EFD - Enforcement Department FCI - Food Corporation of India EGRC - Enterprise Governance Risk and Compliance FCNR(B) - Foreign Currency Non-Resident Account (Bank) EKP - Enterprise Knowledge Portal FCRA - Foreign Currency (Regulation) EMDEs - Emerging Market and Act Developing Economies FCY - Foreign Currency EMEs - Emerging Market Economies FDI - Foreign Direct Investment EoI - Expression of Interest FE - Final Estimates EPFO - Employees’ Provident Fund Organisation FED - Foreign Exchange Department ERM - Enterprise-wide Risk FEMA - Foreign Exchange Management Management Act ixSELECT ABBREVIATIONS FEPA - Financial Education Programme FSA - Financial Stability Assessment for Adults FSAP - Financial Sector Assessment FER - Foreign Exchange Reserves Programme FETP - Financial Education Training FSB - Financial Stability Board Programme FSD - Financial Stability Department FFMCs - Full-Fledged Money Changers FSDC - Financial Stability and FIAP - Financial Inclusion Action Plan Development Council FICNs - Fake Indian Currency Notes FSDC-SC - Financial Stability and FIDD - Financial Inclusion and Development Council - Sub- Development Department Committee FIF - Financial Inclusion Fund FSI - Financial Sector Issues FI-Index - Financial Inclusion Index FSR - Financial Stability Report FinTech - Financial Technology FSRs - Financial Sector Regulators FIP - Financial Inclusion Plan/ G20 - Group of Twenty Financial Information Provider GCCs - General Credit Cards FIs - Financial Intermediaries/ GCF - Gross Capital Formation Financial Institutions FIRRI - Framework for Identification and GDP - Gross Domestic Product Reporting of Risk Incidents GeM - Government e-Marketplace FIT - Flexible Inflation Targeting GFCE - Government Final Consumption FIUs - Financial Information Users Expenditure FLC - Financial Literacy Centre GFCF - Gross Fixed Capital Formation FLW - Financial Literacy Week GFD - Gross Fiscal Deficit FMCBG - Finance Ministers and Central GFIN - Global Financial Innovation Bank Governors Network FMCG - Fast Moving Consumer Goods GFSN - Global Financial Safety Net FMI - Financial Market Infrastructure GIFT-City - Gujarat International Finance FMOD - Financial Markets Operations Tec-City Department GII - Global Innovations Index FMRD - Financial Markets Regulation GMM - Generalised Method of Moments Department GNDI - Gross National Disposable Forex/FX - Foreign Exchange Income FPI - Foreign Portfolio Investment GNPA - Gross Non-Performing Asset FPOs - Follow-on Public Offers GoI - Government of India FPS - Fast Payment System GREEN - Generation of Renewable FRMS - Fraud Risk Management System Energy, Energy Conservation FRRR - Fixed Rate Reverse Repo and Neer Conservation FRSB - Floating Rate Savings Bond GRF - Guarantee Redemption Fund xSELECT ABBREVIATIONS GRIHA - Green Rating for Integrated IFA WG - International Financial Habitat Assessment Architecture Working Group GRQ - General Review of Quotas IFMIS - Integrated Financial Management and Information GSDP - Gross State Domestic Product System G-secs - Government Securities IFSC - Indian Financial System Code/ GST - Goods and Services Taxes International Financial Services GSTN - Goods and Services Taxes Centre Network IFSCA - International Financial Services Centres Authority GVA - Gross Value Added IFTAS - Indian Financial Technology and GVC - Global Value Chain Allied Services GW - Gigawatt IGAS - Indian Government Accounting HFCs - Housing Finance Companies Standards HFIs - High Frequency Indicators IGBs - Indian Government Bonds HFT - Held for Trading IGBC - Indian Green Building Council HI - Hearing Impaired IGIDR - Indira Gandhi Institute of HRMD - Human Resource Management Development Research Department IGR - Internal Grievance Redress HRM-SC - Human Resource Management IIBM - Indian Institute of Bank Sub-Committee Management HS - Harmonised System IIBX - India International Bullion Exchange HTM - Held to Maturity IIP - Index of Industrial Production IA - Internal Audit IMD - India Meteorological Department IBA - Indian Banks’ Association IMEs - Informal Micro Enterprises ICRIER - Indian Council for Research on International Economic Relations IMF - International Monetary Fund IMFC - International Monetary and ICT - Information and Communication Financial Committee Technology IMPS - Immediate Payment Service I-CRR - Incremental Cash Reserve Ratio IMT - Instant Money Transfer ID - International Department INB - Internet Banking IDF - Infrastructure Debt Fund Ind AS - Indian Accounting Standards IDG - Inter Departmental Group InFiNet - Indian Financial Network IDMD - Internal Debt Management INR - Indian Rupee Department IO - Internal Ombudsman IDRBT - Institute for Development and Research in Banking Technology IOs - International Organisations IFA - International Financial IOSCO - International Organisation of Architecture Securities Commissions xiSELECT ABBREVIATIONS IPCs - Irrevocable Payment LCS - Local Currency Settlement Commitments LCSS - Local Currency Settlement IPO - Initial Public Offering System IPP - Instant Payment Platform LEI - Legal Entity Identifier IRA - Investment Revaluation LFPR - Labour Force Participation Rate Accounts LIBOR - London Inter-Bank Offered Rate IRACP - Income Recognition, Asset LLMs - Large Language Models Classification and Provisioning LPA - Long Period Average IRD - Interest Rate Derivatives LPG Liquefied Petroleum Gas IRF - Inter-Regulatory Forum LRS - Liberalised Remittance Scheme IRS - Interest Rate Swap LSF - Late Submission Fee IS - Information Systems LSPs - Lending Service Providers ISPI - Index of Supply Chain Pressures for India LTS - Long-Term Support IT - Information Technology LTV - Loan-to-Value ITeS - IT-enabled Services M - Money Supply 3 IT-SC - Information Technology Sub- MANI - Mobile Aided Note Identifier Committee MAS - Monetary Authority of Singapore ITBs - Intermediate Treasury Bills MCA - Ministry of Corporate Affairs ITC - Indian Trade Classification MCLR - Marginal Cost of Funds-based IWG - Internal Working Group Lending Rate IWST - Institute of Wood Science and MCV - Mobile Coin Van Technology MD - Master Direction/Managing KCC - Kisan Credit Card Director KFS - Key Facts Statement MDM - Mobile Device Management KLEMS - Capital(K), Labour(L), Energy(E), ME - Mutual Evaluation Material(M) and Services(S) MGNREGA - Mahatma Gandhi National Rural KRIs - Key Risk Indicators Employment Guarantee Act kWp - Kilowatt Peak MIBOR - Mumbai Interbank Offered Rate KYC - Know Your Customer MIS - Management Information LABs - Local Area Banks System LAF - Liquidity Adjustment Facility ML - Machine Learning LB - Load Balance MM - Money Multiplier LBS - Lead Bank Scheme MNBCs - Miscellaneous Non-Banking LC - Letter of Credit Companies LCR - Liquidity Coverage Ratio MoE - Memorandum of Error xiiSELECT ABBREVIATIONS MoF - Ministry of Finance NDTL - Net Demand and Time Liabilities MOOCs - Massive Open Online Courses NER - North Eastern Region MoSPI - Ministry of Statistics and NEER - Nominal Effective Exchange Programme Implementation Rate NEFT - National Electronic Funds MoU - Memorandum of Understanding Transfer MPC - Monetary Policy Committee NEM - North-East Monsoon MSF - Marginal Standing Facility NETC - National Electronic Toll MSMEs - Micro, Small and Medium Collection Enterprises NFA - Net Foreign Assets MSP - Minimum Support Price NFC - Non-Food Credit/Near Field MTF - Medium Term Framework Communication MTSS - Money Transfer Service Scheme NGCH - National Grid Clearing House MVP - Minimum Viable Product NGFS - Network for Greening the Financial System NAB - New Agreements to Borrow NGSOC - Next Generation Security NABARD - National Bank for Agriculture and Operation Centre Rural Development NGTA - Next Generation Treasury NACH - National Automated Clearing Application House NHB - National Housing Bank NBBL - NPCI Bharat BillPay Limited NIAP - Nationwide Intensive Awareness NBFC - Non-Banking Financial Company Programme NBFIs - Non-Banking Financial NIBM - National Institute of Bank Institutions Management NCCDs - Non-Centrally Cleared NIPL - NPCI International Private Limited Derivatives NIST - National Institute of Standards NCDs - Non-Convertible Debentures and Technology NCFE - National Centre for Financial NLP - Natural Language Processing Education NNML - Net Non-Monetary Liabilities NCMC - National Common Mobility Card NOFHCs - Non-Operative Financial Holding ND - Nominee Director Companies NDA - Net Domestic Assets/Non- NPA - Non-Performing Assets Disclosure Agreements NPCI - National Payments Corporation NDDC - Non-Deliverable Derivative of India Contract NPI - National Payments Interface NDI - Non-Debt Instrument NPISH - Non-Profit Institutions Serving NDLD - New Delhi Leaders’ Declaration Households NDS-OM Negotiated Dealing System- NRC - Nomination and Remuneration Order Matching Committee xiiiSELECT ABBREVIATIONS NRE - Non-Resident (External) PAs - Payment Aggregators NRIs - Non-Resident Indians PACs - Public Awareness Campaigns NRO - Non-Resident Ordinary PADO - Public Administration, Defence and Other Services NSFE - National Strategy for Financial PAN - Permanent Account Number Education PBs - Payments Banks NSFI - National Strategy for Financial PCA - Prompt Corrective Action Inclusion PDs - Primary Dealers NSMs - Note Sorting Machines PDS - Public Distribution System NSO - National Statistical Office PE - Performance Evaluation NSSF - National Small Savings Fund PFCE - Private Final Consumption NUCFDC - National Urban Cooperative Expenditure Finance and Development PFMIs - Principles for Financial Market Corporation Limited Infrastructure NZDPU - Net-Zero Data Public Utility PFMS - Public Financial Management OBC - Other Backward Classes System OBICUS - Order Books, Inventories and PIB - Press Information Bureau Capacity Utilisation Survey PIDF - Payments Infrastructure Development Fund OD - Overdraft PIDPI - Public Interest Disclosure and OECD - Organisation for Economic Co- Protection of Informers operation and Development PLFS - Periodic Labour Force Survey OH - Orthopaedically Handicapped PLI - Production-Linked Incentive OI - Overseas Investment PMGKAY - Pradhan Mantri Garib Kalyan OID - Overseas Investment Division Anna Yojana OIS - Overnight Index Swap PMI - Purchasing Managers’ Index OLTAS - Online Tax Accounting System PML - Prevention of Money Laundering OMO - Open Market Operation PMUY - Pradhan Mantri Ujjwala Yojana OMSS - Open Market Sales Scheme PoC - Proof of Concept POL - Petroleum, Oil and Lubricants OoH - Out-of-Home POs - Payment Orders OPEC - Organisation of Petroleum Exporting Countries PoS - Point of Sale PPAC - Petroleum Planning and Analysis ORBIOs - Offices of the Reserve Bank of Cell India Ombudsmen PPIs - Prepaid Payment Instruments OTC - Over-the-Counter PPP - Public Private Partnership OTP - One-time Password PRAVAAH - Platform for Regulatory P2M - Person-to-Merchant Application, Validation and P2P - Peer to Peer AutHorisation xivSELECT ABBREVIATIONS PROI - Person Resident Outside India RE - Revised Estimates PSBs - Public Sector Banks ReBIT - Reserve Bank Information Technology Private Limited PSL - Priority Sector Lending REs - Regulated Entities PSLCs - Priority Sector Lending Certificates RFA - Red Flagging of Accounts PSOs - Payment System Operators RFID - Radio Frequency Identification PSPs - Payment System Participants RFP - Request for Proposal PSS - Payment and Settlement RM - Reserve Money Systems RMAB - Royal Monetary Authority of PSUs - Public Sector Undertakings Bhutan PTPFC - Public Tech Platform for RMC - Risk Monitoring Committee Frictionless Credit RMD - Risk Monitoring Department PVBs - Private Banks ROs - Regional Offices PwBD - Persons with Benchmark RPO - Recovery Point Objective Disabilities RPS - Retail Payment Systems QIP - Qualified Institutional Placement RR - Risk Register QR - Quick Response RRBs - Regional Rural Banks R&D - Research and Development RRE - Requirement for Realised Equity RASCI - Responsible, Accountable, RS - Regulatory Sandbox Supporting, Consulted and RTGS - Real Time Gross Settlement Informed RTI - Right to Information RAW - Risk Awareness Week RTLs - Risk Tolerance Limits RBI - Reserve Bank of India RTO - Recovery Time Objective RBIA - Risk-Based Internal Audit SAF - Supervisory Action Framework RBI EPF - Reserve Bank of India Employees’ Provident Fund SAKAR - Supervisory Assessment of KYC/ AML Risks RBIH - Reserve Bank Innovation Hub SAs - Statutory Auditors RB-CRIS - Reserve Bank-Climate Risk Information System SAS - Statistical Analytics System RB-IOS - Reserve Bank-Integrated SAAR - Seasonally Adjusted Annualised Ombudsman Scheme (Growth) Rate RBS - Risk-Based Supervision SAARC - South Asian Association of Regional Cooperation RBSC - Reserve Bank Staff College SAMWAD - Secure Audio-video Meetings RCA - Root Cause Analysis with Advanced Devices RCCS - Rural Consumer Confidence SARFAESI - Securitisation and Survey Reconstruction of Financial RDA - Rupee Drawing Arrangement Assets and Enforcement of RDBs - Rupee Denominated Bonds Security Interest xvSELECT ABBREVIATIONS SATARC - Security Automation, Threat SMCC - Social Media Command Centre Analysis and Response Centre SMEs - Small and Medium Enterprises SBE - Scale-Based Enforcement SMS - Short Messaging Service SBS - Shredding and Briquetting SNA - Single Nodal Agency Systems SNA-SPARSH - Single Nodal Agency - SCBs - Scheduled Commercial Banks Samayochit Pranali Akikrut SDF - Special Drawing Facility/ Sheeghra Hastantaran Standing Deposit Facility SNRR - Special Non-Resident Rupee SDMX - Statistical Data and Metadata SOC - Security Operations Centre Exchange SOP - Standard Operating Procedure sDQI - Supervisory Data Quality Index SPDs - Standalone Primary Dealers SDRs - Special Drawing Rights SPECTRA - Software Platform for External SD-WAN - Software Defined-Wide Area Commercial Borrowings and Network Trade Credits Reporting and SEs - Supervised Entities Approval SEACEN - South East Asian Central Banks SPMCIL - Security Printing and Minting Corporation of India Limited SFBs - Small Finance Banks SRO - Self-Regulatory Organisation SFDB - SAARCFINANCE Database SRVA - Special Rupee Vostro Account SFMS - Structured Financial Messaging System S-SC - Strategy Sub-Committee SFMS MI - SFMS Member Interface SSO - Single Sign-On SFTP - Secure File Transfer Protocol S-SOC - Sectoral Security Operations Centre SFWG - Sustainable Finance Working Group SSCI - Services Sector Composite Index SGBs - Sovereign Gold Bonds ST - Scheduled Tribe SGL - Subsidiary General Ledger STC - Short-term Trade Credit SGrBs - Sovereign Green Bonds StCBs - State Cooperative Banks SGSs - State Government Securities SWIFT - Society for Worldwide Interbank SHGs - Self-Help Groups Financial Telecommunication SIP - Systematic Investment Plan SWM - South-West Monsoon SLBC - State Level Bankers’ Committee TAT - Turn-Around Time SLCC - State Level Coordination T-Bills - Treasury Bills Committee TEs - Training Establishments SLR - Statutory Liquidity Ratio/Sri Lankan Rupee TF - Terrorist Financing SLS - State Linked Schemes TFP - Total Factor Productivity xviSELECT ABBREVIATIONS TGFIFL - Technical Group on Financial VAPX - Vector Autoregression with Inclusion and Financial Literacy Exogenous Variables TIN - Tax Information Network VC - Video Conferencing TOT - Toll-Operate-Transfer VFT - Value Free Transfer TPS - Transactions Per Second VI - Visually Impaired TR - Trade Repository VOICE - Voicing Opinion to Inspire, Contribute and Excel TReDS - Trade Receivables Discounting System VRR - Variable Rate Repo/Voluntary Retention Route TSCAs - Time-Sensitive Critical Activities VRRR - Variable Rate Reverse Repo UAP - Udyam Assist Platform UAT - User Acceptance Test WACR - Weighted Average Call Rate UCBs - Urban Cooperative Banks WADTDR - Weighted Average Domestic Term Deposit Rate UDAY - Ujjwal DISCOM Assurance Yojana WAFaaS - Web Application Firewall as a Service UDCH - User Defined Customer Hierarchy WALR - Weighted Average Lending Rate UI/UX - User Interface/User Experience WAM - Weighted Average Maturity UK - United Kingdom WAS - Weighted Average Spread ULI - Unified Lending Scheme WAY - Weighted Average Yield UO - Umbrella Organisation WB - World Bank UPI - Unified Payments Interface WEO - World Economic Outlook URC - Udyam Registration Certificate WG - Working Group USA - United States of America WLA - White Label ATM USD - US Dollar WLAOs - White Label ATM Operators USSD - Unstructured Supplementary WMA - Ways and Means Advances Service Data WPI - Wholesale Price Index UTs - Union Territories WPR - Worker Population Ratio UTI - Unique Transaction Identifier WTO - World Trade Organisation UTLBCs - Union Territory Level Bankers’ XBRL - eXtensible Business Reporting Committees Language VAaaS - Vulnerability Assessment as a XML - eXtensible Markup Language Service ZIs - Zonal Inspectorates VAPT - Vulnerability Assessment and ZTCs - Zonal Training Centres Penetration Testing This Report can be accessed on Internet URL: www.rbi.org.in xviiTHE ANNUAL REPORTA OSNSE TSHSEM WENOTR KAINNDG PORFO TSHPEE CRTESSERVE BANK OF INDIA For the Year April 1, 2024 to March 31, 2025* PART ONE: THE ECONOMY - REVIEW AND PROSPECTS I ASSESSMENT AND PROSPECTS I.1 The global economic expansion steadily path is expected to continue but at a slower pace continued in 2024, although growth was uneven with AEs likely to reach their targets earlier than amidst geopolitical tensions, geoeconomic EMEs. Accordingly, many central banks pivoted fragmentation, heightened trade tensions and to an easing cycle, while remaining cautious of elevated public debt. Global inflation moderated escalating trade tensions, lingering geopolitical in 2024 on the back of softening commodity uncertainties, global financial market volatility prices, easing supply conditions and the lagged and climate change risks. Policymakers face the impact of monetary tightening in 2022. The daunting task of suitably calibrating monetary disinflationary process, however, remains varied and fiscal policies to support growth, while across countries with persisting stickiness in safeguarding financial and macroeconomic services inflation in major advanced economies stability. (AEs). Financial conditions broadly eased as I.3 Amidst challenging global economic major central banks pivoted to accommodative environment, the Indian economy exhibited monetary policy stance by mid-2024. Yet, bouts resilience during 2024-25, supported by robust of volatility in global financial markets were visible macroeconomic fundamentals and proactive during the year due to the interplay of policy policy measures. Inflation eased and moved shifts, geopolitical developments and stretched below the target by the end of the year. valuations of technological stocks, among others. The financial sector remained resilient and Merchandise trade rebounded gradually in spite robust on the back of healthier bank and non- of persisting geopolitical tensions and policy bank balance sheets, improved asset quality uncertainty. Capital flows to emerging market and capital buffers that enabled double-digit economies (EMEs) remained volatile owing to credit growth. On fiscal front, the central elevated geoeconomic and policy uncertainties. government continued with its efforts towards I.2 The global economy in 2025 is likely to grow fiscal consolidation, supported by buoyant not only below its historical average (2000-19) of tax revenues, while maintaining the thrust on 3.7 per cent, but also below the growth of 3.3 per expenditure quality. A modest current account cent in 2024, on account of heightened global deficit (CAD) and adequate forex reserves trade protectionism, rising policy uncertainty and provided resilience to the external sector even ongoing geopolitical tensions. Disinflationary as capital flows exhibited volatility. * : Wherever information is available, this chapter has been updated beyond March 2025. 1ANNUAL REPORT 2024-25 I.4 The Indian economy is poised to sustain investment, slow productivity growth and high its position as the fastest growing major debt levels. Moreover, the pace of economic economy during 2025-26, supported by pick- activity was impacted by moderation in economic up in private consumption, healthy balance growth in some Asian and European economies, sheets of banks and corporates, easing financial protracted geopolitical tensions and sluggish conditions and the government’s continued thrust recovery in China’s consumption demand and on capital expenditure. The easing of supply property market. Global inflation eased to 5.7 per chain pressures, softening of global commodity cent in 2024 from 6.6 per cent in 2023, reflecting prices and higher agricultural production on the impact of gradual monetary tightening and the back of a likely above-normal south-west the easing of supply chain constraints, but still monsoon augur well for the inflation outlook in remained above pre-pandemic levels, largely 2025-26. Financial markets may exhibit sporadic driven by persistent price pressures in the episodes of volatility triggered by turbulent global services sector. financial markets in the wake of heightened I.6 Global merchandise2 trade volume uncertainty regarding the evolution of trade expanded by 2.9 per cent in 2024 after tariff policies, among others. Export sector is contracting by 1.0 per cent in 2023 with also expected to encounter some headwinds easing of supply chain pressures. Global trade from rising geopolitical tensions, inward-looking flows, however, continue to be confronted by policies and risk of potential tariff-war among geoeconomic fragmentation and restrictive trade major economies. However, India’s participation policies. Services trade exhibited resilience on in 14 free trade agreements (FTAs) and six the back of continued recovery in spending on preferential trade agreements (PTAs), along with travel from the pandemic lows and sustained the new trade deals under negotiation with the demand for digitally delivered services. US, Oman, Peru and the European Union (EU) may support growth in trade. Resilient services I.7 Global financial conditions remained exports and inward remittances are likely to largely accommodative in major AEs, reflecting cushion CAD, which would remain eminently the shift towards less restrictive policy to boost manageable in 2025-26. economic activity as inflation started gradually converging to the target levels. After softening in 2. Assessment of 2024-25 the first half of 2024, sovereign bond yields rose Global Economy again in AEs during the second half of the year I.5 According to the International Monetary amid renewed inflation concerns and divergent Fund (IMF)1, global growth at 3.3 per cent monetary policy trajectories of major central in 2024 (3.5 per cent a year ago) was below banks. Sovereign bond yields in emerging the historical average (2000-19) of 3.7 per market and developing economies (EMDEs) cent, owing to structural challenges like weak generally moderated amidst the global rate cut 1 World Economic Outlook, April 2025, IMF. 2 Global Trade Outlook and Statistics Update, April 2025, World Trade Organisation (WTO). 2ASSESSMENT AND PROSPECTS cycle. The US dollar remained strong throughout India remained the fastest growing major the year with consequent downward pressures economy. Economic activity was supported by on a number of AE and EME currencies. Global an improvement in consumption demand and equity markets inched up higher notwithstanding net exports on the expenditure side, and buoyant intermittent volatility driven by concerns over services sector and recovery in agricultural stretched valuations, divergent monetary policies, production on the supply side. slower pace of disinflation, geopolitical risks and I.10 Growth in gross value added (GVA) in uncertainty on the evolution of tariff policies. the agriculture and allied sector in 2024-25 I.8 Brazil assumed the G20 Presidency from stood at 4.6 per cent as compared with 2.7 per India for 2023-24, forming a historic troika of cent a year ago, driven by record foodgrains three nations from the Global South. Under the production aided by adequate reservoir levels overarching theme of ‘Building a Just World and favourable weather conditions. Horticulture and a Sustainable Planet’, Brazil’s Presidency sector also performed better than last year, prioritised three key areas: (a) combating driven by higher production of onion and potato. hunger, poverty, and inequality; (b) advancing The government has initiated Digital Agriculture the three dimensions of sustainable development Mission to bring innovative farmer-centric – economic, social, and environmental; and digital services, which will enable transparent, (c) reforming global governance structures. efficient, easier and faster service delivery to The Brazilian Presidency advanced initiatives the farmers. This will also enhance productivity such as strengthening international financial and sustainability of India’s agriculture sector. institutions, advancing financial inclusion, Moreover, the government is promoting quality enhancing cross-border payments, promoting seed production and distribution through various cybersecurity, addressing vulnerabilities in non- schemes to enhance climate-resilience and banking financial institutions (NBFIs), climate- improve crop yield in the agriculture sector. related financial risks, and ensuring stability of I.11 Growth in industrial sector moderated to 4.3 the global financial system. per cent in 2024-25, primarily due to deceleration Domestic Economy in manufacturing GVA. Manufacturing sector I.9 Against the backdrop of a steady global witnessed robust growth in Q1:2024-25, but growth amidst multiple headwinds, the Indian moderated in the next three quarters, reflecting economy remained resilient during 2024- both base effect and muted demand conditions. 25, supported by robust macroeconomic The mining sector remained subdued during the fundamentals, proactive policy measures and year with extended monsoon affecting mining sustained government capital expenditure. activity during Q2:2024-25. Electricity generation Although real gross domestic product (GDP)3 registered a modest growth with an above- growth moderated to 6.5 per cent in 2024-25, average monsoon and a relatively mild winter 3 All references to GDP data in this Report are based on the Second Advance Estimates (SAE) of National Income 2024-25 released by the National Statistical Office on February 28, 2025, unless indicated otherwise. 3ANNUAL REPORT 2024-25 bringing down electricity demand. Public sector Change Performance Index (CCPI) 2025, which continued to spearhead investment growth in ranked India among the top 10 high performers 2024-25. The production linked incentive (PLI) for the sixth year in a row since 2020. Renewable scheme helped to steer growth across several energy capacity additions were highest during key manufacturing industries. As of November 2024-25 led by solar energy, with more than 10 2024, investment under PLI scheme reached 57 lakh households installing rooftop solar panels per cent of the aggregate committed target under under Pradhan Mantri Surya Ghar Muft Bijli the schemes. Yojana. During the year, Green Steel Mission and Critical Minerals Mission were launched along I.12 The services sector, with a share of 64.1 with advancements in National Green Hydrogen per cent in GVA, remained the mainstay of Mission. Efforts were strengthened to clean aggregate supply with a growth of 7.5 per cent transportation system through PM Electric Drive in 2024-25. Despite moderation, construction Revolution in Innovative Vehicle Enhancement activity remained resilient with its share (E-DRIVE) scheme, focusing on green mobility reaching the highest level since 2012-13. Public and development of electric vehicle (EV) administration, defence and other services manufacturing ecosystem to achieve the target (PADO) remained buoyant, recording their of 30 per cent EV adoption by 2030. Moreover, highest growth in the last eight years, supported measures aimed at greening of the economy by robust expenditure by the central and state such as issuance of sovereign green bonds, governments as well as sustained momentum green deposits scheme and increased support in other services. Meanwhile, growth in trade to the renewable energy sector in terms of the activity and telecom subscriber base softened revised priority sector lending (PSL) guidelines during the year. bear testimony to a strong commitment towards I.13 As per the annual Periodic Labour Force facilitating resources for sustainable development. Survey (PLFS) data, the labour market remained I.15 Inflation converged closer towards the resilient during January-December 2024. The target during 2024-25 aided by easing input post-pandemic increase in the agriculture sector’s cost pressures, proactive supply management share in total employment reversed in 2024, measures by the government and continuing while the share of other services, construction transmission of past monetary policy actions. and trade sectors rose in 2024 as compared to Headline inflation moderated to an average of 4.6 2023. The quarterly urban PLFS data pertaining per cent during 2024-25 from 5.4 per cent in the to October-December 2024 also indicate robust previous year, largely driven by a moderation in employment in urban areas. core (CPI excluding food and fuel) inflation to 3.5 I.14 Despite uncertainty around globally per cent and deflation in fuel at 2.5 per cent. The coordinated action against climate change, India moderation in core inflation was broad-based remained focused on its mitigation and adaptation across goods and services. The uptick in core measures. This is also reflected in the Climate inflation in the second half of the year was driven 4ASSESSMENT AND PROSPECTS primarily by increase in international gold prices. currency in circulation and the Reserve Bank’s An upward revision in mobile charges by private forex operations. For the year as a whole, liquidity telecom service providers also pushed up services conditions remained in surplus as reflected in inflation. Deflation in fuel was driven by reduction average daily net absorption under the liquidity in liquefied petroleum gas (LPG) and kerosene adjustment facility (LAF) increasing to ₹1,605 prices on the back of softer global energy prices. crore during 2024-25 from ₹485 crore in the In contrast, food inflation remained elevated at previous year. The Reserve Bank conducted a 6.7 per cent in 2024-25, with intermittent spikes suite of market operations, including open market due to overlapping supply shocks emanating operation (OMO) purchases, USD/INR buy/sell from weather anomalies imparting volatility swaps, and longer tenor variable rate repo (VRR) to headline inflation. Food inflation recorded operations, besides reducing the cash reserve an intra-year peak of 9.7 per cent in October ratio (CRR) by 50 bps (in two tranches of 25 bps 2024, before declining dramatically to 2.9 per each), to provide durable liquidity to the system. cent by March 2025. While vegetables inflation The weighted average call rate (WACR), on an experienced heightened volatility during the average, traded 6 bps above the policy repo rate year, inflation persisted in cereals, fruits, edible during 2024-25. oils, and meat and fish, reflecting tight supply I.17 Domestic financial markets remained conditions. Domestic import duty hikes coupled resilient during 2024-25 amidst an uncertain with export restrictions imposed by Indonesia on global environment. Government security edible oils imparted rigidity to food inflation. (G-sec) and corporate bond yields declined over I.16 Considering the growth-inflation dynamics, the year, leading to an increase in corporate bond the Monetary Policy Committee (MPC) issuances. Domestic equities surged in the first changed the policy stance from withdrawal of half, scaling fresh peaks before declining in the accommodation to neutral in October 2024 second half amidst concerns over slowdown in providing the flexibility to monitor the outlook GDP growth and corporate earnings growth, tariff and progress on disinflation and growth and policy uncertainty and foreign portfolio investment act in accordance with the evolving situation. (FPI) outflows. Primary market activity remained Subsequently, with the growth-inflation dynamics upbeat in 2024-25 although it moderated in Q4. opening up policy space to support growth, the MPC reduced the policy repo rate by 25 bps to I.18 The Indian Rupee (INR) underwent 6.25 per cent in February 2025 after maintaining depreciation albeit less than some of its EME status quo since February 2023 at 6.50 per cent. peers as the US dollar and the US asset yields Liquidity conditions improved during 2024-25 remained strong. Nevertheless, India’s robust vis-à-vis last year. Within the year, however, macroeconomic fundamentals characterised system liquidity moved from surplus during by stable and moderate current account and July-November 2024 to deficit during December fiscal deficits allowed for an orderly evolution 2024-March 2025 on account of high increase in of the INR. Moreover, the Reserve Bank also 5ANNUAL REPORT 2024-25 undertook various measures to promote the remained modest. Nevertheless, the consolidated increasing use of INR and local currencies of GFD of states is likely to remain within the budget partner trading countries for international cross- estimate of 3.2 per cent of GDP. border transactions and focused on rationalising I.21 The Reserve Bank revised the ways regulatory, supervisory and authorisation and means advances (WMA) limits of the state frameworks for ease of undertaking forex governments/union territories (UTs), based on transactions. the recommendations of the Working Group I.19 The transmission of policy repo rate constituted under the aegis of the 33rd Conference changes to banks’ deposit and lending rates of the State Finance Secretaries (SFS). The remained robust during 2024-25. The proportion aggregate WMA limit of the state governments/ of external benchmark linked loans in total UTs was revised to ₹60,118 crore from the extant outstanding floating rate loans increased further limit of ₹47,010 crore, effective from July 1, 2024. during the year, with concomitant fall in marginal Based on the recommendations of the Working cost of funds-based lending rate (MCLR) linked Group constituted by the Reserve Bank on loans. consolidated sinking fund (CSF) and guarantee redemption fund (GRF), the special drawing I.20 The central government delivered on its facility (SDF) limits were revised to provide greater fiscal consolidation commitment, with gross fiscal flexibility to state governments/UTs in managing deficit (GFD) declining to 4.7 per cent of GDP in temporary mismatches in their cash flows. 2024-25 [revised estimates (RE)] from 5.5 per cent of GDP in 2023-244. On the expenditure I.22 India’s merchandise exports grew side, the effective capital expenditure5 registered marginally by 0.1 per cent in 2024-25 as against a contraction of 3.1 per cent a year ago. On the a growth of 5.2 per cent over and above 19.8 other hand, merchandise imports grew by 6.2 per per cent recorded in 2023-24, while growth in cent during this period as against a contraction revenue expenditure was 5.8 per cent in 2024- of 5.3 per cent a year ago. Consequently, India’s 25 (RE). On the receipt side, gross-tax and non- merchandise trade deficit widened to US$ 282.8 tax receipts recorded resilient growth of 11.2 per billion during 2024-25 from US$ 241.1 billion a cent and 32.2 per cent, respectively, in 2024- year ago. Nonetheless, strong services exports 25 (RE). Provisional accounts data during April and a steady flow in inward remittances cushioned 2024-February 2025 reveal that states’ revenue India’s CAD to remain within sustainable level at receipts recorded moderate growth on account 1.3 per cent of GDP during April-December 2024 of deceleration in tax revenue growth and decline (1.1 per cent a year ago). in grants from the central government. While revenue expenditure of states picked up during I.23 Capital flows exhibited volatility during April 2024-February 2025, capital expenditure the year. Net foreign direct investment (FDI) 4 The figures may be at variance with those reported in Union Budget 2025-26, as they are computed using the latest available estimates of the GDP. 5 Capital expenditure plus grants in aid for creation of capital assets. 6ASSESSMENT AND PROSPECTS inflows stood at US$ 0.4 billion during 2024-25, along with a steady decline in the slippage ratio. lower than US$ 10.1 billion a year ago, and FPI The provision coverage ratio (PCR) as well as recorded net inflows of US$ 1.7 billion during profitability indicators, viz., return on asset (RoA) 2024-25 (US$ 41.6 billion a year ago). In terms of and return on equity (RoE) remained robust, external financing needs, net capital flows were while the net interest margin (NIM) softened. more than sufficient to finance CAD in H1:2024- Capital and liquidity buffers remained well above 25, and accordingly, there was an accretion to the regulatory requirements. Macro stress tests foreign exchange reserves (on a BoP basis) of suggest that banks’ aggregate capital would US$ 23.8 billion. However, the situation reversed remain above the regulatory minimum under all in H2. Foreign portfolio investors turned net adverse scenarios. sellers in the domestic market with net outflows I.25 Aggregate credit extended by non-banking at US$ 18.5 billion during October 2024 to March financial companies (NBFCs) expanded in double 2025. Notably, net FPI flows in the debt segment digits as at end-December 2024 although growth exhibited resilience with US$ 17.4 billion of inflows in unsecured lending moderated. Profitability during 2024-25. Although other forms of capital indicators and NPA ratios continued to improve flows, such as external commercial borrowings further during this period, while capital adequacy (ECB) and non-resident deposits remained ratio remained robust. Risk weights on bank robust, net capital flows fell short of CAD during credit to NBFCs were reduced effective April Q3:2024-25, leading to a depletion in reserves 1, 2025 to facilitate credit offtake and support (on a BoP basis) to the tune of US$ 37.7 billion. economic growth. Overall, there was a depletion in reserves to the tune of US$ 13.8 billion during April-December I.26 The credit growth of urban cooperative 2024. Nonetheless, strong buffers in the form banks (UCBs) improved as at end-December of ample forex reserves at US$ 668.3 billion 2024. The financial performance of UCBs also (as at end-March 2025), covering 11 months of improved on the back of strengthened capital merchandise imports, helped mitigate external buffers and lower GNPA ratio as compared to the financing needs and adverse global spillovers. corresponding period of the previous year. I.24 During the year, credit-to-deposit ratio of I.27 Several regulatory and supervisory scheduled commercial banks (SCBs) marginally guidelines were issued during the year in line increased, as bank credit growth outpaced with global best practices towards strengthening deposit growth. The gap between credit and governance, risk management practices and deposit growth, however, narrowed, with banks operational resilience. These, inter alia, relate to: continuing to increase their term deposit rates (a) principles for management of model risks in to mobilise deposits to bridge the funding gap. credit; (b) eligibility criteria for voluntary transition SCBs witnessed further improvement in asset of small finance banks (SFBs) to universal banks; quality, as evident from reduction in both gross (c) harmonisation of regulations applicable to NPA (GNPA) ratio and net NPA (NNPA) ratio, housing finance companies (HFCs) and NBFCs; 7ANNUAL REPORT 2024-25 and (d) enhancing operational risk management I.30 India is strategically focusing on building and operational resilience. a strong AI ecosystem to pave the way for self- reliance and innovation in this emerging sector. I.28 On the supervision front, the Reserve Bank The government has launched several initiatives actively engaged with supervised entities (SEs) such as IndiaAI Mission and the establishment to convey expectations related to governance of three centres of excellence (CoE) for AI and assurance functions and compliance with in healthcare, agriculture, and sustainable the extant guidelines. The supervisory initiatives, cities. To further support AI innovation in the inter alia, include: (a) setting up advanced electronics sector and encourage domestic supervisory analytics group for increasing the manufacturing, India is rapidly building a strong use of techniques like artificial intelligence (AI)/ semiconductor infrastructure through initiatives machine learning (ML) in the supervisory process; like India Semiconductor Mission. (b) proactively strengthening international supervisory cooperation by establishing and I.31 As part of the Reserve Bank’s focus on deepening formal relationships with authorities monitoring the use and adoption of technology in in key global jurisdictions with an aim to the financial ecosystem, a unique initiative enhance the stability of the financial system; of ‘FinTech Repository’ was launched (c) development of supervisory data quality index on May 28, 2024. The repository aims (sDQI) to identify and address deficiencies in risk to capture essential information about data aggregation capabilities and risk reporting FinTech entities and their technology stack. practices across SEs; (d) issuing guidelines on Simultaneously, a related repository for prompt corrective action (PCA) framework for regulated entities (REs) called ‘EmTech UCBs; and (e) strengthened cyber risk oversight Repository’ was also launched to capture through onsite/offsite assessments across SEs. information on their adoption of emerging technologies such as AI, ML, cloud computing, I.29 Starting with the initial use cases of distributed ledger technology (DLT), etc. These person-to-person (P2P) and person-to-merchant are secure web-based applications and are (P2M), the Reserve Bank expanded the central managed by the Reserve Bank Innovation bank digital currency (CBDC)-Retail (e₹-R) pilot Hub (RBIH). The repositories would enable to include offline and programmability features availability of aggregate sectoral level data, during 2024-25. As at end-March 2025, the trends and analytics that would be useful for pilot in the e₹-R segment was expanded to 17 both policymakers and participating industry banks and 60 lakh users since its inception in members. December 2022. To further enhance adoption and improve distribution, certain non-banks I.32 During 2024-25, total digital payments have been allowed to offer CBDC wallets. recorded growth of 34.8 per cent and 17.9 per Moreover, the scope of e₹-Wholesale was further cent in volume and value terms, respectively. expanded and diversified with the addition of Moreover, the success of Unified Payments four standalone primary dealers (SPDs). Interface (UPI) placed India in a leadership 8ASSESSMENT AND PROSPECTS position with a share of 48.5 per cent in global services. The exclusive internet domains would real-time payments by volume6. The Reserve also help identify cybersecurity threats and Bank continued to chart the course laid down malicious activities like phishing and would also in the Payments Vision 2025 document. Under considerably reduce instances of financial loss the ‘Inclusion Pillar’, ‘Delegated Payments’ was to the general public. Going forward, it is also introduced to deepen the reach and usage of proposed to have an exclusive domain for other digital payments. This feature enables individuals non-bank entities in the Indian financial sector in (primary user) to allow another individual the form of ‘fin.in’. (secondary user) to make UPI transactions up I.35 In the cross-border payment space, the to a limit from the primary user’s bank account. Reserve Bank joined Project Nexus, a multilateral Further, to promote accessibility of payment international initiative to enable instant cross- system and foster inclusive growth, all payment border retail payments, which aims to connect system participants were advised to review their the fast payment systems (FPS) of four ASEAN payment systems/devices and make necessary countries (viz., Malaysia, Philippines, Singapore modifications to enhance their accessibility to and Thailand) and India. persons with disabilities. I.36 The Reserve Bank’s Financial Inclusion I.33 Regulatory efforts also took centre stage on Index (FI-Index)7, that measures the extent of strengthening fraud reporting mechanisms and financial inclusion in the country, improved from encouraging information security preparedness, 60.1 in March 2023 to 64.2 in March 2024, with with an emphasis on cyber resilience. The growth witnessed across all three sub-indices central payments fraud information registry of access, usage and quality. Improvement (CPFIR) reporting was extended to various in FI Index was mainly contributed by usage categories of banks during the year. Moreover, sub-index, reflecting deepening of financial robust governance mechanisms for identification, inclusion. The Financial Literacy Week (FLW) analysis, monitoring and management of cyber security risks and vulnerabilities were 2025 was observed during February 24-28, 2025 also prescribed for non-bank payment system on the theme of ‘Financial Literacy - Women’s operators. Prosperity’, with a focus on creating financial awareness among women. I.34 To combat the increasing instances of fraud in digital payments, the Reserve Bank proposed I.37 During the year, the Reserve Bank to introduce an exclusive internet domain for embarked on a systematic approach to improve the banks in India in the form of ‘bank.in’ on awareness on issues related to consumer February 7, 2025. This initiative would help in protection. The processes adopted under enhancing trust in digital banking and payment Reserve Bank - Integrated Ombudsman Scheme services and aid in streamlining secure financial was further fine-tuned to enhance its efficiency. 6 ACI Worldwide, 2024. 7 Reserve Bank’s press release dated July 9, 2024 on ‘Financial Inclusion Index for March 2024’. 9ANNUAL REPORT 2024-25 I.38 The Reserve Bank commemorated the stubborn in several parts of the world, enhanced 90th year of its establishment during 2024-25 tariffs increasing inflation in the US and possible with year-long events and activities reflecting risks of desynchronisation of monetary policy on the Reserve Bank’s legacy of nine decades responses. (RBI@90), while looking ahead towards I.41 Global merchandise trade volume is strategies for the coming decade (RBI@100). projected to contract by 0.2 per cent in 20259 The commemoration was launched with an under the adjusted scenario based on the tariff opening ceremony, graced by the Hon’ble Prime situation as of April 14, 2025. However, the Minister of India as the Chief Guest on April 1, signing of a trade deal between the US and the 2024 in Mumbai and concluded with a grand UK on May 8, 2025 and the agreement made event, graced by the Hon’ble President of India by the US and China on May 12, 2025 to avoid as the Chief Guest on April 1, 2025 in Mumbai. retaliation and to engage in future discussions 3. Prospects for 2025-26 augur well for global trade, going ahead. Global Economy I.42 High levels of public debt in major AEs and EMEs are raising concerns around I.39 The global economic outlook for 2025 and the sustainability of public finances in these 2026 remains clouded by multiple challenges: the economies and run the risk of adding to already pace of disinflation losing momentum; elevated heightened financial market volatility. Elevated public debt across several economies; protracted sovereign debt levels in systemic economies geopolitical tensions; heightened trade tensions; are already leading to spikes in risk premia and financial market volatility; and climate shocks. yields. Stretched asset valuations, with capital The global economy is projected8 to grow by 2.8 flows chasing yields, could lead to tightening per cent in 2025 and 3.0 per cent in 2026 (3.3 per financial conditions, thereby raising financial cent in 2024). The growth in EMDEs is projected stability concerns as evidenced by episodic sell- at 3.7 per cent in 2025 and is expected to improve off pressures in global equity markets during marginally to 3.9 per cent in 2026. The growth 2024. Disorderly adjustments in financial markets rate in AEs is projected to decelerate to 1.4 per of systemic AEs have the potential to spillover to cent in 2025 from 1.8 per cent in 2024, before EMDEs amidst persistent geopolitical tensions, marginally improving to 1.5 per cent in 2026. geoeconomic fragmentation, emergence of trade I.40 Global inflation is expected to moderate tensions and disruptive technological shocks. from 5.7 per cent in 2024 to 4.3 per cent in 2025 Climate change, cybersecurity, crypto currency, and further to 3.6 per cent in 2026. However, the FinTech, CBDC and tech disruptions through AI/ near-term trajectory of price stability may still ML also require coordinated policy response at face challenges with services inflation remaining the global level. 8 World Economic Outlook, April 2025, IMF. 9 Global Trade Outlook and Statistics Update, April 2025, WTO. 10ASSESSMENT AND PROSPECTS Domestic Economy lakh for loans taken through the kisan credit card (KCC). Moreover, with rising global demand for I.43 The outlook for the Indian economy organic produce, efforts are being made towards remains promising in 2025-26, supported by promoting sustainable farming, including a plan revival in consumption demand, government’s to cover one crore farmers under the National continued thrust on capex while adhering Mission on Natural Farming, to enhance the to the path of fiscal consolidation, healthy climate resilience of the agriculture sector as well balance sheets of banks and corporates, easing as soil health and biodiversity. financial conditions, continuing resilience of the services sector and strengthening of I.45 Manufacturing sector is expected to gain further traction in 2025-26 supported consumer and business optimism, besides by improvement in domestic demand, higher sound macroeconomic fundamentals. However, capacity utilisation, healthy balance sheets uncertainty about global trade post-protectionist of corporates and banks, and consumer and measures, protracted geopolitical tensions and business optimism. The government’s focus on global financial market volatility pose downside widening the manufacturing base and the policy risks to the growth outlook and upside risks to the support through the ongoing PLI scheme and inflation outlook. National Manufacturing Mission12 announced I.44 The prospects for agriculture sector appear in the Union Budget 2025-26 is expected to favourable in 2025-26 on the back of expected further strengthen ‘Make in India’ initiative. The above normal south-west monsoon and several construction sector is also expected to continue productivity-enhancing government policies. In its robust performance in 2025-26 aided by the Union Budget 2025-26, various new initiatives increased allocation for Pradhan Mantri Awas have been announced for boosting agriculture Yojana (PMAY). Moreover, the announcement sector such as Prime Minister Dhan-Dhaanya of the second Asset Monetisation Plan (2025- Krishi Yojana10; Mission for Aatmanirbharta 30), aimed at unlocking ₹10 lakh crore through (self-reliance) in pulses; comprehensive asset monetisation, is expected to provide a programme to promote production, efficient significant boost to the infrastructure sector. supplies and processing of vegetables and fruits; These factors are expected to create new launch of National Mission on High Yielding employment opportunities, improve labour Seeds11; Mission for Cotton Productivity; and income and strengthen domestic demand. The enhancement of credit limit under the modified optimism about manufacturing and services interest subvention scheme from ₹3 lakh to ₹5 sectors is also reflected in the forward-looking 10 The programme will cover 100 districts with low productivity, moderate crop intensity and below-average credit parameters to: (a) enhance agricultural productivity; (b) adopt crop diversification and sustainable agriculture practices; (c) augment post-harvest storage at the panchayat and block level; (d) improve irrigation facilities; and (e) facilitate availability of long-term and short-term credit. 11 Aimed at: (a) strengthening the research ecosystem; (b) targeted development and propagation of seeds with high yield, pest resistance and climate resilience; and (c) commercial availability of more than 100 seed varieties released since July 2024. 12 Emphasis on five focal areas, viz., (a) ease and cost of doing business; (b) future ready workforce; (c) vibrant and dynamic micro, small and medium enterprise (MSME) sector; (d) availability of technology; and (e) quality products. 11ANNUAL REPORT 2024-25 surveys conducted by the Reserve Bank. Taking development of multiple sovereign foundational into account these factors, real GDP growth for AI models, including large language models 2025-26 is projected at 6.5 per cent, with risks (LLMs) and problem-specific AI solutions. evenly balanced. I.48 Supply management measures by the I.46 To support the country’s energy transition, government contained food inflation, and with the Union Budget 2025-26 has set the target of the lagged impact of monetary policy tightening 100 gigawatt (GW) of nuclear power capacity by working through the system, headline inflation 2047. The emphasis on small modular reactors eased by 73 bps to 4.6 per cent in 2024-25. (SMRs), with their smaller size and lower capital Going forward, easing supply chain pressures, investment requirements, is expected to aid in softening global commodity prices, expected achieving this target. The Union Budget also higher agricultural production supported by advanced power sector reforms by permitting above-normal south-west monsoon and elevated states an additional borrowing limit of 0.5 per reservoir levels augur well for the inflation outlook cent of gross state domestic product (GSDP) in 2025-26. The increasing incidence of climate for improving distribution and transmission shocks as seen in recent years, however, warrants infrastructure. Additionally, funding for the careful monitoring of food price outlook. Prolonged Pradhan Mantri Surya Ghar Muft Bijli Yojana has geopolitical uncertainties, excessive global been significantly increased in the Union Budget, financial market volatilities, trade fragmentation aimed at accelerating the adoption of renewable and restrictive trade policies pose upward risks to energy. the inflation trajectory. Taking into account these factors, CPI inflation for 2025-26 is projected at I.47 The budgetary provision for the Ministry of 4.0 per cent, with risks evenly balanced. Science and Technology has more than doubled in 2025-26 from the previous year. This bodes I.49 With inflation falling below the target well for enhancing India’s relatively low share of in February and March 2025, supported by a research & development (R&D) expenditure in sharp fall in food inflation, there is now greater GDP (0.6 per cent) to catch up with the levels confidence about a durable alignment of headline of its peers such as China (2.4 per cent), Korea inflation with the target of 4.0 per cent over a (4.8 per cent) and Malaysia (1 per cent)13. The 12-month horizon. The benign inflation outlook stepped-up budget for science and technology and moderate growth warrant monetary policy to is likely to enhance India’s innovation landscape be growth supportive, while remaining watchful and R&D programmes, which are positively about the rapidly evolving global macroeconomic associated with productivity growth in the long- conditions. Accordingly, the MPC in its April 2025 run. To further strengthen14 its AI capabilities, meeting unanimously voted to reduce the policy the government has planned to facilitate the repo rate by 25 bps to 6.0 per cent. Moreover, 13 World Development Indicators, World Bank. 14 The Union Budget 2025-26 announced the fourth CoE for AI in education with an outlay of ₹500 crore. 12ASSESSMENT AND PROSPECTS the MPC also decided to change the stance from Maldives and Mauritius in November 2024 and neutral to accommodative. The Reserve Bank March 2025, respectively. will continue to undertake liquidity management I.51 The impetus to growth-inducing capital operations in sync with the monetary policy spending would be sustained by the central stance to keep system liquidity adequate to meet government, with effective capital expenditure the productive requirements of the economy. It budgeted to rise to 4.3 per cent of GDP in 2025-26 will deploy an appropriate mix of instruments to from 4.0 per cent in 2024-25 (RE). Moreover, to modulate frictional as well as durable liquidity, encourage capital spending by states, the central ensuring orderly movement of money market government’s financial assistance scheme for interest rates. states’ capital expenditure has been extended to I.50 In 2025-26, markets will closely track 2025-26 with an outlay of ₹1.5 lakh crore. The the implications of tariff policies of the US and central government adhered to its medium-term reciprocal measures by others, as an uncertain objective of bringing the GFD below 4.5 per cent policy environment may instil volatility in global of GDP by 2025-26 by targeting the GFD at 4.4 financial markets. Following a correction in per cent of GDP in 2025-26 (BE), down from 4.7 the second half of 2024, Indian equity markets per cent in 2024-25 (RE). From 2026-27 onwards, are expected to remain resilient amidst stable the central government aims to maintain the fiscal macroeconomic conditions and moderation in deficit on a trajectory that ensures a declining public debt-to-GDP ratio, reaching around 50 equity market valuations, although geopolitical per cent by end-March 2031. The fiscal outlook uncertainty poses downside risk. Resource for states remains positive for 2025-26 with their mobilisation through primary market is expected consolidated GFD budgeted at 3.3 per cent of to regain momentum as secondary market GDP15. The gross transfer to states from the sentiments stabilise. In the short-run, however, centre during 2025-26 is budgeted to increase markets may experience volatility reflecting by 12.5 per cent, driven mainly by tax devolution, global policy uncertainty. Amidst accentuation centrally sponsored schemes (CSS) and special of the trend in protectionism worldwide, assistance to states for capital expenditure, measures to promote the use of INR (i.e., providing adequate fiscal headroom to pursue internationalisation of INR) through increased higher capital expenditure. accessibility and acceptability thereof for cross- border transactions, and use of local currencies I.52 India’s merchandise exports are expected for cross-border transactions with trade-partner to be uncertain from a projected slowdown in countries are expected to continue during the global trade due to downside risks emanating year as reflected in memoranda of understanding from ongoing geopolitical conflicts, geoeconomic towards local currency settlement signed with fragmentation and policy uncertainty. However, 15 Data pertain to 28 states and 3 union territories which have presented their budget for 2025-26. 13ANNUAL REPORT 2024-25 the ongoing trade agreement negotiations I.55 Despite some moderation, NBFCs remain with several trade partners may facilitate significantly dependent on banks for funding, India’s greater participation in global trade. underscoring the need for greater diversification of their funding sources. Scale-based regulatory The expansion of key export sectors including framework is expected to further improve electronics, pharmaceuticals, engineering goods governance and risk management. and agriculture, coupled with innovations in e-commerce and digital trade, would benefit I.56 In order to make the financial system more India’s export growth16. resilient, sound, safe and inclusive, the Reserve Bank would be undertaking several initiatives in I.53 Robust outlook for India’s services trade areas such as regulation, supervision, FinTech, balance and inward remittance receipts is payment systems, customer protection and expected to support CAD to remain well within financial inclusion. Moreover, the Reserve Bank the sustainable limit during 2025-26. Moreover, would leverage on technology towards providing the inclusion of Indian sovereign bonds in secure, accessible, affordable and an efficient global bond indices and raising the FDI cap in financial sector. insurance sector to 100 per cent from 74 per I.57 In the regulatory space, the Reserve Bank cent earlier, as announced in the Union Budget would consolidate and streamline regulations 2025-26, should continue to bolster foreign to improve business efficiency and simplify investment flows. Additionally, export friendly compliance. The PRAVAAH17 portal, which environment and nurturing of India’s comparative was launched in May 2024, has now been advantage, harnessing the potential of regional made mandatory w.e.f. May 1, 2025 for REs to trade agreements, greater Indian participation in submit their applications to the Reserve Bank. global value chains (GVCs), diversifying India’s It will continue to improve the efficiency and merchandise trade and services baskets to effectiveness of the portal. new frontiers and leveraging international trade I.58 The Reserve Bank would continue with the in INR would boost India’s exports and further supervisory initiatives aimed at early identification strengthen the resilience of India’s external of risks and vulnerabilities, increasing the focus sector, going forward. on root cause of vulnerabilities, and harmonising I.54 Indian banking sector has been resilient, the supervisory rigour across various segments although heightened global uncertainties of the financial system. Further, the Reserve underscore the importance of proactive risk Bank would focus on enhancing cyber resilience management. Considering the dynamic nature of and capabilities of supervised entities (SEs) by the interest rate risk, banks need to address both implementing recommendations of the inter- trading and banking book risks, especially in light regulatory Working Group on uniformity in baseline of moderation in NIM. cybersecurity guidelines of financial entities. 16 PIB (2025), ‘India’s Exports Reach Historic Heights’, Ministry of Commerce and Industry, Government of India, February 1. 17 Platform for Regulatory Application, Validation and Authorisation (PRAVAAH), launched on May 28, 2024, is a unified and secure portal for submission of applications for regulatory approvals, authorisations and licenses from the Reserve Bank. 14ASSESSMENT AND PROSPECTS I.59 The Reserve Bank would further expand the affordable banking services to all sections of scope and coverage of ongoing pilots in e₹-Retail society and strengthening the credit delivery and e₹-Wholesale by introducing new use cases system to cater to the needs of productive and features, besides bringing improvements to sectors of the economy, particularly agriculture, technological aspects of the account aggregator and micro and small enterprises. Towards this framework to enhance transparency, customer end, a technology-based initiative in the form convenience and efficiency. Moreover, the of Unified Lending Interface (ULI) has been Reserve Bank is exploring commencement of operationalised through Reserve Bank Innovation CBDC pilots on cross-border payments both on Hub (RBIH) which is aimed at improving access bilateral and multilateral basis to overcome key and enhancing efficiency in terms of turnaround time, cost and convenience among the borrowers challenges related to turnaround time, efficiency in the agriculture, dairy and MSME segments. and transparency. The Reserve Bank issued the revised Master I.60 As Payments Vision 2025 culminates in Directions on PSL, which has come into effect 2025-26, the Reserve Bank will embark upon from April 1, 2025. Moreover, a review of Financial drafting a new Payments Vision document, which Inclusion Index (FI-Index) would be undertaken would aim to build on the growth of payment in 2025-26. systems in the last decade and provide further I.63 A review of citizens’ charter would be impetus to entities in the payments ecosystem undertaken by the Reserve Bank towards to develop and deploy solutions in this space. A further improving the timeliness of regulatory survey on usage of digital payments will approvals and citizen centric services. Moreover, be conducted to facilitate evidence-based to enhance quality and speed of grievance decision making, which will lay the groundwork resolution under the Reserve Bank - Integrated for a more inclusive payments ecosystem. Ombudsman Scheme, 2021, the Reserve Bank Internationalisation of domestic payment systems shall be undertaking a review of the Scheme and will also remain a key priority and the Reserve embarking upon technology driven initiatives, Bank will continue to explore collaboration with especially the upgradation of the complaint other countries on bilateral as well as multilateral management system. The Reserve Bank will also level. focus on strengthening the internal grievance I.61 As digital payments continue to rise, the redressal processes of the regulated entities for Reserve Bank’s commitment to enhancing enhanced customer satisfaction. security, customer protection and fraud prevention 4. Conclusion will remain key priorities in 2025-26. The Digital I.64 To sum up, the Indian economy exhibited Payments Intelligence Platform is being planned, resilience during 2024-25, supported by strong which will leverage advanced technologies to macroeconomic fundamentals and proactive curb payment related frauds. policy measures, amidst protracted geopolitical I.62 The Reserve Bank would continue to tensions and geoeconomic fragmentation. focus on ensuring availability of accessible and Inflation moderated during the year, moving 15ANNUAL REPORT 2024-25 closer to the target, largely due to easing input services exports and steady remittance inflows, cost pressures, proactive supply-side measures keeping the CAD at a sustainable level. and the continued impact of past monetary policy I.65 Going forward, global financial actions. The strength of the financial sector, market volatility, geopolitical tensions, trade reflected in improved asset quality and well- fragmentation, supply chain disruptions and capitalised banks, further supported economic climate-induced uncertainties pose downside activity. Amidst multiple global headwinds, the risks to the growth outlook and upside risks to the Indian financial markets demonstrated resilience inflation outlook. However, the Indian economy and orderly movements. The central government is poised to remain the fastest-growing major sustained its fiscal consolidation efforts, economy in 2025-26 by leveraging its sound supported by buoyant tax revenues and prudent macroeconomic fundamentals, robust financial expenditure management. On the external front, sector and commitment towards sustainable merchandise trade deficit was offset by robust growth. 16ECONOMIC REVIEW II ECONOMIC REVIEW The Indian economy exhibited resilience during 2024-25, supported by robust macroeconomic fundamentals and proactive policy measures, amidst persisting geopolitical tensions and geoeconomic fragmentation. Headline inflation moderated, although the pace of disinflation was impeded by elevated and volatile food inflation. Deposit and credit exhibited double digit growth. Fiscal consolidation continued both at the centre and state level. The continued strength of the external sector, as reflected in adequate forex reserves and modest current account deficit, supported macroeconomic and financial stability. II.1.1 The global economic expansion was financial markets exhibited bouts of volatility steady in 2024 albeit uneven, amidst geopolitical over inflated valuations, uncertain trajectory of tensions, geoeconomic fragmentation and monetary policy, disinflation losing pace, rising heightened trade tensions. Financial conditions trade tensions and geopolitical risks. Sovereign turned less restrictive as major central banks bond yields softened in the first half of 2024 to embarked on monetary policy easing. Global rise again during the second half of the year. The GDP grew by 3.3 per cent in 2024 (3.5 per cent US dollar remained firm through the year, putting a year ago)1. Global inflation eased to 5.7 per downward pressure on other advanced economy cent in 2024 from 6.6 per cent a year ago as the (AE) and emerging market economy (EME) effect of monetary tightening took hold along with currencies. the easing of supply chain pressures; however, II.1.2 Against this challenging global economic it was still above the pre-pandemic average, landscape, the Indian economy remained with elevated services inflation persisting in resilient, supported by robust macroeconomic some major advanced economies. Pandemic- fundamentals and proactive policy measures. induced fiscal policy measures and gradual fiscal Although real gross domestic product (GDP) consolidation continued to exert upward pressure growth moderated to 6.5 per cent4 in 2024-25, on the global public debt-GDP ratio, which is India remained the fastest growing large expected to approach 100 per cent by 20302. economy. Economic activity was bolstered by Global goods and services trade volume growth an improvement in consumption demand and recovered to 3.8 per cent in 2024 from 1.0 per net exports on the expenditure side and buoyant cent in 20233, supported by strong services trade services sector and recovery in agricultural growth and normalising of supply chains. Global production on the supply side. 1 World Economic Outlook (WEO), April 2025, International Monetary Fund (IMF). 2 Fiscal Monitor, April 2025, IMF. 3 WEO, April 2025, IMF. 4 Refer to footnote 3 of Chapter I of this Report. 17ANNUAL REPORT 2024-25 II.1.3 Headline inflation moderated further of the real economy is presented in section during 2024-25. While food inflation remained 2 followed by that of inflation and its drivers volatile and elevated, core disinflation in in section 3. The developments in monetary both goods and services and deflation in fuel aggregates and financial markets are presented contributed to softening of headline inflation, in sections 4 and 5, respectively. The evolution paving the way for progressive alignment of of government finances (centre and states) headline inflation with the target. is discussed in section 6, and external sector dynamics are covered in section 7. II.1.4 Both central and state governments pursued fiscal consolidation during 2024-25. The II.2 THE REAL ECONOMY tax receipts of both central and state governments II.2.1 The Indian economy exhibited resilience remained robust. On the capital expenditure in 2024-25, supported by robust macroeconomic front, the central government and states recorded fundamentals and proactive policy measures. modest growth on a year-on-year basis. Economic activity recovered in H2:2024-25 II.1.5 Domestic financial markets broadly from the trough in Q2:2024-25, supported by evolved in an orderly manner during 2024-25. buoyant rural demand, recovery in government Money market rates largely remained range- expenditure, improved agriculture sector and bound, and generally aligned with the policy repo resilient services sector activity. The financial system remains sound and well-capitalised, rate even as system liquidity oscillated between underpinned by the healthy balance sheets of surplus and deficit conditions. Issuances of financial institutions and corporates. certificates of deposit (CDs) increased as credit growth remained robust, although there was II.2.2 An assessment of aggregate demand narrowing of the gap between credit and deposit and its major components is etched out in sub- growth. Sovereign bond yields softened steadily section 2. The developments in aggregate in H1:2024-25 on fiscal consolidation, inclusion of supply conditions in terms of the performance of Indian government bonds (IGBs) in major global agriculture, industry and services are presented bond indices and decline in crude oil prices. in sub-section 3. Employment and labour market However, they exhibited two-way movements in dynamics are discussed in sub-section 4, with the latter half of the year and fell sharply after the concluding observations in sub-section 5. Reserve Bank initiated the policy easing cycle 2. Aggregate Demand in the February policy meeting. Equity market II.2.3 Aggregate demand – measured by registered strong gains in the first half of the year GDP at constant prices – is estimated to have before correcting in H2:2024-25. A modest current grown by 6.5 per cent in 2024-25, as compared account deficit and adequate forex reserves with 9.2 per cent a year ago (Table II.2.1 and imparted resilience to the external sector even as Appendix Table 1). While growth in consumption capital flows exhibited volatility. expenditure and export demand accelerated II.1.6 Against this backdrop, the rest of the during the year, that in fixed investment recorded chapter is structured into six sections. An analysis a moderation (Appendix Table 2). In terms of 18ECONOMIC REVIEW Table II.2.1: Real GDP Growth (Per cent) Component 2020-21 2021-22 2022-23 2023-24 2024-25 1 2 3 4 5 6 I. Total -4.6 9.8 7.0 5.9 7.1 Consumption Expenditure Private -5.3 11.7 7.5 5.6 7.6 Government -0.8 0.0 4.3 8.1 3.8 II. Gross Capital -10.6 25.4 3.5 7.3 5.8 Formation Gross Fixed -7.1 17.5 8.4 8.8 6.1 Capital Formation Change in -76.4 525.4 24.3 53.4 4.3 Stocks Valuables 29.9 32.5 -16.9 14.4 1.0 Y-o-Y: Year-on-Year. Q-o-Q: Quarter-on-Quarter. MA: Moving Average. SAAR: Seasonally Adjusted Annualised Rate. III. Net Exports Source: NSO and RBI staff estimates. Exports -7.0 29.6 10.3 2.2 7.1 Imports -12.6 22.1 8.9 13.8 -1.1 as seen from its proximate indicators, viz., sales IV. GDP -5.8 9.7 7.6 9.2 6.5 of two-wheelers, motorcycles and tractors, Source: NSO. and volume growth of fast-moving consumer goods (FMCG) companies in rural areas. Urban quarterly trajectory, real GDP rose (y-o-y) by 6.5 per cent in Q1:2024-25; growth softened to 5.6 demand, after remaining the driver of post- per cent in Q2, inter alia, on excess rainfall which pandemic consumption, lost pace as reflected in dampened mining output and electricity demand indicators such as consumer non-durables, retail and restrained government expenditure5. The passenger vehicle sales and FMCG volumes economy, however, picked up momentum in Q3 in urban areas. Government final consumption to grow by 6.2 per cent (Chart II.2.1). expenditure (GFCE) grew at a modest 3.8 per cent in 2024-25, following a robust expansion of Consumption 8.1 per cent during 2023-24. With exports growth II.2.4 Growth in private final consumption outpacing that of imports, net exports contributed expenditure (PFCE) – the main component of positively to GDP growth (Chart II.2.2). aggregate demand – improved to 7.6 per cent in Investment and Saving 2024-25, buoyed by rural consumption demand even though urban demand exhibited some II.2.5 The rate of gross domestic investment moderation. The share of PFCE in real GDP in the Indian economy, measured by the ratio of increased to 56.7 per cent in 2024-25. Good gross capital formation (GCF) to GDP at current agricultural performance boosted rural demand prices, declined to 31.4 per cent in 2023-24 from 5 In H1:2024-25, the central government’s revenue expenditure grew by 4.2 per cent, with capital expenditure contracting by 15.4 per cent. For state governments (22 states), while revenue expenditure increased by 10.2 per cent, capital expenditure contracted by 6.9 per cent. 19 tnec reP Chart II.2.1: Real GDP Growth - Quarterly 14 12 10 8 6 4 2 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2022-23 2023-24 2024-25 Y-o-Y growth 3Q MA - SAAR Q-o-Q SAARANNUAL REPORT 2024-25 32.6 per cent in the preceding year, wholly due in Q3:2024-25 was higher than the preceding to a reduction in net capital inflow from the rest quarter and its level in the corresponding quarter of the world (ROW), which fell to 0.7 per cent of a year ago7. As per the results of the Reserve GDP in 2023-24 from 2.0 per cent in the previous Bank’s 109th industrial outlook survey (IOS), year. Available information for 2024-25 indicates manufacturing firms reported an improvement in an easing in growth of constituents of GCF. demand conditions in Q4:2024-25. Growth in gross fixed capital formation (GFCF) II.2.6 Gross domestic saving as per cent – a primary component of GCF – moderated to to gross national disposable income (GNDI) 6.1 per cent in 2024-25 from 8.8 per cent in the remained steady at 30.3 per cent in 2023-24 previous year. It may be noted that government primarily due to a decline in general government’s capital outlay (Centre and states6 combined) dissaving. Further, as against the increase in declined by 2.7 per cent (y-o-y) during 2024-25 household liabilities to 6.1 per cent of GNDI, the (up to February 2025) as compared with a growth gross financial saving of households increased of 31.2 per cent in the corresponding period of to 11.2 per cent of GNDI in 2023-24 from 10.7 2023-24. The softening in GFCF was mirrored in its key coincident indicators, including steel per cent in the previous year. Resultantly, consumption, cement production, and production household financial saving (net) improved to and imports of capital goods (Chart II.2.3). 5.1 per cent of GNDI in 2023-24 from 4.9 per Seasonally adjusted capacity utilisation (CU) cent in the previous year (Table II.2.2 and of the manufacturing sector at 75.3 per cent Appendix Table 3). 6 Data pertain to 20 states. 7 Based on order books, inventories and capacity utilisation survey (OBICUS) of the Reserve Bank. 20 stniop egatnecreP Chart II.2.2: Weighted Contribution to GDP Growth 16 12 6.5 8 4 0 -4 -8 Net Exports Gross Fixed Capital Formation Government Final Consumption Expenditure Private Final Consumption Expenditure GDP (Y-o-Y growth, per cent) Note: Component-wise contributions do not add up to the growth rate as change in stocks, valuables and statistical discrepancies are not included. Source: NSO. 81-7102 91-8102 02-9102 12-0202 22-1202 32-2202 42-3202 52-4202 )y-o-y ,tnec rep( htworG Chart II.2.3: Indicators of Investment Demand 20 18 16 12.3 14 12 10 11.9 8 7.9 6 6.6 4 2 0 Steel Consumption Cement Production IIP Capital Goods Imports of Capital Goods Source: Joint Plant Committee, Office of Economic Adviser, NSO and Directorate General of Commercial Intelligence and Statistics (DGCI&S). 42-3202:1Q 42-3202:2Q 42-3202:3Q 42-3202:4Q 52-4202:1Q 52-4202:2Q 52-4202:3Q 52-4202:4QECONOMIC REVIEW Table II.2.2: Financial Saving of Household Sector (Per cent of GNDI) Item 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 1 2 3 4 5 6 7 8 9 10 11 A. Gross Financial Saving 9.9 10.7 10.4 11.9 11.8 11.4 15.2 10.9 10.7 11.2 of which: 1. Currency 1.0 1.4 -2.1 2.8 1.4 1.4 1.9 1.1 0.9 0.4 2. Deposits 4.8 4.6 6.3 3.0 4.2 4.3 6.2 3.5 4.1 4.5 3. Shares and Debentures 0.2 0.2 1.1 1.0 0.9 0.5 0.5 0.9 0.8 0.9 4. Claims on Government 0.0 0.5 0.7 0.9 1.1 1.3 1.3 1.1 0.8 1.1 5. Insurance Funds 2.4 1.9 2.3 2.0 2.0 1.7 2.8 2.0 2.0 1.9 6. Provident and Pension Funds 1.5 2.1 2.1 2.1 2.1 2.2 2.5 2.3 2.3 2.4 B. Financial Liabilities 3.0 2.7 3.0 4.3 4.0 3.8 3.7 3.8 5.8 6.1 C. Net Financial Saving (A-B) 6.9 7.9 7.3 7.5 7.8 7.6 11.6 7.2 4.9 5.1 GNDI: Gross National Disposable Income. Note: Figures may not add up to total due to rounding off of numbers. Source: NSO and RBI staff estimates. II.2.7 The saving-investment gap narrowed 3. Aggregate Supply during 2023-24, reflecting a reduced drawdown II.2.8 Aggregate supply – measured by real by the general government, weaker investment gross value added (GVA) at basic prices – demand from households and non-financial expanded by 6.4 per cent in 2024-25 as compared corporations, and moderation in savings by with 8.6 per cent a year ago. While industrial financial corporations (Chart II.2.4). activity slowed partly due to an unfavourable Chart II.2.4: Sectoral Resource Gap base and services sector growth moderated, an improvement in agriculture helped sustain the momentum (Table II.2.3 and Chart II.2.5). Agriculture and Allied Activities II.2.9 Agriculture and allied sectors recovered during 2024-25, supported by an above normal south-west monsoon (SWM). The overall SWM rainfall in 2024 (June-September) was 108 per cent8 of the long-period average (LPA) at the all-India level as against a deficit of six per cent in 2023 (Chart II.2.6a). Its onset over Kerala on May 30 was ahead of the usual date of June 1, NPISH: Non-profit Institutions Serving Households. Source: NSO and RBI staff estimates. and it progressed well to cover the entire country 8 As per the India Meteorological Department (IMD), normal rainfall range is 96-104 per cent of LPA. 21 PDG fo tnec reP PDG fo tnec reP 15 6 10 4 5 2 0 0 -5 -2 -10 -4 -15 -6 Households including NPISH General Government Public Non-financial Corporations Private Financial Corporations Private Non-financial Corporations Public Financial Corporations Overall Resource Gap (RHS) 21-1102 31-2102 41-3102 51-4102 61-5102 71-6102 81-7102 91-8102 02-9102 12-0202 22-1202 32-2202 42-3202ANNUAL REPORT 2024-25 Table II.2.3: Real GVA Growth (Per cent) Sector 2020-21 2021-22 2022-23 2023-24 2024-25 1 2 3 4 5 6 I. Agriculture, Forestry and Fishing 4.0 4.6 6.3 2.7 4.6 II. Industry 1.1 9.6 0.0 11.0 4.3 II.1 Mining and Quarrying -8.2 6.3 3.4 3.2 2.8 II.2 Manufacturing 3.1 10.0 -1.7 12.3 4.3 II.3 Electricity, Gas, Water Supply and Other Utility Services -4.2 10.3 10.8 8.6 6.0 III. Services -7.9 10.6 10.2 9.2 7.5 III.1 Construction -4.6 19.9 9.1 10.4 8.6 III.2 Trade, Hotels, Transport, Communication and Services Related -19.9 15.2 12.3 7.5 6.4 to Broadcasting III.3 Financial, Real Estate and Professional Services 1.9 5.7 10.8 10.3 7.2 III.4 Public Administration, Defence and Other Services -7.6 7.5 6.7 8.8 8.8 IV. GVA at Basic Prices -4.1 9.4 7.2 8.6 6.4 Source: NSO and RBI staff estimates. on July 2, six days ahead of the normal date. the end of the SWM season from a five-year low The SWM rainfall over the monsoon core zone, of 20 per cent in June 2024 (Chart II.2.6b). which consists of most of the rainfed agriculture II.2.11 Satisfactory progress of SWM and regions in the country, stood at 122 per cent comfortable reservoir levels aided the expansion of LPA. of the area under foodgrains and oilseeds II.2.10 Above-normal SWM helped replenish (kharif and rabi) by 2.7 per cent during the year. reservoir levels to 88 per cent of the capacity by Accordingly, the second advance estimates (SAE) of agricultural crops placed foodgrains Chart II.2.5: Real GVA Growth - Quarterly production during 2024-25 (kharif and rabi) at 3,309.2 lakh tonne, 4.8 per cent higher than the final estimates of 2023-24 (Table II.2.4). The year was marked with the record production of rice, wheat, maize, groundnut and soybean. According to the first advance estimates (FAE), the output of horticultural crops during 2024-25 was placed at 3,620.9 lakh tonne, 2.1 per cent higher than the final estimates (FE) of 2023-24, driven by higher production of onion and potato. II.2.12 The government announced an increase SAAR - Seasonally Adjusted Annualised Rate. MA: Moving Average. Source: NSO and RBI staff estimates. in minimum support prices (MSP) for major 22 tnec reP 14 12 10 8 6 4 2 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2022-23 2023-24 2024-25 Y-o-Y growth 3Q MA - SAAR Q-o-Q SAARECONOMIC REVIEW Chart II.2.6: Rainfall and Reservoir Levels Source: India Meteorological Department (IMD) and Central Water Commission (CWC), GoI. kharif and rabi crops for 2024-25 in a range of focused on areas such as enhancing productivity 1.4 to 12.7 per cent, ensuring a return of at least and sustainability in agriculture and improving 50 per cent over the cost of production9. Wheat agricultural infrastructure. and paddy MSPs provide 105 per cent and 50 II.2.13 The overall public stock of foodgrains per cent returns over the cost of production, held by the Food Corporation of India (FCI) stood respectively. The Union Budget 2025-26 has at 749 lakh tonne (as at end-March 2025), with Table II.2.4: Agricultural Crop Production 2024-25* (Lakh tonne) Crop 2023-24 2024-25 2024-25 (SAE) Variation over Final Estimates Second Advance Estimates 2023-24 Final Estimates (FE) (SAE) (per cent) 1 2 3 4 1. Foodgrains 3,157.7 3,309.2 4.8 Rice 1,278.6 1,364.4 6.7 Wheat 1,132.9 1,154.3 1.9 Nutri/Coarse Cereals 524.5 560.3 6.8 Pulses 221.7 230.2 3.8 Tur 34.2 35.1 2.8 Gram 110.4 115.4 4.5 Urad 20.9 18.0 -14.0 Moong 12.6 16.1 28.0 2. Oilseeds 384.4 416.7 8.4 3. Cotton# 325.2 294.3 -9.5 4. Jute and Mesta## 96.9 86.2 -11.0 5. Sugarcane 4,531.6 4,350.8 -4.0 *: Kharif and Rabi crops (excluding summer crops). #: Lakh bales of 170 kg each. ##: Lakh bales of 180 kg each. Source: Ministry of Agriculture and Farmers Welfare, GoI. 9 Actual paid out cost plus imputed value of family labour (A2+FL). 23 APL morf erutrapeD )tnec rep( 2023 2024 level riovreser lluf fo tnec reP a. South-West Monsoon (Spatial) b. Reservoir Level 25 100 20 19 90 14 80 15 70 10 7 8 60 5 1 0 50 42 0 40 37 -5 30 -10 -8 -6 12 00 -15 -14 0 -20 -18 East and North Central South All India North West India Peninsula East India India 10-year Average Weekly Status 32-nuJ-1 32-luJ-6 32-guA-01 32-peS-41 32-tcO-91 32-voN-32 32-ceD-82 42-beF-1 42-raM-7 42-rpA-11 42-yaM-61 42-nuJ-02 42-luJ-52 42-guA-92 42-tcO-3 42-voN-7 42-ceD-21 52-naJ-61 52-beF-02 52-raM-72ANNUAL REPORT 2024-25 Chart II.2.7: Monthly Position of Stock, Offtake and Buffer Norm Source: Food Corporation of India, Ministry of Consumer Affairs, Food and Public Distribution, GoI. rice stock of 631 lakh tonne (4.6 times the buffer based classification, all categories of industries requirement) and wheat stock at 118 lakh tonne except consumer non-durables recorded growth (1.6 times the buffer requirement) [Chart II.2.7]. (Chart II.2.9b). The government relaxed the export restrictions II.2.16 The production linked incentive (PLI) on rice on improved supply conditions while it scheme is helping to steer growth across undertook offloading of wheat under open market sales scheme (OMSS) to moderate wheat prices several key manufacturing industries and for consumers. placing the country as a part of the global value Industrial Sector chain through production and exports. By end- II.2.14 Industrial sector GVA growth eased to 4.3 per cent in 2024-25 from 11.0 per cent in the preceding year (Table II.2.3). Manufacturing sector, which accounts for 80 per cent of the industrial sector also moderated to 4.3 per cent in 2024-25 over a high base of 12.3 per cent in 2023-24. This was mirrored in a slowdown of profitability in the corporate manufacturing sector (Chart II.2.8). II.2.15 Industrial output, as measured by the index of industrial production (IIP), moderated during 2024-25 (Chart II.2.9a). Within the manufacturing sector, 17 of 23 industry groups recorded expansion (y-o-y). As per the use- 24 ennot hkaL ennot hkaL ennot hkaL ennot hkaL a. Rice b. Wheat 700 14 600 12 500 10 400 8 300 6 200 4 100 2 0 0 Stock Buffer Norm OMSS Offtake (RHS) 12-yaM 12-luJ 12-peS 12-voN 22-naJ 22-raM 22-yaM 22-luJ 22-peS 22-voN 32-naJ 32-raM 32-yaM 32-luJ 32-peS 32-voN 42-naJ 42-raM 42-yaM 42-luJ 42-peS 42-voN 52-naJ 52-raM 600 25 500 20 400 15 300 10 200 5 100 0 0 12-yaM 12-luJ 12-peS 12-voN 22-naJ 22-raM 22-yaM 22-luJ 22-peS 22-voN 32-naJ 32-raM 32-yaM 32-luJ 32-peS 32-voN 42-naJ 42-raM 42-yaM 42-luJ 42-peS 42-voN 52-naJ 52-raM Stock Buffer Norm OMSS Offtake (RHS) )y-o-y ,tnec rep( htworG )y-o-y ,tnec rep( htworG Chart II.2.8: Organised Manufacturing Firms 80 20 70 15 60 7.9 10 50 2.3 5 40 30 0 1.2 20 -5 10 4.5 -10 0 -15 -10 -1.2 -20 -20 Net Profit Salaries and Wages (RHS) Net Sales Interest Expenses (RHS) Input Costs (RHS) Note: Total sample size is 1,758. Source: CMIE Industry Outlook. 32-nuJ 32-peS 32-ceD 42-raM 42-nuJ 42-peS 42-ceDECONOMIC REVIEW Chart II.2.9: Index of Industrial Production Mining Manufacturing Electricity IIP Source: MoSPI, GoI. November 2024, actual investments of around Services Sector ₹1.61 lakh crore have been realised, resulting in II.2.18 Growth in the services sector softened production and sales of around ₹14 lakh crore, in H1:2024-25 due to a broad-based moderation over 11.5 lakh jobs (direct and indirect) and more across its constituents. Proximate indicators of than ₹5.3 lakh crore of exports in key sectors the services sector, such as GST E-way bills, such as electronics, pharmaceuticals, and food processing10. The government has launched the second edition of the PLI scheme for specialty steel in January 202511. II.2.17 Renewable energy (including large hydro), which accounts for around 20.0 per cent of the total power generation, recorded a healthy growth of 12.2 per cent (y-o-y) during 2024-25 as compared to a contraction of 1.6 per cent in the previous year (Chart II.2.10). As at end-March 2025, India’s renewable energy capacity stood at 220.1 gigawatts (GW) [46.3 per cent of the total installed capacity]. 10 ‘PLI scheme incentivises domestic manufacturing, increases production, creates new jobs and boosts exports’, Press Information Bureau (PIB), March 22, 2025. 11 ‘PLI Scheme 1.1 Launched by Union Steel and Heavy Industries Minister’, PIB, January 6, 2025. 25 )y-o-y( tnec reP Primary Goods Consumer Durables Infrastructure/Construction Goods Intermediate Goods Capital Goods Consumer Non-durables )y-o-y( tnec reP a. Sectoral Growth b. Use-Based Classification - Growth 30 20 25 15 20 10 7.9 15 5.5 6.6 5 3.9 4.1 10 3.9 0 5 -1.6 0 -5 2021-22 2022-23 2023-24 2024-25 H1 H2 H1 H2 H1 H2 H1 H2 2021-22 2022-23 2023-24 2024-25 )hWG dnasuoht ni( noitareneg rewoP Chart II.2.10: Renewable Power Generation GWh: Gigawatt hour. Source: Central Electricity Authority. tnec reP 140 35 120 30 100 20 25 80 20 60 15 40 10 20 5 0 0 Renewable Power Generation Renewable Share in Total Power Generation (RHS) 61-raM 61-peS 71-raM 71-peS 81-raM 81-peS 91-raM 91-peS 02-raM 02-peS 12-raM 12-peS 22-raM 22-peS 32-raM 32-peS 42-raM 42-peS 52-raMANNUAL REPORT 2024-25 commercial vehicle sales, aviation cargo and II.2.19 India’s construction sector exhibited a passenger traffic have remained firm in H2 mixed picture as steel consumption slowed while (Table II.2.5). cement production recovered during H2. Housing Table II.2.5: High Frequency Indicators - Growth Rate (Per cent, y-o-y) 2023-24 2024-25 Indicators Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 1 2 3 4 5 6 7 8 9 Industry Index of Industrial Production 4.8 7.8 6.1 5.1 5.5 2.7 4.4 3.6 Eight Core Industries 6.0 10.5 8.4 5.8 6.3 2.4 5.4 4.4 Electricity Demand (Energy Met) 0.7 11.7 25.4 7.9 11.6 1.1 6.4 -27.5 Production of Passenger Vehicles 6.7 7.3 5.0 9.4 6.2 -0.5 7.4 6.4 Production of Two Wheelers 1.3 -1.5 19.0 26.4 19.6 12.5 8.4 5.8 Production of Three Wheelers 24.3 19.8 14.0 9.0 9.2 6.3 9.4 9.5 Urban Demand Domestic Air Passenger Traffic 19.1 23.0 9.1 5.2 5.6 7.2 11.4 12.0 Passenger Vehicle Sales 9.6 5.8 8.6 10.8 3.5 -1.3 5.1 3.6 Agriculture / Rural Demand Domestic Sales of Tractors -1.9 -5.8 -4.9 -22.9 0.5 0.7 13.5 23.4 Two-Wheeler Sales 11.2 -1.6 22.6 24.9 20.4 12.6 3.0 1.4 Three-Wheeler Sales 89.6 62.6 36.0 7.8 13.7 6.7 0.2 8.0 MGNREGA: Work Demand (Persons) -0.9 14.7 -0.2 -8.9 -14.1 -18.0 0.5 5.4 Transport Commercial Vehicle Sales -3.5 6.8 3.7 -3.6 3.5 -10.9 1.3 1.6 Vahan Total Registration 6.0 13.8 10.7 11.0 10.1 3.0 11.7 0.5 Two-Wheeler Retail Sales 3.2 12.2 10.8 11.4 12.7 4.7 12.4 -1.3 Three-Wheeler Retail Sales 76.3 68.0 40.2 26.8 11.4 4.9 4.0 -0.3 Passenger Vehicles Retail Sales 5.0 12.5 9.0 8.9 3.6 -5.1 5.9 4.5 Tractor Retail Sales 19.2 9.4 -5.9 9.2 -12.4 -5.1 20.1 -4.5 Commercial Vehicle Retail Sales 7.0 6.7 6.4 1.6 1.0 -3.8 -1.4 0.8 Toll Collection - Volume 15.3 13.3 12.8 10.9 5.6 7.6 9.8 15.1 Toll Collection - Value 22.4 20.5 19.0 17.3 9.5 10.3 12.7 17.2 Petrol Consumption 6.8 5.7 4.7 8.4 7.1 7.3 9.7 5.8 ATF Consumption 13.4 13.1 11.0 10.0 11.4 9.4 8.8 6.5 Diesel Consumption 8.0 4.3 1.0 4.1 1.6 0.1 4.8 1.2 International Air Passenger Traffic 35.0 21.6 18.5 17.0 15.9 10.3 10.0 8.6 Domestic Air Cargo -4.7 -1.0 8.5 10.0 7.1 7.6 4.6 3.1 International Air Cargo 0.1 3.7 10.7 25.0 18.4 21.9 15.0 1.3 Freight Traffic: Freight Originating# 1.1 4.8 6.4 8.4 5.0 -0.4 1.4 - Port Cargo 1.9 2.9 10.2 3.6 3.9 6.1 -1.7 8.3 Domestic Trade GST E-Way Bill 15.8 15.0 17.1 16.3 16.0 16.8 16.9 19.4 GST E-Way Bill Intra-State 19.3 18.4 22.1 18.2 17.5 17.0 13.8 19.5 GST E-Way Bill Inter-State 10.0 9.3 8.6 13.1 13.2 16.5 23.0 19.1 GST Revenue 11.6 10.6 12.9 11.5 10.1 8.9 8.3 10.4 26ECONOMIC REVIEW Table II.2.5: High Frequency Indicators - Growth Rate (Concld.) (Per cent, y-o-y) 2023-24 2024-25 Indicators Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 1 2 3 4 5 6 7 8 9 External Trade Merchandise Exports -14.1 -3.2 1.0 4.9 5.9 -3.4 3.0 -4.4 Merchandise Imports -12.8 -9.9 0.0 2.7 7.6 9.7 6.5 1.2 Services Exports 5.9 4.2 5.2 4.1 9.8 12.2 17.9 -25.7 Services Imports 0.9 -4.7 -4.3 -0.2 7.2 12.7 22.2 -33.1 Import of Capital Goods 9.2 9.6 5.6 8.9 10.0 11.7 6.0 7.9 Construction Steel Consumption 12.1 17.7 14.7 10.6 15.0 12.0 7.8 11.9 Cement Production 12.7 10.3 5.0 7.5 0.5 3.2 8.7 12.4 Tourism and Hospitality Hotel Occupancy Rate -2.6 -2.1 0.2 2.4 -2.4 2.1 1.8 1.2 Foreign Tourist Arrivals* 36.2 21.3 17.2 8.1 2.4 -1.7 -3.0 -4.5 PMI Manufacturing PMI 57.9 57.9 55.5 57.5 58.2 57.4 56.8 57.4 Manufacturing Future Outlook 63.0 65.1 63.5 65.4 65.2 62.6 63.4 64.8 Services PMI 60.6 61.1 58.7 61.2 60.5 59.6 58.7 58.0 Services Future Outlook 60.2 63.5 62.9 62.3 63.2 62.2 63.8 62.2 Composite PMI 60.9 61.3 58.1 61.2 61.0 59.9 59.0 58.7 Composite Future Outlook 61.0 64.0 62.5 63.2 63.8 62.3 63.6 63.1 Contraction Expansion *: Data for Q4:2024-25 are up to February 2025. ATF: Aviation Turbine Fuel. PMI: Purchasing Managers’ Index. #: Data for Q3:2024-25 pertain to October-November. -: Not available. Note: All PMI values are reported in index form (>50: Expansion; <50: Contraction; and =50: No change). Source: Society of Indian Automobile Manufacturers (SIAM); Federation of Automobile Dealers Associations (FADA); Ministry of Statistics and Program Implementation (MoSPI), GoI; Office of Economic Adviser, GoI; S&P Global; Ministry of Petroleum and Natural Gas, GoI; Tractor and Mechanisation Association; Vahan Registration Portal; Airports Authority of India; Ministry of Railways, GoI; Indian Ports Association; Goods and Services Tax Network (GSTN); Joint Plant Committee; HVS Anarock; Ministry of Tourism, GoI; Ministry of Commerce and Industry, GoI; Ministry of Rural Development, GoI; and RBI. sales, after registering an uptick in 2023-24, II.2.20 The services sector composite index slowed in 2024-25 with growth turning negative (SSCI)12, which monitors activity in construction, in the last three quarters. Launches continued trade, transport, and financial services, and to decline for the sixth quarter on a y-o-y basis serves as a coincident indicator of GVA (Chart II.2.11). growth in the services sector [excluding public 12 SSCI is constructed by extracting and combining high-frequency data from key indicators across three major sub-sectors of the services sector, viz., construction; trade, hotels, transport, communication and services related to broadcasting; and financial, real estate and professional services. These indicators are combined using a dynamic factor model to generate the final index. 27ANNUAL REPORT 2024-25 administration, defence, and other services regions. The proportion of self-employed in the (PADO)], rebounded in Q3:2024-25 after workforce has been increasing consistently since observing a sequential decline in the previous two 2018-19 while the share of casual labourers is on quarters. The recovery in Q3 was on account of a the decline. The share of regular wage/salaried turnaround in trade and construction sector employees improved to 21.7 per cent in 2023-24 indicators. SSCI remained robust in Q4:2024-25 from 20.9 per cent in 2022-23, although it was (Chart II.2.12). lower than 23.8 per cent recorded in 2018-19 (Chart II.2.13c). 4. Employment II.2.22 As per the quarterly PLFS covering II.2.21 According to the latest periodic labour urban areas, the LFPR and the worker force survey (PLFS) report, the labour force participation rate (LFPR) and worker population population ratio for persons aged 15 years and ratio (WPR) increased during 2023-24 (July- above remained steady during Q3:2024-25, June), marking their highest levels since its with unemployment rate hovering at the inception. The unemployment rate (UR) remained lowest of the series (Chart II.2.14). The unchanged in 2023-24 from the previous year employment in the organised sector, as measured (Chart II.2.13a). The overall LFPR increased in by payroll data, also remained robust in 2024- both rural and urban areas in 2023-24, driven 25 (Chart II.2.15). The average net subscribers by a rise in the female LFPR (Chart II.2.13b). added to employees’ provident fund organisation Similar patterns were witnessed in the case of (EPFO) per month stood at 10.8 lakh during WPR. The unemployment rate declined in urban 2024-25, reflecting continued strength in formal regions, while it increased marginally in rural sector employment opportunities. 28 )sdnasuoht( stinu laitnediseR Chart II.2.11: Residential Housing Sector Source: PropTiger. )y-o-y( tnec reP 400 160 140 300 120 100 200 80 60 100 40 20 0 0 -20 -100 -40 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q Chart II.2.12: Growth in Services Sector (Excluding PADO) and SSCI 2022-23 2023-24 2024-25 Sales Sales Growth (RHS) Launches Launches Growth (RHS) *: SSCI for March 2025 quarter is based on partial data available. Source: NSO and RBI staff estimates. )y-o-y( tnec reP ICSS 30 25 20 15 10 5 0 -5 -10 -15 -20 -25 -30 GVA Growth in Services Excluding PADO SSCI (RHS) 81-nuJ 81-peS 81-ceD 91-raM 91-nuJ 91-peS 91-ceD 02-raM 02-nuJ 02-peS 02-ceD 12-raM 12-nuJ 12-peS 12-ceD 22-raM 22-nuJ 22-peS 22-ceD 32-raM 32-nuJ 32-peS 32-ceD 42-raM 42-nuJ 42-peS 42-ceD *52-raM 10 8 6 4 0.71 2 0 -2 -4 -6 -8 -10ECONOMIC REVIEW Chart II.2.13: Labour Market Indicators – Annual PLFS c. Category of Employment (Age 15 Years and Above) Source: MoSPI, GoI. 29 tnec reP a. All India tnec reP b. Rural, Urban tnec reP tnec reP tnec reP 65 7 60.1 60 6 55 58.2 5 50 4 45 3.2 3 40 2 81-7102 91-8102 02-9102 12-0202 22-1202 32-2202 42-3202 65 63.7 8 60 5.1 6 55 52.0 4 50 45 2.5 2 40 0 Labour Force Participation Rate Worker Population Ratio Unemployment Rate (RHS) 81-7102 91-8102 02-9102 12-0202 22-1202 32-2202 42-3202 LFPR (Rural) LFPR (Urban) UR (Rural) [RHS] UR (Urban) [RHS] 100 90 24.9 24.1 23.6 23.3 22.7 21.8 19.8 80 67 00 22.8 23.8 22.9 21.1 21.5 20.9 21.7 50 40 30 52.2 52.1 53.5 55.6 55.8 57.3 58.4 20 10 0 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 Self-employed Regular/Salaried Casual Labour II.2.23 The employment index in the manufacturing and services sector throughout purchasing managers’ index (PMI) remained 2024-25 (Chart II.2.16a). The Naukri index, which above the ‘no change’ level of 50 for the provides information on job listings, showed an Chart II.2.14: Quarterly Labour Market Indicators – Urban Areas Source: MoSPI, GoI. tnec reP tnec reP 52 50.4 22 50 20 48 18 46 47.2 16 44 42 14 40 12 38 10 36 6.4 8 34 32 6 30 4 Labour Force Participation Rate Worker Population Ratio Unemployment Rate (RHS) 91-8102 :1Q 91-8102 :2Q 91-8102 :3Q 91-8102 :4Q 02-9102 :1Q 02-9102 :2Q 02-9102 :3Q 02-9102 :4Q 12-0202 :1Q 12-0202 :2Q 12-0202 :3Q 12-0202 :4Q 22-1202 :1Q 22-1202 :2Q 22-1202 :3Q 22-1202 :4Q 32-2202 :1Q 32-2202 :2Q 32-2202 :3Q 32-2202 :4Q 42-3202 :1Q 42-3202 :2Q 42-3202 :3Q 42-3202 :4Q 52-4202 :1Q 52-4202 :2Q 52-4202 :3Q Chart II.2.15: Employees’ Provident Fund - Net Payroll Additions Source: Ministry of Labour and Employment, GoI. )hkal ni( rebmuN 18 16 14.6 14 12 10 8 6 4 2 32-rpA 32-yaM 32-nuJ 32-luJ 32-guA 32-peS 32-tcO 32-voN 32-ceD 42-naJ 42-beF 42-raM 42-rpA 42-yaM 42-nuJ 42-luJ 42-guA 42-peS 42-tcO 42-voN 42-ceD 52-naJ 52-beF 52-raMANNUAL REPORT 2024-25 Chart II.2.16: PMI Employment Indices and Naukri Index Source: IHS Markit, Infoedge. uptick in white-collar hiring in 2024-25 (Chart expenditure in GDP rose marginally from 0.61 II.2.16b). per cent to 0.64 per cent13 between 1995-96 and 2020-21. India’s share in global R&D expenditure II.2.24 Research and development (R&D) expenditure fosters innovation and technological rose from 2.1 per cent in 2000 to 2.6 per cent in progress and is associated with improved firm 2023 (World Intellectual Property Organisation, and overall productivity. In India, the ratio of R&D 2024) [Box II.2.1]. Box II.2.1 R&D Expenditure as a Driver of India’s Productivity Growth Impact of R&D investment on total factor productivity (Krammer, 2015). The effect of domestic R&D on TFP (TFP) is well established through specific sectors and growth followed an inverted-U pattern, suggesting that firm size, with large firms and high-tech industries gaining middle-income countries benefit the most from domestic more (Griliches,1998). Recent country-specific studies R&D as compared to low-and high-income countries (Goñi (Mamatzakis et al., 2023; Ali and Akhtar, 2024) as well and Maloney, 2014). In case of India, productivity gains of as panel studies on emerging market economies (EMEs) high-tech firms in the manufacturing sector are found to [Herzer, 2022] also corroborate the positive impact of R&D be associated with higher R&D intensity in the previous investment on TFP. The available literature suggests that period along with FDI flows in the sector and higher usage the effect is more pronounced for advanced economies of imported inputs and capital goods (Bhattacharya et al., owing to their higher absorptive capacity and supportive 2021). institutional frameworks (OECD, 2015); foreign R&D spillovers via imports or foreign direct investment (FDI) Cross-country data suggest that R&D expenditure is which often outweigh the impact of domestic R&D generally positively associated with TFP growth (Chart 1a). (Contd.) 1103 SS&&TT IInnddiiccaattoorrss TTaabblleess -- RReesseeaarrcchh aanndd DDeevveellooppmmeenntt SSttaattiissttiiccss,, 22002222--2233 ,M Mininisistrtryy o of fS Sccieiennccee & & T Teecchhnnoolologgyy, ,G Goovveerrnnmmeennt to of fI nInddiaia..(Contd.) 30 )0001=8002 yluJ( xednI )y-oy( tnec reP a. PMI Employment Indices b. Naukri JobSpeak Index )egnahc oN=05( xednI Naukri JobSpeak Index Zero Growth Line (RHS) PMI Manufacturing-employment PMI Services-employment Growth (RHS) 32-raM 32-yaM 32-luJ 32-peS 32-voN 42-naJ 42-raM 42-yaM 42-luJ 42-peS 42-voN 52-naJ 52-raM 58 3,100 15 57 2,900 10 56 53.4 2,700 5 55 0 2,500 54 -5 53 2,300 -10 52 2,100 -15 51 52.5 1,900 -20 50 1,700 -25 49 1,500 -30 48 32 raM 32 yaM 32 luJ 32 peS 32 voN 42 naJ 42 raM 42 yaM 42 luJ 42 peS 42 voN 52 naJ 52 raMECONOMIC REVIEW Chart 1: R&D Expenditure, Innovation, GDP Per Capita and Total Factor Productivity a. Gross R&D Expenditure and TFP Growth (2016-2020 Average) b. Global Innovation Index (2024) BR: Brazil. CA: Canada. CN: China. FR: France. GR: Germany. JP: Japan. RU: Russia. SA: South Africa. UK: United Kingdom. US: United States. Source: World Development Indicators, World Bank; World Intellectual Property Organization; and The Conference Board. (Contd.) 31 )tnec rep ,y-o-y( htworg PFT knaR 1.5 0 CN JP UK US 1.0 US 20 CA 0.5 INDIA CA CN INDIA GR 0.0 RU GR 40 BR FR -0.5 BR 60 RU -1.0 FR JP 80 SA -1.5 UK 100 -2.0 SA 120 -2.5 -3.0 140 0 1 2 3 4 5 6 2 3 4 5 6 Gross R&D Expenditure as Per cent of GDP Log 10 (GDP Per Capita, 2023 Current Prices US$) Table 1: Impact of R&D Expenditure Growth on TFP Growth in India Dependent Variable: India’s Aggregate TFP Growth 1 2 3 4 5 Model 1 Model 2 Model 3 Model 4 Gross R&D Expenditure 0.24** 0.24*** 0.26*** 0.21*** (0.12) (0.088) (0.055) (0.077) FDI Inflows 0.0029* 0.0035** (0.0017) (0.0018) Export + Import 0.062*** (0.024) Deterministic Trend -0.00016 0.021 0.15*** 0.19*** (0.046) (0.052) (0.034) (0.027) Global Metal Price Index -0.016 -0.045** -0.030 t-2 (0.019) (0.019) (0.022) Annual Rainfall’s Deviation from LPA 0.030 0.062*** 0.12*** t-2 (0.028) (0.024) (0.034) Constant -0.43 -0.53 -3.28*** -4.14*** (1.12) (0.72) (1.06) (1.00) Number of Observations 34 34 29 29 Wald Chi-Square 10.1 40.8 45.9 71.5 Wald Chi-Square: p-value 0.017 0.00 0.00 0.00 Hansen’s J Chi-Square 1.37 12.3 11.9 10.3 Hansen’s J Chi-Square p-value 0.50 0.09 0.16 0.17 GMM C (Orthogonality) Chi-Square 0.86 0.059 0.29 2.68 GMM C (Orthogonality) Chi-Square: p-value 0.35 0.80 0.87 0.44 ***, ** and * indicate significance levels at 1 per cent, 5 per cent and 10 per cent, respectively. Note: 1. Figures in parentheses are robust standard errors. 2. Hansen’s J-test suggests that the overidentifying restrictions are valid at 5 per cent. 3. The GMM C tests fail to reject the null hypothesis that the explanatory variables are exogenous at 5 per cent. 4. The Annual estimates for R&D expenditure are available from 1995-96 onwards only. Additional estimates for 1985-86 and 1990- 91 were available at the source. The R&D expenditure for the intermediate years between 1985-86 and 1990-91, and 1990-91 and 1995-96 are interpolated. 5. TFP growth, gross R&D expenditure, FDI inflows, export and import, and global metal price index have been used in terms of y-o-y growth.ANNUAL REPORT 2024-25 Countries with higher income levels, as measured by GDP Productivity Growth: The Case of Pakistan’, Journal of per capita, tend to have better innovation rankings. India the Knowledge Economy, 15(1), 3085-3099. secured 39th position among 133 economies in the Global 2. Bhattacharya, M., Okafor, L. E., and Pradeep, V. (2021), Innovation Index 2024 (Chart 1b). ‘International Firm Activities, R&D, and Productivity: In this study, the impact of growth in India’s aggregate Evidence from Indian Manufacturing Firms’, Economic R&D expenditure on aggregate TFP growth is explored Modelling, 97, 1-13. in a generalised method of moments (GMM) framework for the period 1986-87 to 2019-20 (Table 1). The GMM 3. Goñi, E. and Maloney, W. F. (2014), ‘Why Don’t Poor methodology was preferred to control for inherent Countries Do R&D?’, Policy Research Working Paper endogeneity, as R&D investments may also be Series 6811, The World Bank, Washington D.C. affected by the level of output, profits, and productivity. 4. Griliches, Z. (1998), ‘R&D and Productivity: The Accordingly, appropriate instruments are used for Econometric Evidence’, University of Chicago Press, R&D investments like growth, economic disturbances, Chicago. commodity prices, etc. The models suggest that a one percentage point 5. Herzer, D. (2022), ‘The Impact of Domestic and increase in R&D expenditure leads to a 0.21 to 0.26 Foreign R&D on TFP in Developing Countries’, World percentage point rise in TFP growth. Some of the control Development, 151, 105754. variables such as FDI and trade flows were found to 6. Krammer, S. M.S. (2015), ‘Do Good Institutions positively and significantly impact TFP. In contrast, some Enhance the Effect of Technological Spillovers on supply side factors such as increase in global metal price Productivity? Comparative Evidence from Developed and adverse monsoons have a negative impact on TFP and Transition Economies’, Technological Forecasting growth. and Social Change, 94(C), 133-154. The above evidence substantiates the criticality of R&D investment for sustaining innovation and long- 7. Mamatzakis, E., Pegkas, P., Staikouras, C., and term productivity growth. Apart from the direct impact, Tsamadias, C. (2023), ‘R&D Contribution in TFP incentivising R&D could have a significant spillover effect Growth of Greek industry: A Limited Information on the wider economy. Likelihood Approach’, Bulletin of Economic Research, References: 75(4), 1086-1111. 1. Ali, L., and Akhtar, N. (2024), ‘The Effectiveness of 8. OECD (2015), ‘The Future of Productivity’, Organisation Export, FDI, Human Capital, and R&D on Total Factor for Economic Co-operation and Development, Paris. 5. Conclusion input cost pressures in the manufacturing sector coupled with global headwinds such II.2.25 India’s economic activity gained as protectionist trade policies, persistent momentum in H2:2024-25 driven by an uptick in domestic demand, increase in exports of geopolitical tensions and subdued global goods and services, buoyant agriculture sector demand, however, continue to pose risks to and sustained resilience in services. Rising growth. 32ECONOMIC REVIEW II.3 PRICE SITUATION Chart II.3.1: Inflation across Major Components II.3.1 In India, headline inflation14 moderated to an average of 4.6 per cent during 2024-25 from 5.4 per cent during 2023-24, with intra-year trajectory driven by food price fluctuations due to recurrent supply-side shocks from weather disturbances. Consumer Price Index (CPI) inflation eased during April-August 2024 followed by hardening in September-October due to a sharp increase in food prices, driven mainly by vegetables and edible oils. Subsequently, food Food and Beverages (45.9) Fuel and Light (6.8) inflation eased during November 2024-March CPI-Combined Excluding Food and Fuel (47.3) 2025 with the winter crop arrivals. Fuel prices Lower Tolerance Level Upper Tolerance Level Note: 1. Figures in parentheses indicate weight in CPI-Combined. remained in deflation led by a fall in liquefied 2. April and May 2020 data were imputed by the NSO. Source: NSO and RBI staff estimates. petroleum gas (LPG) prices. Core inflation (i.e., CPI excluding food and fuel) eased during 2024- 25, reflecting, inter alia, the cumulative and unchanged in 2024-25 (Table II.3.1). The intra- lagged impact of monetary policy actions and year distribution of inflation showed a negative easing of input cost pressures (Chart II.3.1). kurtosis reflecting fewer extreme values in Proactive supply management measures by the 2024-25. government also aided in containing inflationary II.3.3 Against this backdrop, sub-section 2 pressures in 2024-25. assesses developments in global commodity II.3.2 Volatility of headline inflation, as prices and inflation. Sub-section 3 discusses measured by standard deviation, remained movements in headline inflation in India including Table II.3.1: CPI Headline Inflation – Key Summary Statistics (Per cent) 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 2024-25 1 2 3 4 5 6 7 8 9 10 11 Mean 4.9 4.5 3.6 3.4 4.8 6.2 5.5 6.7 5.4 4.6 Standard Deviation 0.7 1.0 1.2 1.1 1.8 1.1 0.9 0.7 0.9 0.9 Skewness -0.9 0.2 -0.2 0.1 0.5 -0.7 -0.1 -0.1 1.5 0.0 Kurtosis -0.1 -1.6 -1.0 -1.5 -1.4 -0.7 -1.0 -0.6 1.6 -1.2 Median 5.0 4.3 3.4 3.5 4.3 6.5 5.6 6.7 5.1 4.8 Maximum 5.7 6.1 5.2 4.9 7.6 7.6 7.0 7.8 7.4 6.2 Minimum 3.7 3.2 1.5 2.0 3.0 4.1 4.2 5.7 4.3 3.3 Note: Skewness and Kurtosis are unit-free. Annual inflation is the average of the monthly inflation rates during the year and therefore, may vary from the annual inflation calculated from the average index for the year. Source: NSO and RBI staff estimates. 14 Headline inflation is measured by year-on-year changes in the all-India CPI-Combined (Rural + Urban) [base year: 2012=100] released by the National Statistical Office (NSO), Ministry of Statistics and Programme Implementation (MoSPI), Government of India (GoI). 33 )y-o-y( tnec reP 16 14 12 10 8 4.1 6 3.3 4 2 2.9 1.5 0 -2 -4 -6 71-rpA 71-peS 81-beF 81-luJ 81-ceD 91-yaM 91-tcO 02-raM 02-guA 12-naJ 12-nuJ 12-voN 22-rpA 22-peS 32-beF 32-luJ 32-ceD 42-yaM 42-tcO 52-raMANNUAL REPORT 2024-25 major turning points, followed by a detailed amid subdued consumption demand. Metals analysis of its primary constituents in sub- and minerals prices, however, increased in 2024 section 4. Other indicators of prices and costs with increase in copper and aluminium demand are analysed in sub-section 5, followed by the from renewable energy sources, electricity grids concluding observations. and electric vehicles. Prices of precious metals such as gold and silver increased on rising global 2. Global Inflation Developments demand for safe haven assets. II.3.4 Global commodity prices moderated 3. Inflation in India in 2024 on the back of subdued demand and improved supply conditions (Chart II.3.2). II.3.5 CPI headline inflation in India eased from While food prices corrected in 2024 on robust 4.8 per cent in April-May 2024 to 3.6 per cent agricultural production and higher supplies, in July 2024 before rising again to 6.2 per cent beverages witnessed sharp price pressures in October 2024 (Chart II.3.3). The movements – driven primarily by cocoa and coffee prices in headline inflation were driven primarily by the on weather-induced supply disturbances. In food group due to overlapping supply shocks the second half of 2024, palm oil prices also from intermittent weather disturbances, even increased sharply, inter alia, on Indonesia’s as core inflation remained largely contained announcement of the B40 bio-diesel programme while fuel continued to be in deflation. Headline in August 2024 mandating higher palm oil inflation eased to 3.3 per cent in March 2025 blending with diesel (up from 35 per cent to 40 on sharp moderation in food inflation. Overall, per cent), effective from January 1, 2025. Energy headline inflation averaged 4.6 per cent during prices fell further in 2024 as increased oil supply 2024-25, 73 basis points (bps) lower than the by non-OPEC offset supply cuts by OPEC+ previous year (Appendix Table 4). Chart II.3.2: International Commodity Prices Source: World Bank Pink Sheet Database. 34 001=0102 :xednI 180 160 140 120 100 80 60 40 20 Energy Non-energy Food Metals and Minerals 71-rpA 71-peS 81-beF 81-luJ 81-ceD 91-yaM 91-tcO 02-raM 02-guA 12-naJ 12-nuJ 12-voN 22-rpA 22-peS 32-beF 32-luJ 32-ceD 42-yaM 42-tcO 52-raM Chart II.3.3: Movements in Headline Inflation Source: NSO and RBI staff estimates. tnec reP )y-o-y( tnec reP 4 8 3 6 2 1 4 0 2 -1 0 -2 -2 -3 -4 -4 M-o-M Change Base Effect Inflation (RHS) 12-rpA 12-yaM 12-luJ 12-peS 12-voN 22-naJ 22-raM 22-yaM 22-luJ 22-peS 22-voN 32-naJ 32-raM 32-yaM 32-luJ 32-peS 32-voN 42-naJ 42-raM 42-yaM 42-luJ 42-peS 42-voN 52-naJ 52-raMECONOMIC REVIEW headline inflation during 2024-25 as compared Chart II.3.4: Drivers of Inflation (Y-o-Y) with 61 per cent a year ago (Chart II.3.4). Weather disturbances such as heatwave conditions and uneven rainfall distribution affected agricultural crops, disrupting the domestic availability and supply chains. While tight supply conditions in wheat and pulses impacted domestic availability, uptick in global edible oil prices led to a substantial pick-up in imported inflation. Consequently, food inflation remained firm, with Food and Beverages Pan, Tobacco and Intoxicants vegetables, cereals, pulses and edible oil prices Clothing and Footwear Housing Fuel and Light Household Goods and Services being the key drivers. Transport and Communication Health and Education Others* CPI-Combined Inflation (per cent) *: Includes recreation and amusement, and personal care and effects. II.3.7 Apart from recurrent supply shocks, Source: NSO and RBI staff estimates. the changing consumption pattern of households II.3.6 Inflation in food and beverages averaged also weigh on the dynamics of food inflation 6.7 per cent and contributed 68 per cent to (Box II.3.1). Box II.3.1 Food Inflation Persistence and Shifting Household Consumption Pattern Amidst continuing pressures from food inflation on account (based on seasonally adjusted CPI) of the ith item at time of overlapping supply shocks, persistence in food inflation t, ρ is the persistence parameter, and ε is the error term. i i,t and its components is estimated for a 48-month rolling The results show that the persistence in food prices, which window using an AR(1) process. had moderated post the introduction of flexible inflation π ρ π ε .…. (1) i, i i,t i,t targeting (FIT), picked up in the post-COVID period, where π refers t =t o *th e -1 d +e meaned monthly momentum yet remaining lower than the pre-FIT period (Chart 1a). i, t (Contd.) 35 stniop egatnecrep ni noitubirtnoC 6 5.4 5 4.6 4 3 2 1 0 2023-24 2024-25 -1 Chart 1: Persistence in CPI Food and its Components a. Persistence in CPI Food and Beverages b. Persistence in Food Components 0.6 0.5 0.4 0.3 0.2 0.1 0.0 Dec-2014 Dec-2019 Dec-2024 Dec-2014 Dec-2019 Dec-2024 Note: CPI Food persistence parameter is derived as a weighted average of its components on a 48-months rolling window. Source: MoSPI and RBI staff estimates. retemarap ecnetsisreP retemarap ecnetsisreP 0.9 0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0.0 slaereC taeM ,ggE hsiF & kliM staF & sliO stiurF selbategeV sesluP raguS secipS dooF dessecorP segareveB &ANNUAL REPORT 2024-25 A disaggregated analysis indicates that this increase is Chart 2: Shift in Real Expenditures of Households primarily driven by cereals, egg, meat and fish, fruits, milk, oils and fats, spices, and processed food and beverages (Chart 1b). On the other hand, inflation persistence is estimated to have ebbed in vegetables, sugar and pulses. Apart from intermittent supply shocks, demand side factors can also impart stickiness to food prices. The evolving demand conditions have been analysed using the 2011- 12 and 2022-23 rounds of the household consumption expenditure survey (HCES). The estimated per capita real expenditure across 12 fractiles (as defined by the HCES) shows an upward shift in both rural and urban sectors (Chart 2). A mapping of changes in expenditure shares with Source: HCES (2011-12 and 2022-23), MoSPI and RBI staff estimates. persistence reveals that food sub-groups that saw an increase in expenditure on animal proteins (i.e., egg, meat, among higher fractile groups. Cereals, however, show fish, and milk), fruits, oils and fats, and processed food and a diverging trend – a rise in persistence despite a fall in beverages, have also become more persistent in recent expenditure shares indicating the dominance of supply side years (Table 1). Moreover, the shift in expenditure towards factors. Overall, the overlapping supply shocks coupled with fruits, egg, meat and fish, milk, and oils and fats are the the evolving demand dynamics for food products, driven by largest across lower fractile households, while increased change in dietary habits, underscore the need for careful expenditure on processed food and beverages is greater monitoring of food inflation. Table 1: Change in Expenditure Shares and Persistence Food Sub-group Weight in CPI-Food Change in Expenditure Shares in Food Group by Expenditure Change in and Beverages Fractiles (per cent) Persistence (per cent) 0-40 40-50 50-100 All Classes Parameter 1 2 3 4 5 6 7 Cereals 9.7 -13.24 -9.67 -6.00 -8.35 0.16 Pulses 2.4 -1.20 -1.27 -1.14 -1.19 -0.11 Vegetables 6.0 -1.30 -1.20 -0.85 -1.01 -0.42 Fruits 2.9 3.18 3.04 1.60 2.25 0.07 Egg, Meat and Fish 4.0 2.78 1.71 0.39 1.13 0.03 Milk 6.6 4.98 3.42 1.10 2.45 0.11 Spices 2.5 -0.35 -0.42 -0.20 -0.29 0.08 Oils and Fats 3.6 1.17 0.30 -0.02 0.32 0.50 Sugar 1.4 -1.19 -1.33 -1.24 -1.24 -0.02 Processed Food and Beverages 5.6 5.17 5.42 6.35 5.93 0.28 Note: 1. Change in expenditure share is derived as variation in 2022-23 over 2011-12. 2. Change in persistence is derived as variation in persistence parameter between 2021-24 and 2016-19. 3. Expenditure fractiles: 0-40 per cent, 40-50 per cent, 50-100 per cent, and all classes are aggregated from the HCES, and the values depict changes in expenditure shares of food items for the respective expenditure groups. Source: MoSPI and RBI staff estimates. References: 1. Bilke, L. and Stracca L. (2007), ‘A Persistence-weighted Measure of Core Inflation in the Euro Area’, Economic Modeling, 24(6). 2. Patra, M. D., Khundrakpam, J. K., and George, A. T. (2014), ‘Post-global Crisis Inflation Dynamics in India: What has Changed?’, India Policy Forum 2013-14, Vol. 10, National Council of Applied Economic Research (NCAER), New Delhi. 3. Blinder, A. (1997), ‘Measuring Short-run Inflation for Central Bankers: A Commentary’, Federal Reserve Bank of Saint Louis Review, May/June 1997, 79(3). 4. Mittal, S. (2006), ‘Structural Shift in Demand for Food: Projections for 2020’, Working Paper No.184, August, Indian Council for Research on International Economic Relations (ICRIER), New Delhi. 36 atipac rep ylhtnoM )₹( erutidnepxe 12,000 10,000 8,000 6,000 4,000 2,000 0 5-0 01-5 02-01 03-02 04-03 05-04 06-05 07-06 08-07 09-08 59-09 001-59 Expenditure fractile (Per cent) Rural 2011-12 Urban 2011-12 Rural 2022-23 Urban 2022-23ECONOMIC REVIEW II.3.8 Inflation in fuel and light averaged (-) 2.5 compared to 6.9 per cent in the corresponding per cent during 2024-25, significantly lower than period of 2023-24. However, sharp correction in 1.2 per cent a year ago. The deflation was driven vegetable prices in February-March 2025 led to by reduction in domestic prices of LPG and a moderation in food inflation to 6.7 per cent in kerosene during 2023 and 2024 in the wake of 2024-25 as compared to 7.0 per cent in 2023-24. a correction in global energy prices. Electricity Within the food group, inflation increased in four prices, however, increased by 6.4 per cent during sub-groups while it moderated for the remaining 2024-25 due to tariff hikes in some states. eight sub-groups as compared with last year (Charts II.3.5 and II.3.6). II.3.9 Inflation excluding food and fuel, or core inflation, eased to 3.5 per cent during 2024-25 II.3.11 Vegetables (weight: 13.2 per cent in the from 4.3 per cent a year ago, driven mainly by food and beverages group) inflation remained clothing and footwear, housing, household goods volatile and elevated at 19.4 per cent in 2024-25, and services, health, and education. Inflation in keeping overall food inflation firm. Vegetable transport and communication and personal care prices rose during April-July 2024 on the back of and effects, however, were higher due to hikes in supply disturbances from heatwave conditions mobile tariffs by major telecom service providers in northern India and excess rains in southern and international price pressures in gold and and central parts of the country. Prices, after silver, respectively. softening in August, driven by sharp correction in tomato prices, hardened again in September- 4. Constituents of CPI Inflation October on account of weather disturbances and Food festive demand. Prices corrected sharply during II.3.10 Food and beverages inflation averaged November 2024-March 2025 by around (-) 38 per 7.4 per cent in April 2024-January 2025 as cent with increase in market arrivals, reflecting Chart II.3.5: Drivers of Food Inflation (Y-o-Y) *: Includes egg, milk and products, and meat and fish. #: Includes fruits, sugar and confectionery, non-alcoholic beverages, and prepared meals. Source: NSO and RBI staff estimates. 37 stniop egatnecrep ni noitubirtnoC 14 12 10 8 6 4 2 0 -2 -4 -6 Cereals and Products Animal Proteins* Oils and Fats Vegetables Pulses and Products Spices Others# Food and Beverages (per cent) 12-rpA 12-nuJ 12-guA 12-tcO 12-ceD 22-beF 22-rpA 22-nuJ 22-guA 22-tcO 22-ceD 32-beF 32-rpA 32-nuJ 32-guA 32-tcO 32-ceD 42-beF 42-rpA 42-nuJ 42-guA 42-tcO 42-ceD 52-raM Chart II.3.6: Inflation in Major Food Sub-groups Cereals and Products 20 Food and Beverages Meat and Fish 15 10 Prepared Meals, Snacks, 5 Egg Sweets etc. 0 -5 Non-alcoholic -10 Milk and Beverages -15 Products Spices Oils and Fats Sugar and Fruits Confectionery Pulses and Vegetables Products 2023-24 2024-25 Source: NSO and RBI staff estimates.ANNUAL REPORT 2024-25 Chart II.3.7: Seasonality in CPI - Vegetables Prices and Temperature Anomaly a. CPI-Vegetables (Cumulative Momentum) Note: For chart b, temperature anomaly is defined as deviation from 30-year average (1991 to 2020). Source: NSO, Indian Meteorological Department, and RBI staff estimates. higher production in 2024-25 [3.6 per cent as per government allowed export of onions subject to first advance estimates (1st AE) over 2023-24] a 40 per cent export duty and a minimum export (Charts II.3.7a and II.3.7b). price (MEP) of US$ 550 per metric tonne (MT) in May 2024 which was withdrawn subsequently; II.3.12 Among key vegetables, potato inflation and the export duty was lowered to 20 per cent in remained elevated and averaged 54.1 per cent September 2024. However, higher production in during 2024-25 on account of a production 2024-25 (18.9 per cent as per 1st AE over 2023- shortfall in 2023-24 [(-) 5.0 per cent over 2022-23] 24) and robust market arrivals led to correction in due to high minimum temperatures during winter onion prices during December 2024-March 2025. and prolonged fog conditions in major producing Tomato prices exhibited significant volatility in states. However, with increase in production in 2024-25, recording an average inflation (y-o-y) of 2024-25 (4.4 per cent as per 1st AE over 2023- 36.6 per cent between April-June 2024, before 24) and higher market arrivals, potato inflation recording deflation of 43 per cent in July due moderated during January-March 2025. Onion to favourable base effects, which deepened to price inflation averaged 52.3 per cent during April- 47.9 per cent in August 2024 due to sharp price October 2024 due to a steep fall in production corrections on fresh crop arrivals. However, in 2023-24 [(-) 19.5 per cent over 2022-23]. In inflation in tomato prices increased to 161 per order to contain price pressures, the government cent in October on lower mandi arrivals due procured 4.7 lakh metric tonnes (MT) of rabi to crop damage from high temperatures and onion for open market sales at a subsidised rate rainfall in southern states. This was followed of ₹35 per kg across major consumption centres by a sharp price correction as supply improved in September 2024 and started a special train in during January-March 2025 leading to a deflation October, ‘Kanda Express’, for faster distribution of (-) 35.0 per cent in March 2025. Vegetables from surplus states to deficit states. Further, the excluding TOP (tomato, onion, and potato), 38 tnec reP 60 50 40 30 20 10 0 -10 rpA yaM nuJ luJ guA peS tcO voN ceD naJ beF raM b. Temperature Anomaly tnec rep ni erutrapeD 1.6 1.4 1.2 1.0 0.8 0.6 0.4 0.2 0.0 -0.2 -0.4 Average (2011-17) Average (2017-23) 2023-24 2024-25 Average (2011-17) Average (2017-23) 2023-24 2024-25 rpA yaM nuJ luJ guA peS tcO voN ceD naJ beF raMECONOMIC REVIEW particularly garlic, also witnessed high price measures, including imposition of stock limits for pressures due to excess rain-induced damages traders and wholesalers (till March 2025), sale which, however, corrected sharply during of 2.5 million tonnes of wheat through e-auctions November 2024-March 2025 with improvement in under OMSS till March 2025 [at a reserve domestic supply. Overall, vegetables witnessed price of ₹2,325 per quintal for fair and average the highest winter price correction in the current quality (FAQ) grain and ₹2,300 per quintal for series of CPI (November-February), which under reduced specifications (URS) grain], and extended to March 2025 on higher mandi arrivals continued restrictions on wheat exports. Wheat and conducive weather conditions. buffer stocks remained at 1.6 times the norm as of April 1, 2025. Higher rabi production of wheat II.3.13 Inflation in cereals and products (weight in 2024-25 (1.9 per cent as per 2nd AE over of 21 per cent in the CPI-food and beverages) 2023-24) augurs well for the wheat prices going remained firm at 7.2 per cent during 2024-25, forward. albeit lower than 10.7 per cent in the previous year. Within cereals, inflation in rice prices, II.3.14 Animal protein items such as eggs, after remaining in double-digits for 22 months, meat and fish (weight of 8.8 per cent in CPI-food moderated to 9.6 per cent in August 2024 and and beverages) witnessed seasonal uptick in further to 4.9 per cent in March 2025. The prices during April-June 2024 due to heatwaves which impacted the production of poultry in correction was largely on account of higher production in 2024-25 (6.7 per cent as per 2nd major producing states of southern India (Chart II.3.8a). Prices moderated subsequently due to AE over 2023-24) as well as supply management the seasonal fall in demand during July-August measures by the government such as retail 2024 on account of Shravana period. However, sale of ‘Bharat Rice’ and provisioning for rice- price pressures re-emerged in September- deficient states to directly purchase from the October 2024, particularly in case of eggs Food Corporation of India (FCI) at a fixed price reflecting pick-up in seasonal demand. Driven by of ₹2,250 per quintal under the open market sale reduced demand due to bird flu in some states, scheme (OMSS) from August 2024. With easing prices for eggs, meat and fish, softened during supply conditions, the government removed the February-March 2025. Inflation in prices of milk MEP of US$ 950 per MT on basmati rice, lifted and products was range bound at 2.9 per cent the ban on exports of non-basmati white rice in during 2024-25, benefitting from stable prices of September 2024, removed its MEP clause in feed and adequate milk supply (Chart II.3.8b). October 2024, and revoked the ban on broken rice in March 2025, to encourage higher exports. II.3.15 Prices of oils and fats (weight of 7.8 per Inflation in wheat prices, on the other hand, cent in CPI-food and beverages) continued in increased from 6.0 per cent in April 2024 to 9.0 deflation during April-August 2024 averaging (-) 4.2 per cent in March 2025, even as production was per cent; inflation turned positive in September higher (2.5 per cent in 2023-24 over 2022-23). and reached 17.1 per cent in March 2025. The The government undertook price stabilisation turnaround in prices after a gap of 19 months was 39ANNUAL REPORT 2024-25 Chart II.3.8: CPI-Animal Protein - Seasonality in Prices a. CPI-Egg, Meat and Fish (Cumulative Mome ntum) Note: For April 2020, index for meat and fish was imputed by the NSO. Source: NSO and RBI staff estimates. due to increase in international edible oil prices March 2025 (Chart II.3.10). Higher production and import duty hike of 20 percentage points of key pulses such as tur (2.8 per cent), moong on crude and refined edible oils, effective from (28 per cent) and gram (4.5 per cent) as per September 2024 (Chart II.3.9). Ghee and butter 2nd AE of 2024-25 over 2023-24, and supply price inflation, however, continued to moderate in management measures, including continued tandem with declining milk prices. free imports of yellow peas till May 31, 2025, II.3.16 Inflation in prices of pulses (weight of 5.2 tur and urad till March 31, 2026, weekly stock per cent in CPI-food and beverages) moderated disclosure requirements for major pulses, and from May 2024 and recorded (-) 2.7 per cent in sale of chana, moong and masur dal under the 40 tnec reP tnec reP b. CPI-Milk and Products (Momentum) 8 6 4 2 0 Average (2011-17) Average (2017-23) 2023-24 2024-25 Average (2011-17) Average (2017-23) 2023-24 2024-25 rpA yaM nuJ luJ guA peS tcO voN ceD naJ beF raM 1.2 1.0 0.8 0.6 0.4 0.2 0.0 rpA yaM nuJ luJ guA peS tcO voN ceD naJ beF raM Chart II.3.9: CPI-Oils and Fats (Cumulative Momentum) Source: NSO and RBI staff estimates. tnec reP 20 15 10 5 0 -5 -10 -15 Average (2011-17) Average (2017-23) 2023-24 2024-25 rpA yaM nuJ luJ guA peS tcO voN ceD naJ beF raM Chart II.3.10: Component-wise Contribution in CPI-Pulses Inflation *: Includes moong, masur, peas, khesari, besan and other pulses products. Note: Figures in parentheses indicate weight in CPI-pulses and products. Source: NSO and RBI staff estimates. stniop egatnecrep ni noitubirtnoC 25 20 15 10 5 0 -5 Arhar (33.4) Gram and Products (13.3) Urad (11.5) Pulses and Products (y-o-y, per cent) Others* (41.8) 22-yaM 22-luJ 22-peS 22-voN 32-naJ 32-raM 32-yaM 32-luJ 32-peS 32-voN 42-naJ 42-raM 42-yaM 42-luJ 42-peS 42-voN 52-naJ 52-raMECONOMIC REVIEW brand ‘Bharat Dal’, contributed to the moderation ethanol production were, however, eased in in pulses price inflation. August 2024. Inflation in prepared meals also remained subdued and averaged 3.8 per cent II.3.17 Inflation in fruits (weight of 6.3 per during 2024-25. cent in CPI-food and beverages) averaged 6.3 per cent during April-June 2024 on account of Fuel lower mandi arrivals of major fruits including II.3.19 Fuel and light (weight of 6.8 per cent in banana, mango and coconut. Prices corrected CPI) prices remained in deflation during 2024-25, in July on favourable base effects. However, averaging (-) 2.5 per cent (Chart II.3.11). After inflation increased to 10.2 per cent during August remaining in deflation during April 2024-February 2024-March 2025 despite adequate production 2025, fuel inflation increased to 1.5 per cent (0.2 per cent higher as per 1st AE 2024-25 over in March 2025. The domestic LPG price cut of 2023-24), primarily driven by a sharp increase in ₹100 per cylinder in March 2024 accentuated coconut prices. the pace of deflation in fuel observed in 2024-25 II.3.18 Among other food items, inflation in (Chart II.3.12). Consequently, the contribution of prices of spices corrected to an average of (-) 3.3 the fuel group to headline inflation decreased to per cent during 2024-25 as against 18.9 per (-) 3.6 per cent in 2024-25 from 1.6 per cent a cent a year ago, driven primarily by fall in prices year ago. of jeera (cumin) and dry chillies, on account Core Inflation (Inflation Excluding Food and Fuel) of higher production of spices in 2023-24 (5.5 per cent over 2022-23). Inflation in sugar and II.3.20 Inflation excluding the food and fuel confectionery prices was subdued in 2024-25 groups, i.e., core inflation, moderated to an despite a shortfall in production [(-) 4.0 per cent average of 3.5 per cent during 2024-25 from 4.3 as per 2nd AE 2024-25 over 2023-24]. Restrictions per cent a year ago (Appendix Table 4). After previously imposed on sugar diversion for touching 3.1 per cent during May-June 2024 – Chart II.3.11: Drivers of Fuel Inflati on 41 stniop egatnecrep ni noitubirtnoC Chart II.3.12: Movements in LPG Prices Dung Cake (6.5) Fuel & Light (y-o-y, per cent) Firewood & Chips (30.2) Electricity (33.0) Kerosene* (8.0) Others** (3.5) LPG [Excl. Conveyance](18.8) LPG - International LPG - Domestic Non-subsidised )y-o-y( tnec reP 20 100 15 80 10 60 5 40 20 0 0 -5 -20 -10 -40 -60 *: Includes kerosene public distribution system (PDS) and kerosene from other sources. **: Includes diesel, coke, coal, charcoal, and other fuel. Note: 1. Figures in parentheses indicate weight in CPI-Fuel and light. 2. Domestic non-subsidised LPG prices are the average of prices in four metros (Delhi, Mumbai, Kolkata and Chennai). Source: NSO, Petroleum Planning and Analysis Cell (PPAC), Bloomberg and RBI staff estimates. 22-yaM 22-luJ 22-peS 22-voN 32-naJ 32-raM 32-yaM 32-luJ 32-peS 32-voN 42-naJ 42-raM 42-yaM 42-luJ 42-peS 42-voN 52-naJ 52-raM 22-yaM 22-luJ 22-peS 22-voN 32-naJ 32-raM 32-yaM 32-luJ 32-peS 32-voN 42-naJ 42-raM 42-yaM 42-luJ 42-peS 42-voN 52-naJ 52-raMANNUAL REPORT 2024-25 wearing apparel. Household goods and services, Chart II.3.13: Drivers of CPI Excluding Food and Fuel Inflation health, and education also witnessed moderate price pressures during 2024-25. Inflation in transport and communication rose marginally to 2.4 per cent in 2024-25 from 1.9 per cent a year ago, driven by the increase in mobile tariffs in July-August 2024. After a cut in domestic retail prices of petrol and diesel in March-April 2024, they remained unchanged during the year (Chart II.3.14). The pick-up in inflation in transport and communications from 1 per cent during May-June Housing Transport and Communication Education Household Goods and Services 2024 to 2.8 per cent during July 2024-March 2025 Health Clothing and Footwear Others* Pan, Tobacco and Intoxicants contributed to the rise in core inflation. Around 78 Excluding Food and Fuel (per cent) per cent of the core CPI items registered less than *: Includes recreation and amusement, and personal care and effects. Source: NSO and RBI staff estimates. 4 per cent inflation during 2024-25 as compared to 51 per cent in the previous year (Chart II.3.15). the lowest in the current series – it picked up in the subsequent months to reach 4.1 per cent in II.3.22 Housing inflation fell from 3.9 per cent during 2023-24 to 2.8 per cent during 2024-25 March led by hike in mobile tariffs and hardening due to subdued house rent inflation. Inflation in of gold and silver prices (Chart II.3.13). personal care and effects rose to 9.8 per cent II.3.21 Among the major constituents, inflation during 2024-25 from 7.8 per cent a year ago, in clothing and footwear fell to 2.7 per cent during primarily driven by higher international prices 2024-25 from 4.7 per cent a year ago, reflecting of gold on global safe haven demand amidst lower domestic and international cotton prices geopolitical uncertainty and the evolving global and subdued export demand of textiles and monetary policy trajectory. 42 stniop egatnecrep ni noitubirtnoC 8 7 6 5 4 3 2 1 0 12-rpA 12-nuJ 12-guA 12-tcO 12-ceD 22-beF 22-rpA 22-nuJ 22-guA 22-tcO 22-ceD 32-beF 32-rpA 32-nuJ 32-guA 32-tcO 32-ceD 42-beF 42-rpA 42-nuJ 42-guA 42-tcO 42-ceD 52-raM Chart II.3.14: Domestic Oil Price Tre nds Chart II.3.15: Inflation - Core Items 120 100 80 60 40 20 0 International Crude Oil Petrol Greater than 4 Per cent 50 Per cent Indian Basket Diesel Less than 4 Per cent Note: International crude oil price represents the average price of West Texas Intermediate (WTI), Brent and Dubai Fateh. Source: World Bank Pink Sheet Database, Indian Oil Corporation Limited, PPAC, NSO and RBI staff estimates. ertil rep ₹ 71-rpA 71-peS 81-beF 81-luJ 81-ceD 91-yaM 91-tcO 02-raM 02-guA 12-naJ 12-nuJ 12-voN 22-rpA 22-peS 32-beF 32-luJ 32-ceD 42-yaM 42-tcO 52-raM smeti fo tnec reP 100 90 80 70 60 50 40 30 20 10 0 22-yaM 22-luJ 22-peS 22-voN 32-naJ 32-raM 32-yaM 32-luJ 32-peS 32-voN 42-naJ 42-raM 42-yaM 42-luJ 42-peS 42-voN 52-naJ 52-raMECONOMIC REVIEW 5. Other Indicators of Inflation recorded the highest increase among the rabi crops. II.3.23 From a sectoral perspective, inflation measured by the CPI for industrial workers (CPI- II.3.26 Nominal rural wage growth decelerated IW) moderated to 3.4 per cent during 2024-25 marginally to 5.9 per cent during 2024-25 from 6.0 from 5.2 per cent a year ago, driven by lower per cent during the previous year, primarily driven fuel and core inflation. Inflation based on the by non-agricultural wages, which moderated to 5.6 CPI for agricultural labourers (CPI-AL) and rural per cent during 2024-25 from 5.9 per cent a year labourers (CPI-RL) moderated to 5.7 per cent, ago. The moderation was driven by handicraft each, during 2024-25 from 7.1 per cent and 6.9 workers, bamboo/cane basket weavers, and per cent, respectively, a year ago, primarily driven sweeping/cleaning workers within the category by moderation in food inflation. of non-agricultural labourers. Agricultural wages, II.3.24 Inflation measured by the wholesale price however, increased marginally to 6.3 per cent index (WPI) increased to 2.3 per cent during during 2024-25 from 6.0 per cent a year ago. 2024-25 from a deflation of (-) 0.7 per cent a year 6. Conclusion ago, primarily due to an uptick in food inflation and pass-through of global metals and minerals II.3.27 Headline inflation moderated in 2024-25 prices. WPI inflation in primary articles (weight on account of robust agricultural crop production, of 22.6 per cent in the WPI basket) increased to softening global commodity prices - particularly 5.1 per cent during 2024-25 from 3.5 per cent a food and energy, easing supply chain pressures, year ago, driven by food price pressures due to supply management measures undertaken by weather disturbances. In contrast, fuel and power the government and lagged impact of monetary recorded deflation, averaging (-) 1.3 per cent policy actions. Food inflation, which remained during 2024-25, mirroring the easing of global elevated on recurrent weather-induced supply energy prices. Inflation in manufactured products disturbances, corrected in January-March 2025 (weight of 64.2 per cent) increased to 1.7 per cent on higher market arrivals. Fuel prices remained in during 2024-25 from a deflation of (-) 1.7 per cent deflation in 2024-25 on lower prices of LPG and a year ago, led by food products, and non-ferrous kerosene. Core inflation softened to its lowest in the and precious metals. Reflecting the increase in current series during the initial part of the year, with WPI inflation, the gross domestic product (GDP) benign uptick in the subsequent months. Looking deflator inflation increased to 3.0 per cent during ahead, food inflation is likely to soften on the back April-December 2024 from 2.3 per cent in the of a better rabi crop leading to gradual moderation corresponding period of the previous year. in headline inflation. The disinflationary process, II.3.25 Minimum support prices (MSPs) in 2024- however, is subject to uncertainties emanating 25 were increased in the range of 1.5-12.7 per from prolonged geopolitical conflicts, evolving cent for the kharif crops and 2.4-7.0 per cent for trade dynamics and weather conditions, which the rabi crops. Nigerseed witnessed the maximum warrant continuous vigil and careful monitoring of MSP increase among the kharif crops while barley the evolving dynamics. 43ANNUAL REPORT 2024-25 II.4 MONEY AND CREDIT Chart II.4.1: Reserve Bank's Balance Sheet - Components (Liabilities) [end-March] II.4.1 Monetary and credit conditions evolved in sync with the monetary policy stance during the year. Reserve money (RM) adjusted for the first- round impact of changes in the cash reserve ratio (CRR)15 moderated during the year on account of deceleration in bankers’ deposits with the Reserve Bank; while currency in circulation (CiC) expanded at a higher pace in comparison with the previous year as the impact of withdrawal of ₹2000 banknotes from circulation initiated in May NNML: Comprise economic capital (such as capital, reserves, contingency 2023 dissipated. Bank credit growth remained fund, asset development fund, currency and gold revaluation account, investment revaluation account and foreign exchange forward contracts in double digits, even as the wedge between valuation account), RBI employee provident fund account and IMF quota subscriptions and other payments minus other assets. deposit and credit growth moderated. Source: RBI. II.4.2 Against this backdrop, sub-section 2 delves II.4.4 The Reserve Bank’s balance sheet size into reserve money dynamics and the shifts in moderated to 22.8 per cent of GDP as at end- the Reserve Bank’s balance sheet. Sub-sections March 2025 from 23.5 per cent as at end-March 3 and 4 examine developments in money supply 2024, mirroring the trend observed in other major and bank credit, respectively, followed by economies (Chart II.4.2). concluding observations. II.4.5 The RM17 growth, adjusted for the first- 2. Reserve Money16 round impact of change in CRR, stood at 5.8 per cent in 2024-25 as compared with 6.7 per II.4.3 Reserve money (RM) represents the cent a year ago (Chart II.4.3a and Appendix stock of monetary liabilities in the central bank’s Table 4). RM growth witnessed a transient balance sheet (Chart II.4.1). Risk buffers and slump in August 2024 due to the base effect revaluation accounts [forming the bulk of net non- of temporary imposition of incremental CRR monetary liabilities (NNML)] along with surplus (I-CRR)18 in August 2023 (Chart II.4.3b). liquidity placed by banks with the Reserve Bank under the reverse repos/standing deposit facility II.4.6 The growth in CiC - the major constituent (SDF) are the other major components of the of RM with a share of 76.9 per cent – recovered balance sheet. to 5.8 per cent during 2024-25 from 4.1 per cent 15 CRR was reduced from 4.5 per cent to 4.0 per cent in two tranches of 25 basis points (bps) each effective fortnight beginning December 14, 2024 and December 28, 2024. 16 In sub-section 2, growth and other ratios pertain to the last Friday of the respective financial year/quarter/month. 17 Comprises currency in circulation, bankers’ deposits with the Reserve Bank and other deposits with the Reserve Bank, on the liabilities side. 18 Effective August 12, 2023, the Reserve Bank imposed a 10 per cent I-CRR on the increase in net demand and time liabilities (NDTL) of scheduled banks during May 19 - July 28, 2023 to absorb the surplus liquidity resulting from the withdrawal of ₹2000 banknotes. This measure was phased out between September 9, 2023 and October 7, 2023 to ensure orderly liquidity management. 44 ezis teehs ecnalab fo tnec reP PDG fo tnec reP 100 30 90 80 25 70 60 22.8 50 20 40 30 15 20 10 0 10 Reserve Money Reverse Repos/SDF Net Non-monetary Liabilities (NNML) Others Balance Sheet as per cent of GDP (RHS) 4.16 12-0202 6.26 22-1202 1.96 32-2202 2.66 42-3202 1.46 52-4202ECONOMIC REVIEW a year ago, reflecting the impact of withdrawal of ₹2000 banknotes, as noted earlier19 (Charts II.4.3a and II.4.3c). Growth in bankers’ deposits with the Reserve Bank (20.8 per cent share in RM), i.e., balances maintained by banks to meet their CRR requirements, declined by 6.5 per cent during the year, reflecting the reduction in CRR by 50 bps and moderation in bank deposits (Chart II.4.3a). Adjusted for the first-round impact of the CRR reduction, bankers’ deposits rose by 4.4 per cent. II.4.7 The currency-GDP ratio moderated further with the increasing usage of digital payments, including central bank digital currency (CBDC)20. Retail digital payments Chart II.4.3: Reserve Money - Components (Liabilities) a. RM - Components (Growth) Reserve Money Currency in Circulation (RHS) Reserve Money Adjusted for CRR Bankers' Deposits with the RBI (RHS) Source: RBI. 19 See Chapter VIII for details. 20 Details on various modes of digital payments (including CBDC) are covered in Chapters VI, VIII and IX of this Report. 45 tnec reP tnec reP b. CRR-adjusted RM Y-o-Y Growth: Weekly Trend 2023-24 2024-25 )y-o-y( tnec reP 10 9 8 7 6 5 4 50-rpA 62-rpA 71-yaM 70-nuJ 82-nuJ 91-luJ 90-guA 03-guA 02-peS 11-tcO 10-voN 22-voN 31-ceD 30-naJ 42-naJ 41-beF 70-raM 82-raM c. CiC Growth: Financial Year Variation 2023-24 2024-25 tnec reP 6 4 2 0 -2 -4 50-rpA 62-rpA 71-yaM 70-nuJ 82-nuJ 91-luJ 90-guA 03-guA 02-peS 11-tcO 10-voN 22-voN 31-ceD 30-naJ 42-naJ 41-beF 70-raM 82-raM 20 28 16 22 12 16 8 10 4 4 0 -2 -4 -8 91-8102 02-9102 12-0202 22-1202 32-2202 42-3202 52-4202 Source: RBI, FRED (St. Louis Fed), BoE, IMF, CEIC, GoI and RBI staff estimates. PDG fo tnec reP Chart II.4.2: Central Bank Balance Sheet Size (end-December) 70 60 50 40 30 20 10 US UK Euro Area India 5102 6102 7102 8102 9102 0202 1202 2202 3202 4202ANNUAL REPORT 2024-25 Chart II.4.4: Currency in Circulation and Digital Payments $: Introduced on December 1, 2022. Source: RBI, GoI, CEIC, Statista, IMF and RBI staff estimates. increased by 17.9 per cent in value terms and 35 2025 from 8.3 per cent as at end-March 2024, per cent in volume terms during 2024-25 mainly due to revaluation gains from gold prices. (Chart II.4.4). The Reserve Bank’s net credit to the government expanded during the year owing to the liquidity II.4.8 On the sources side (assets), RM comprises net domestic assets (NDA)21 and net injection through purchase of G-secs via open foreign assets (NFA)22 of the Reserve Bank. market operations (OMOs) during January- During 2024-25, NFA expanded by ₹2.8 lakh March 2025 (Chart II.4.5). crore, although growth in FCA decelerated with 3. Money Supply23 net sales to authorised dealers at ₹2.9 lakh crore as against net purchases of ₹3.4 lakh crore II.4.9 Money supply – in terms of broad money during the previous year. The share of gold in (M ) – mainly consists of currency with the public 3 NFA increased to 12.0 per cent as at end-March (CwP) and aggregate deposits (AD) of banks on 21 Comprises net Reserve Bank credit to banks, government and commercial sector (mainly primary dealers). 22 Consists of gold and foreign currency assets (FCA). FCA includes special drawing rights (SDRs) transferred from the Government of India (GoI). The remaining SDR holdings with the GoI and reserve tranche position (RTP) in the IMF, which represents India’s quota contribution to the IMF in foreign currency, are not a part of the Reserve Bank’s balance sheet. 23 In sub-sections 3 and 4, growth and other ratios pertain to the last reporting Friday of the respective financial year/quarter/month. Data exclude the impact of merger of a non-bank with a bank. 46 )001 = 7102( xednI a. Currency to GDP Ratio (end-December) b. Retail Digital Transactions (end-December) tnec reP US UK Sweden Euro Area India c. Retail Digital Payments - India emuloV )erorc dnasuoht( tnec reP d. CBDC (Retail)$ - India Retail Digital Payments CiC/GDP Ratio (RHS) gnidnatstuo tnuomA )erorc ₹( 15 10 5 0 4102 5102 6102 7102 8102 9102 0202 1202 2202 3202 4202 25 15 20 14 15 13 10 12 5 11 0 10 91-8102 02-9102 12-0202 22-1202 32-2202 42-3202 52-4202 301 432 993 837 119 610,1 1200 1000 800 600 400 200 0 32-ceD 42-raM 42-nuJ 42-peS 42-ceD 52-raM 300 250 200 150 100 50 0 aidnI SU KU UE nedewS 2019 2020 2021 2022 2023 2024ECONOMIC REVIEW the components side (liabilities). M recorded a by bank deposits (Chart II.4.6). The expansion 3 growth of 9.6 per cent as on March 21, 2025 as in bank deposits24 outpaced that in CwP for the compared with 11.2 per cent a year ago, driven third consecutive year. The ratio of M to GDP 3 Chart II.4.6: Money Supply and SCBs’ Time Deposits a. Money Supply (M) Components (Liabilities) - Growth b. Time Deposits and Interest Rate 3 Note: Time deposit interest rate refers to weighted average domestic term deposit rates for fresh rupee term deposits of SCBs. Source: RBI. 24 Demand deposits remained volatile, largely mirroring the variation in currency with the public. 47 tnec reP Currency with the Public Aggregate Deposits Money Supply Nominal GDP )y-o-y( tnec reP tnec reP 20 16 12 8 4 0 -4 Time Deposit Growth Time Deposit Interest Rate (RHS) 91-8102 02-9102 12-0202 22-1202 32-2202 42-3202 52-4202 14 7.0 13 6.5 6.0 12 5.5 11 5.0 10 4.5 9 4.0 8 3.5 7 3.0 22-naJ 22-raM 22-yaM 22-luJ 22-peS 22-voN 32-naJ 32-raM 32-yaM 32-luJ 32-peS 32-voN 42-naJ 42-raM 42-yaM 42-luJ 42-peS 42-voN 52-naJ 52-raM Chart II.4.5: Reserve Money - Sources (Assets) a. NDA and NFA b. NDA and NFA: Variation 140 120 100 80 60 40 20 0 -20 -40 c. NDA Components: Variation d. NFA Components: Variation Source: RBI. 51-4102 61-5102 71-6102 81-7102 91-8102 02-9102 12-0202 22-1202 32-2202 42-3202 52-4202 10 8 6 4 2 0 -2 -4 -6 NFA NDA 51-4102 61-5102 71-6102 81-7102 91-8102 02-9102 12-0202 22-1202 32-2202 42-3202 52-4202 NDA NFA NFA Adjusted for Valuation 5 7 4 3 6 2 5 1 0 4 -1 3 -2 -3 2 -4 1 -5 RBI's Net Credit to RBI's Net Credit to 0 Government Banks and Commercial Sector 2019-20 2020-21 2021-22 2022-23 2023-24 2024-25 02-9102 12-0202 22-1202 32-2202 42-3202 52-4202 FCA Gold MR fo tnec reP erorc hkal ₹ erorc hkal ₹ erorc hkal ₹ANNUAL REPORT 2024-25 Chart II.4.8: Money Supply Sources (Assets) - Growth Source: RBI. remained broadly at the level of the previous Key Monetary Ratios year (Chart II.4.7). II.4.11 The transaction velocity of money, i.e., II.4.10 On the sources side (assets), the nominal GDP as a proportion of M , remained 3 expansion in M was mainly driven by bank credit stable during 2024-25. The currency-deposit ratio 3 to the commercial sector, which grew by 11.8 per at 15.4 per cent as on March 21, 2025 moderated cent in 2024-25 (15.6 per cent a year ago). Net further from 15.9 per cent as on March 22, 2024, bank credit to government increased by 11.2 per reflecting, inter alia, an increasing shift in public cent in 2024-25 (5.7 per cent a year ago). The preference towards digital modes of payments. excess holdings of statutory liquidity ratio (SLR) The reserve-deposit ratio softened during the securities25 of SCBs were 10.3 per cent of NDTL year due to reduction in CRR (Chart II.4.9a). as on March 21, 2025. The net foreign assets The cumulative impact of moderation in both of the banking sector increased, mirroring the currency-deposit ratio and reserve-deposit ratio expansion in NFA of the Reserve Bank’s balance reflected on the money multiplier (MM), which sheet during the year (Charts II.4.5 and II.4.8; increased to 5.7 as on March 21, 2025 from 5.4 as on March 22, 2024 (Chart II.4.9b). Table II.4.1). 25 Excess holdings of SLR securities provide collateral buffers to banks for availing funds under the liquidity adjustment facility (LAF) and are also a component of the liquidity coverage ratio (LCR). The Reserve Bank increased the limit for holding securities under the held to maturity (HTM) category from 22 per cent to 23 per cent of NDTL, effective April 8, 2022. The HTM limits have been restored to 19.5 per cent in a phased manner as on March 31, 2025. 48 tnec reP 24 20 16 12 8 4 0 -4 Net Bank Credit to Government Net Foreign Assets of the Banking Sector Bank Credit to Commercial Sector 81-7102 91-8102 02-9102 12-0202 22-1202 32-2202 42-3202 52-4202 Chart II.4.7: M to GDP Ratio (end-December) 3 Source: RBI, GoI, IMF, CEIC and RBI staff estimates. tnec reP 160 140 120 100 82.4 80 60 40 US UK Euro Area India 8102 9102 0202 1202 2202 3202 4202ECONOMIC REVIEW Table II.4.1: Monetary Aggregates Item Outstanding as on Growth Rate^ (per cent, y-o-y) March 21, 2025 (₹ lakh crore) 2022-23 2023-24 2024-25 1 2 3 4 5 I. Reserve Money (RM) 48.4* 9.7 6.7 3.3 (7.4) (6.7) (5.8) II. Money Supply (M) 272.1 9.0 11.2 9.6 3 III. Major Components of M 3 III.1. Currency with the Public 36.2 7.9 4.3 5.9 III.2. Aggregate Deposits 234.8 9.1 12.3 10.1 IV. Major Sources of M 3 IV.1. Net Bank Credit to Government 81.4 11.5 5.7 11.2 IV.2. Bank Credit to Commercial Sector 186.4 14.4 15.6 11.8 IV.3. Net Foreign Assets of the Banking Sector 59.8 -0.6 12.2 8.0 V. Money Multiplier (Ratio) 5.7 *: Data for RM pertain to March 28, 2025. ^: Data for RM and M relate to last Friday and last reporting Friday of the financial year, respectively. 3 Note: 1. Figures in parentheses indicate growth in RM adjusted for the first-round impact of CRR changes. 2. Data are provisional. Source: RBI. 4. Credit II.4.12 Double digit growth in bank credit registered higher credit growth than that of was sustained during 2024-25, led by retail private sector banks (PVBs), with the former and services sectors (Box II.4.1). Bank maintaining the largest share in total credit group-wise, public sector banks (PSBs) (Chart II.4.10). Chart II.4.9: Monetary Ratios a. Behavioural Ratios Underlying Money Mul tiplier 18 5.0 4.5 16 4.0 14 3.5 12 3.0 10 2.5 Source: RBI staff estimates. 49 tnec reP 91-8102 02-9102 12-0202 22-1202 32-2202 42-3202 52-4202 tnec reP b. Money Velocity and Money Multiplier 6.0 5.7 1.3 5.5 1.2 5.0 1.1 4.5 4.0 1.0 Currency-Deposit Ratio Reserve-Deposit Ratio (RHS) CRR (RHS) oitaR 02-9102:4Q 12-0202:1Q 12-0202:2Q 12-0202:3Q 12-0202:4Q 22-1202:1Q 22-1202:2Q 22-1202:3Q 22-1202:4Q 32-2202:1Q 32-2202:2Q 32-2202:3Q 32-2202:4Q 42-3202:1Q 42-3202:2Q 42-3202:3Q 42-3202:4Q 52-4202:1Q 52-4202:2Q 52-4202:3Q 52-4202:4Q oitaR Money Multiplier Money Velocity (RHS) Money Multiplier Adjusted for Reverse RepoANNUAL REPORT 2024-25 Chart II.4.10: Bank Group-wise Credit a. SCBs' Credit Growth b. Share in Total SCBs' Credit Box II.4.1 Drivers of Firm Demand for Credit Bank credit growth remains in double digits, albeit with Regression results indicate that larger firms are less some moderation. To explore the role of firm characteristics likely to borrow, which could be due to better availability and macroeconomic conditions in determining firm-level of internal resources (Table 1). Older firms, while using borrowing (from banks as well as total borrowings), the less bank credit, have higher total debt, likely using non- following regression equation adapted from Ottonello and bank funding for expansion or refinancing. Sales growth, Winberry (2020) is estimated for Indian non-financial firms pre-COVID, positively correlates with bank borrowing for for the period 2013-14 to 2023-24: expansion, though this relationship weakened post-COVID. Δlog(Debt ) α α γSpread β (Leverage Spread ) Firms with better liquidity and ICR borrow more, reflecting i,t i s i,t stronger financials, while highly leveraged firms borrow β (NonBan =k S+p re+ad ) Γ Xs,t + 1 A ϵ –1* s,t i,t t i,t less on aggregate, potentially deleveraging or facing w+ he2 re ‘i’, ‘s’ and* ‘t’ denos, tt e +fi rm1’, se– c1 t+o rΓ a2’n d – t1 im + e, respectively; funding constraints. Higher domestic growth increases α and α refer to firm and sector fixed effects, respectively; overall funding demand for business activity. i s ‘X’ denotes firm-specific controls [viz., leverage, size, age, Higher relative bank loan costs drive firms, especially in liquidity, growth in sales and investment, and interest services, towards cheaper market-based funding. Firms coverage ratio (ICR)]; and ‘A’ denotes aggregate control with non-bank funding access are more sensitive to these (viz., non-agricultural real GVA growth). Spread, a proxy for cost differences, increasing total borrowing when bank the relative cost of funds, captures the difference between loans become expensive. sector specific weighted average lending rates (WALR) and market-based funds [external commercial borrowing Overall, firm-specific factors, macroeconomic conditions, (ECB)] rate. The interaction terms with spread allow the and relative funding costs are key borrowing determinants, impact of spread on debt growth to vary depending on varying across sectors and time. Given strong bank balance the firm’s existing leverage and access to alternative sheets, a revival in private investment can potentially drive funding. increased demand for bank credit. (Contd.) 50 tnec reP tnec reP 30 25 20 15 10 5 0 -5 -10 Public Sector Banks Foreign Banks Private Sector Banks Scheduled Commercial Banks Source: RBI. 51-4102 61-5102 71-6102 81-7102 91-8102 02-9102 12-0202 22-1202 32-2202 42-3202 52-4202 Public Sector Banks Private Sector Banks Foreign Banks 3.75 2.93 100 90 80 70 60 50 40 30 20 10 0 51-4102 61-5102 71-6102 81-7102 91-8102 02-9102 12-0202 22-1202 32-2202 42-3202 52-4202ECONOMIC REVIEW Table 1: Estimated Firm-Level Borrowing Dependent Variable: log(Debt ) i,t Explanatory Variable Δ Coefficients All Sectors Services Sector Borrowings Total Borrowings Total from Banks Borrowings from Banks Borrowings 1 2 3 4 5 0.005 0.014* 0.010 0.013 (0.011) (0.008) (0.025) (0.015) Spreads,t * NonBank Leverage Spread 0.014** 0.007* 0.026** 0.005 i,t s,t (0.006) (0.004) (0.011) (0.008) –1* Spread -0.060** 0.088*** -0.126** 0.164*** s,t (0.028) (0.020) (0.051) (0.038) Size -0.277*** -0.363*** -0.452*** -0.585*** i,t (0.081) (0.058) (0.145) (0.102) –1 Age -0.052*** 0.048*** -0.082*** 0.095*** i,t (0.017) (0.013) (0.029) (0.023) –1 Sales Growth 0.010 -0.011 0.002 -0.007 i,t (0.014) (0.008) (0.023) (0.015) –1 Investment Growth 0.007 -0.006 0.005 0.006 Firm Controls i,t (0.012) (0.008) (0.017) (0.014) –1 Liquidity 0.266*** 0.202*** 0.273*** 0.200*** i,t (0.079) (0.041) (0.100) (0.051) –1 Leverage -0.227** -0.197*** -0.314*** -0.218*** i,t (0.044) (0.030) (0.086) (0.059) –1 ICR 0.035 0.070*** 0.025 0.059** i,t (0.028) (0.022) (0.027) (0.025) –1 Aggregate Control Non-agri Growth -1.151*** 1.386*** -2.161** 2.412*** t (0.428) (0.297) (0.835) (0.599) –1 R-squared 0.156 0.219 0.188 0.246 Number of Observations 13,260 15,362 4,243 5,456 ***, ** and * represent significance levels at 1 per cent, 5 per cent and 10 per cent, respectively. Note: 1. Figures in parentheses indicate robust standard errors. 2. Unit-level data, accessed from CMIE Prowess, include those firms which have at least three years of data on outstanding debt; and also, do not belong to finance, insurance, real estate, utilities and public administration. All other data are sourced from DBIE, RBI. 3. Services sector includes wholesale and retail trade, transport, information and communication technology, professional and other services. 4. Firm and sector fixed effects have been included. 5. Dependent variable captures change in log of real debt outstanding as a total or from banks. Firm-specific controls include lagged values of size (log of real total assets), age in years since incorporation, growth in real sales, growth in real investment, leverage (ratio of total debt to total assets) and liquidity (quick ratio). Investment denotes changes to real total capital and includes both fixed and intangible assets. ICR denotes ratio of earnings to interest expense. Real variables are obtained using non-agricultural GDP deflator. Non-agricultural real GVA growth is in y-o-y growth terms. 6. Leverage has been demeaned for the firm, and all firm-specific variables have been standardised across the sample, enabling better comparison across firms and sectors over time. 7. Non-bank dummy takes value 1 if a firm has accessed credit from a non-bank source (viz., domestic financial market and ECBs) during the sample period. Dummies are also included for asset quality review (2015-16), COVID-19 (2020-21) and merger of a non-bank with a bank (2023-24). Source: RBI staff estimates. Reference: Ottonello, P. and Winberry, T. (2020), ‘Financial Heterogeneity and the Investment Channel of Monetary Policy’, Econometrica, 88: 2473-2502. 51ANNUAL REPORT 2024-25 II.4.13 Sector-wise26, credit to agriculture and credit to NBFCs by 25 percentage points in allied activities continued to exhibit double digit November 2023. Personal loans grew by 14.0 expansion in 2024-25. Industrial credit remained per cent as at end-March 2025 as compared with robust, driven by a pick-up in credit to medium 17.6 per cent during the previous year, supported and large industry. Credit to micro and small by housing loans which account for nearly half industries continued albeit with some moderation of the segment. Other segments within personal in the recent period. Similarly, credit to services loans such as vehicle loans and other personal sector grew but at a decelerated pace. Credit to loans grew by 8.6 and 8.4 per cent, respectively, services sector moderated from elevated levels, at end-March 2025 (Chart II.4.11 and Table following the increase in risk weights on SCBs’ II.4.2). Table II.4.2: Sectoral Credit Growth - SCBs (Per cent, y-o-y) Sector 2023-24# 2024-25 Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Non-food Credit 16.3 15.3 16.2 13.9 15.1 15.0 14.4 12.8 11.8 12.4 12.5 12.0 12.0 I. Agriculture & Allied Activities 20.0 19.8 21.6 17.4 18.1 17.7 16.4 15.5 15.3 12.5 12.2 11.4 10.4 II. Industry 8.0 6.9 8.9 7.7 10.2 9.8 9.1 8.0 8.1 7.4 8.2 7.3 8.0 (Micro & Small, Medium and Large) II.1. Micro & Small 14.4 15.2 15.3 10.7 13.3 13.6 13.5 10.1 10.2 9.9 9.6 9.8 9.1 II.2. Medium 13.2 13.1 15.3 12.5 17.0 19.3 20.5 19.7 20.1 20.0 18.5 18.1 18.6 II.3. Large 5.8 4.1 6.5 6.3 8.7 7.8 6.6 6.1 6.3 5.3 6.7 5.4 6.4 Major Sub-sectors of Industry II.a. Infrastructure 5.6 3.9 6.3 4.6 4.0 3.8 2.2 1.8 1.7 1.2 1.8 1.1 1.7 II.b. Basic Metals & Metal Products 11.7 11.4 13.4 11.3 13.4 16.1 15.5 15.5 16.0 13.4 14.4 13.3 13.0 II.c. Chemicals & Chemical Products 11.2 13.3 13.6 11.7 16.7 15.9 14.9 12.8 11.5 7.1 9.6 6.8 7.4 II.d. Textiles 11.1 8.1 9.3 6.1 8.6 6.4 5.4 5.6 5.5 5.6 5.8 7.1 8.3 II.e. All Engineering 10.5 9.4 10.5 8.7 10.8 16.6 15.7 14.5 18.3 19.5 18.1 19.0 22.1 II.f. Food Processing 14.9 17.9 14.5 10.8 17.1 14.4 11.6 9.9 12.1 10.7 11.0 9.3 5.1 III. Services 20.8 19.5 20.7 15.1 15.9 15.6 15.2 14.1 14.4 13.0 13.8 13.0 13.4 III.1. Trade 17.2 14.4 17.3 14.4 15.6 15.7 14.5 12.6 14.7 14.2 14.6 14.8 15.8 III.2. NBFCs 15.0 15.1 15.8 8.2 13.0 12.2 9.7 6.6 8.0 6.9 7.9 6.6 5.9 IV. Personal Loans 17.6 17.0 19.3 16.6 17.3 17.4 16.4 15.8 16.3 14.9 14.2 14.0 14.0 IV.1. Consumer Durables 13.0 11.0 15.0 7.6 11.3 10.1 8.6 6.6 4.8 -1.1 -2.6 2.2 -1.3 IV.2. Housing 17.1 17.6 19.9 18.2 19.1 19.7 18.3 17.8 18.0 16.7 15.5 15.6 15.3 IV.3. Credit Cards Outstanding 25.6 23.0 26.2 23.3 22.0 19.9 18.0 16.9 18.1 15.6 13.0 11.2 10.6 IV.4. Vehicle Loans 17.6 17.2 18.4 15.5 14.6 14.5 13.9 12.0 10.3 8.8 9.7 9.6 8.6 IV.5. Other Personal Loans 18.6 15.8 17.1 13.1 13.5 13.0 11.8 11.2 12.2 9.7 9.2 8.4 8.4 #: March 2024 over March 2023. Note: Data are provisional and exclude the impact of merger of a non-bank with a bank. Source: RBI. 26 Non-food credit data are based on fortnightly Section 42 return and covers all SCBs. Sectoral non-food credit data are based on sector- wise and industry-wise bank credit (SIBC) return, which covers select banks accounting for about 95 per cent of total non-food credit extended by all SCBs. Data pertain to the last reporting Friday of the month. 52ECONOMIC REVIEW Chart II.4.11: Sector-wise SCBs’ Non-food Credit a. Non-food Credit Growth b. Share of Major Sectors in SCBs' Incremental Non-food Credit II.4.14 SCBs’ deposit growth remained below incremental credit-deposit ratio (Chart II.4.12). that of bank credit during 2024-25; however, To bridge the funding gap, banks took recourse the wedge between deposit and credit to large issuances of certificates of deposit growth narrowed which led to a decline in the (CDs)27. 27 See Section 5 of Chapter II for details. 53 )y-o-y( tnec reP tnec reP 100 80 60 40 20 0 Agriculture & Allied Activities Personal Loans Industry (Micro & Small, Medium and Large) Non-food Credit Agriculture & Allied Activities Services Services Industry (Micro & Small, Medium and Large) Personal Loans Source: RBI. 22-raM 22-nuJ 22-peS 22-ceD 32-raM 32-nuJ 32-peS 32-ceD 42-raM 42-nuJ 42-peS 42-ceD 52-raM 30 25 20 15 10 5 0 22-raM 22-yaM 22-luJ 22-peS 22-voN 32-naJ 32-raM 32-yaM 32-luJ 32-peS 32-voN 42-naJ 42-raM 42-yaM 42-luJ 42-peS 42-voN 52-naJ 52-raM 14.0 13.4 12.0 10.4 8.0 Chart II.4.12: SCBs’ Deposits and Credit a. Aggregate Deposits and Credit Growth - Wedge b. Credit Growth (Y-o-Y) c. SCBs' Incremental Credit-Deposit Ratio tnec reP erorc hkal ₹ stniop egatnecreP stniop egatnecreP tnec reP oitaR 20 10 15 5 10 0 5 -5 0 -10 Aggregate Deposits Credit Wedge (RHS) Source: RBI. 12-raM 12-nuJ 12-peS 12-voN 22-beF 22-rpA 22-luJ 22-tcO 22-ceD 32-raM 32-nuJ 32-guA 32-voN 42-naJ 42-rpA 42-luJ 42-peS 42-ceD 52-raM 4 20 2 16 0 12 -2 8 -4 4 -6 0 Momentum Effect Base Effect Credit Growth (RHS) 12-rpA 12-nuJ 12-peS 12-ceD 22-beF 22-yaM 22-guA 22-tcO 32-naJ 32-raM 32-nuJ 32-peS 32-voN 42-beF 42-yaM 42-luJ 42-tcO 42-ceD 52-raM 25 1.5 1.3 20 1.1 0.9 15 0.7 10 0.5 Incremental Deposit Incremental Credit Incremental Credit-Deposit Ratio (RHS) 22-rpA 22-nuJ 22-peS 22-ceD 32-raM 32-yaM 32-guA 32-voN 42-naJ 42-rpA 42-luJ 42-peS 42-ceD 52-raMANNUAL REPORT 2024-25 5. Conclusion markets registered fresh highs in the first half of the year whereas the second half witnessed a II.4.15 Double digit growth in bank deposits and correction due to domestic and global factors. credit was sustained during 2024-25. Although During 2024-25, the Indian Rupee (INR) exhibited deposit growth trailed credit growth, the gap orderly movements with a depreciation bias narrowed during the year. Bank credit expansion amid resurgence in the US dollar index (DXY), was largely broad-based, led by retail, services heightened global uncertainties and portfolio and agriculture sectors. Currency demand investment outflows. growth remained moderate with increasing public preference for digital modes of payments. II.5.3 Against this backdrop, money market developments are detailed in sub-section 2. II.5 FINANCIAL MARKETS Market developments in government securities II.5.1 Global financial markets remained volatile (G-secs) and corporate bonds are discussed in during 2024-25, driven by the uncertain trajectory sub-sections 3 and 4, respectively. Equity and of monetary policy normalisation amidst sticky foreign exchange market developments are services inflation, persisting geopolitical tensions, covered in sub-sections 5 and 6, respectively, with and geoeconomic fragmentation. With inflation concluding observations in sub-section 7. gradually moving towards its target from multi- 2. Money Market decadal highs, several central banks embarked on policy pivots during the year. A few central II.5.4 During 2024-25, money market rates banks continued with monetary tightening on the oscillated largely within the policy corridor in tune back of elevated inflation while others maintained with the evolving liquidity conditions. Liquidity a pause. conditions moved from deficit during Q1:2024- 25 to surplus in Q2 and in major part of Q3 (till II.5.2 Domestic financial markets exhibited first half of December 2024) but transited to resilience notwithstanding global headwinds deficit in Q4 (see Chapter III). The weighted and occasional volatility spikes in some market average call rate (WACR) – the operating target segments during 2024-25. Money market of monetary policy – remained within the policy rates remained relatively stable and evolved corridor notwithstanding intermittent breaches. It in sync with liquidity conditions. Issuances of traded above the policy repo rate in Q1; generally certificates of deposit (CDs) increased as banks hovered around the policy repo rate in Q2; firmed supplemented their deposit resources. Sovereign up towards the end of Q3; and remained above bond yields softened on the back of inclusion the policy repo rate in Q4 (Chart II.5.1). The of Indian sovereign bonds in major global bond average spread of the WACR over the policy repo indices, ongoing fiscal consolidation, decline in rate moderated to 6 basis points (bps) in 2024-25 crude oil prices, and beginning of the monetary from 13 bps in 2023-24. easing cycle. Corporate bond yields also softened tracking government security (G-sec) yields along II.5.5 Volatility in the WACR, measured by the with a widening of spreads amidst moderation in coefficient of variation28, moderated to 2.2 per corporate earnings and growth trajectory. Equity cent in 2024-25 from 2.5 per cent in 2023-24. 28 Coefficient of variation is the ratio of standard deviation to mean. 54ECONOMIC REVIEW Chart II.5.1: Money Market Rates and Policy Corridor Source: RBI, FBIL, CCIL-Ftrac and RBI staff estimates. The average daily volume in the money market crore in Q3 amidst credit growth remaining higher increased by 10 per cent to ₹5.5 lakh crore than deposit growth and stood at ₹3.7 lakh crore during 2024-25 from the previous year. The in Q4. Total CD issuances amounted to ₹11.9 lakh money market continued to be dominated by the crore during 2024-25 as compared to ₹8.7 lakh collateralised segment, with the share of call/ crore during the previous year. Banks used CDs notice money being mostly stable at 2 per cent. to bridge the credit-deposit gap in 2024-25, with Within the collateralised segment, the share of liquidity conditions influencing CD rate spreads triparty repo rose from 66 per cent in Q1:2024-25 over WACR (Box II.5.1). to 72 per cent in Q3:2024-25, before declining to 68 per cent in Q4 with concomitant change in the share of market repo (Chart II.5.2). II.5.6 In other segments of the money market, the average daily spread of CD and commercial paper (CP) rates over treasury bill (T-bill) rates of corresponding maturity increased during 2024-25 on the back of higher issuances of CDs and CPs and regulatory measures on consumer credit and bank credit to non-banking financial companies (NBFCs) announced by the Reserve Bank on November 16, 2023 (Chart II.5.3). II.5.7 In the primary market, fresh issuance of CDs increased to ₹2.8 lakh crore in Q2:2024-25 from ₹2.5 lakh crore in Q1 and further to ₹2.9 lakh 55 tnec reP 8.5 8.0 7.5 7.0 6.5 6.0 5.5 WACR 91-day T-Bill Rate Triparty Repo Rate Repo Rate Market Repo Rate MSF Rate 3-month CP Rate SDF Rate 3-month CD Rate 42-rpA-20 42-rpA-71 42-yaM-20 42-yaM-71 42-nuJ-10 42-nuJ-61 42-luJ-10 42-luJ-61 42-luJ-13 42-guA-51 42-guA-03 42-peS-41 42-peS-92 42-tcO-41 42-tcO-92 42-voN-31 42-voN-82 42-ceD-31 42-ceD-82 52-naJ-21 52-naJ-72 52-beF-11 52-beF-62 52-raM-31 52-raM-82 Chart II.5.2: Share of Major Segments in Money Market Volume Source: CCIL and RBI staff estimates. tnec reP Call/Notice Triparty Repo Market Repo 27 52 86 92 56 33 06 83 06 83 36 53 46 43 86 03 96 92 07 82 86 03 96 82 96 82 66 23 56 33 56 23 56 33 86 03 96 92 96 92 96 92 17 82 37 52 27 62 96 92 96 92 76 03 100 90 80 70 60 50 40 30 20 10 0 32-naJ 32-beF 32-raM 32-rpA 32-yaM 32-nuJ 32-luJ 32-guA 32-peS 32-tcO 32-voN 32-ceD 42-naJ 42-beF 42-raM 42-rpA 42-yaM 42-nuJ 42-luJ 42-guA 42-peS 42-tcO 42-voN 42-ceD 52-naJ 52-beF 52-raM Chart II.5.3: Spread of 3-month CP and CD Rate over 91-day T-bill Rate Spread of CD Rate Over 91-day T-Bill Rate Spread of 3M CP (NBFC) Rate Over 91-day T-Bill Rate Spread of 3M CP (Non-NBFC) Rate Over 91-day T-Bill Rate Source: FBIL, Cogencis and RBI staff estimates. stniop sisaB 180 160 141 140 120 121 100 80 60 40 20 0 42-rpA-20 42-rpA-22 42-yaM-21 42-nuJ-10 42-nuJ-12 42-luJ-11 42-luJ-13 42-guA-02 42-peS-90 42-peS-92 42-tcO-91 42-voN-80 42-voN-82 42-ceD-81 52-naJ-70 52-naJ-72 52-beF-61 52-raM-80 52-raM-82 97ANNUAL REPORT 2024-25 Box II.5.1 What Drives the Money Market Term Spread? Credit growth has outpaced deposit growth since February The concentration of money market activity in the overnight 2022 with bank credit registering double digit growth since segment along with the relative illiquidity between 3-days April 2022. This, inter alia, has resulted in banks taking and three months maturity may also impact the spread increasing recourse to issuances of CDs to meet the between WACR and CD rates. funding gap (Chart 1). CD issuances are often costlier Drawing from the literature on the term premium (Patra et relative to deposits and more sensitive to demand-supply al., 2020), the spread of CD rate over WACR is examined. dynamics based on the evolving liquidity and financial In this regard, modelling the spread of CD rate over conditions (Chart 2). WACR could be useful in comprehending how liquidity and As suggested by the liquidity preference theory of the term credit market conditions affect the CD market, given the structure, investors prefer short tenor instruments that are increasing issuance of CDs. more liquid vis-à-vis longer tenor. Risk averse investors The potential determinants of the spread of CD rate over would, therefore, demand sufficient liquidity premium to WACR30 are explored using generalised autoregressive hold longer tenor instruments. The spread of CD rates conditional heteroscedasticity (GARCH) approach. Based over WACR, therefore, constitute such a premium.29 The on the money market dynamics, the selected explanatory WACR – being the operating target of monetary policy – variables include daily net LAF outstanding (NLAF), VIX is broadly reflective of liquidity conditions in the overnight index, and a dummy variable (DUM-CDGap). The NLAF money market. Given its information content and its role and VIX capture the liquidity conditions and uncertainty as a signaling mechanism, movements in WACR gets in financial markets, respectively, while DUM-CDGap transmitted to the outer segment of the money market represents the evolving demand-supply pressures in including CDs. The transmission of signals from WACR to the credit market which, in turn, gets reflected in the CD CDs could be more than proportionate in certain periods of market. The GARCH model is employed to analyse the liquidity stress or if funding gaps are persistent because of spread based on daily data spanning January 1, 2020 - an increasing wedge between credit and deposit growth. September 30, 2024. Thus, the sample covers both easing Chart 1: CD Issuances (Fortnightly) 1.4 1.2 1.0 0.8 0.6 0.4 0.2 0.0 Note: The shaded area represents episodes of credit growing faster than deposit growth. Source: RBI. (Contd.) 29 Non-bank participants such as mutual funds actively participate in the CD market as buyers. 30 Priyadarshini et al., (2024) investigate the risk premia - spread of 3-month CP rate over the 91-day T-bills - and find that system liquidity is a key factor. Moreover, credit growth is found to be a key determinant of CD rate (FBIL, 2020). 56 erorc hkal ₹ 80-raM 90-raM 01-raM 11-raM 21-raM 31-raM 41-raM 51-raM 61-raM 71-raM 81-raM 91-raM 02-raM 12-raM 22-raM 32-raM 42-raM 52-raM Chart 2: CD Rates - Primary and Secondary Market erorc dnasuoht ₹ tnec reP 1,000 9 8 800 7 600 6 400 5 200 4 3 0 2 -200 1 -400 0 Source: RBI and RBI staff estimates. 12-naJ 12-rpA 12-luJ 12-tcO 22-naJ 22-nuJ 22-peS 22-ceD 32-raM 32-nuJ 32-peS 32-ceD 42-raM 42-nuJ 42-peS 42-ceD 52-raM Net LAF CD Rate - Primary Market (RHS) CD Rate - Secondary Market (RHS)ECONOMIC REVIEW and tightening phases of monetary policy as well as periods Table 1: GARCH (1,1) Estimation Results when credit growth lagged deposit growth and vice versa. Model 1 Model 2 Model 3 Under the GARCH (1,1)-X framework, the mean equation Mean equation: is modelled as follows: Spread β β Spread β X Ɛ t t- t t Spread t β β Spread t β X t Ɛ t …. (1) Consta n=t 0 + 1 1 + 2 + 5.133*** 2.743*** 5.902*** The sp r=e ad0 +o f 1 C D rate– 1 i +s in2 flu e+n ced by past values, with (0.659) (1.043) (0.655) X as a vector of explanatory variables and an error term Spread t-1 0.922*** 0.906*** 0.910*** t (0.009) (0.010) (0.009) reflecting shocks that impact the CD rates. The error DUM-CDGap 3.617** term is a function of lagged information matrix and is t (1.069) assumed to be normally distributed with zero m Ωe-a1n. The NLAF -0.467*** -0.116 -0.653*** variance h tis defined as: t (0.114) (0.164) (0.120) h t Ɛ 2 t-1 h t-1 VIX t …. (2) NLAF t 0.612*** X (0.209) wh =e rαe0 + α,1 a+n αd2 +aαre3 coefficients of ARCH, GARCH DUM -CDGap t effects αan1d αv2olatility α 3in financial markets. Variance equation: h Ɛ h VIX t t-1 t The regression results indicate that an improvement in 2 AR =C αH0 +( 1α)1 t-1 + α2 + α3 0.380*** 0.390*** 0.384*** system liquidity has a moderating (statistically significant) (0.042) (0.044) (0.043) impact on the spread of CDs, while increasing wedge GARCH (1) 0.294*** 0.292*** 0.300*** between credit and deposit growth elongates the spread. (0.052) (0.053) (0.054) The interactive term of NLAF and DUM-CDGap31 suggest VIX 5.344*** 5.169*** 5.185*** t that although the sobering impact of system liquidity (0.499) (0.486) (0.506) remains statistically significant, the effect wanes when Diagnostics: credit growth is faster than that of deposits. Moreover, Log likelihood: -3453.49 -3449.29 -3450.20 the estimates of conditional volatility reveal that volatility Total Observations: 907 907 907 of the spread was generally low, barring a few episodes ARCH (LM) Prob. (F): 0.920 0.875 0.893 including COVID-19 (Table 1 and Chart 3). The residual Akaike Info Criterion: 7.768 7.760 7.762 diagnostics show no ARCH effects and no autocorrelation in residuals. ***, **, and * indicate significance levels at 1 per cent, 5 per cent and 10 per cent, respectively. Chart 3: Time Varying Volatility of CD Rate Spread Note: Figures in parentheses are standard errors. Source: RBI staff estimates. References: 1. FBIL (2020), ‘Indian CD Market: 2013-2019’, FBIL Thematic Study, July. 2. Patra, M. Behera, H. and John, J. (2020), ‘Revisiting the Determinants of the Term Premium in India’, RBI Bulletin, November. 3. Priyadarshini, P., Anshul, Sardar, S., Chaudhari, D.R., and Das, S. (2024), ‘Drivers of Commercial Paper Rate Spread - An Empirical Assessment’, RBI Working Paper Series, March. 31 DUM-CDGAP dummy variable takes value 0 for the period when deposit grew faster than credit and 1 otherwise. 57 )spb( noitaived dradnats lanoitidnoC 160 140 120 100 80 60 40 20 0 02-naJ-10 02-beF-72 02-rpA-42 02-nuJ-02 02-guA-61 02-tcO-21 02-ceD-80 12-beF-30 12-rpA-10 12-yaM-82 12-luJ-42 12-peS-91 12-voN-51 22-naJ-11 22-raM-90 22-yaM-50 22-luJ-10 22-guA-72 22-tcO-32 22-ceD-91 32-beF-41 32-rpA-21 32-nuJ-80 32-guA-40 32-peS-03 32-voN-62 42-naJ-22 42-raM-91 42-yaM-51 42-luJ-11 42-peS-60 Source: RBI staff estimates.ANNUAL REPORT 2024-25 II.5.8 New issuances of CPs in the primary the quarter at 7.01 per cent, a decline of 5 bps market, which moderated to ₹3.7 lakh crore in from its level as at end-March 2024 (Chart II.5.4). Q2:2024-25 from ₹3.8 lakh crore in Q1, rebounded II.5.10 During Q2:2024-25, G-sec yields for to ₹3.8 lakh crore in Q3 and stood at ₹4.4 lakh the shorter tenor declined more than the longer crore in Q4. During 2024-25, fresh issuances tenor amidst steepening of yield curves globally, of CPs increased to ₹15.7 lakh crore due to fall in crude oil prices, continued FPI inflows and sustained demand and the regulatory measures beginning of rate easing cycle by major central on NBFCs mentioned earlier, as compared to banks, including a 50-bps rate cut by the US Fed. ₹13.8 lakh crore during the previous year. The government’s commitment towards fiscal 3. Government Securities Market prudence as reflected in the Union Budget 2024- 25 along with lower CPI inflation prints for July II.5.9 During Q1:2024-25, G-sec yields exhibited and August – below 4.0 per cent for the first time two-way movements. Yields initially rose at the since September 2019 – also led to softening beginning of the quarter amid foreign portfolio of G-sec yields during the quarter. The 10-year investment (FPI) outflows and higher crude oil generic G-sec yield closed the quarter at 6.75 prices but softened thereafter in the wake of per cent, a decline of 26 bps from its level at end- record surplus transfer by the Reserve Bank to June 2024 – the biggest quarterly decline since the central government, FPI buying ahead of the quarter ended March 2020. bond index inclusion32 and decline in crude oil prices. The 10-year generic G-sec yield closed II.5.11 During Q3:2024-25, G-sec yields were range-bound with upward pressures from higher Chart II.5.4: 10-year Generic G-sec Yield US treasury yields and domestic CPI inflation being somewhat ameliorated by the monetary policy committee’s (MPC’s) decision to change the monetary policy stance to neutral and the announcement of the Indian government bonds’ inclusion in FTSE Russell index33. The 10-year generic G-sec yield closed at 6.76 per cent at end-December 2024, almost unchanged from its level at end-September 2024. II.5.12 During Q4:2024-25, G-sec yields largely trended downwards amid several liquidity infusion measures and commencement of monetary policy easing cycle by the Reserve Bank. The yields Source: Bloomberg. rose in the first fortnight of Q4 to touch a high 32 Eligible Indian Government Bonds (IGBs) were included in J.P. Morgan Government Bond Index - Emerging Market (GBI-EM) starting June 28, 2024. 33 On October 8, 2024, FTSE Russell announced that India will be added to FTSE Emerging Markets Government Bond Index (EMGBI) starting in September 2025. 58 tnec reP 7.3 7.2 7.1 7.0 6.9 6.8 6.7 6.6 6.58 6.5 42-raM 42-rpA 42-yaM 42-nuJ 42-luJ 42-guA 42-peS 42-tcO 42-voN 42-ceD 52-naJ 52-beF 52-raMECONOMIC REVIEW Table II.5.1: FPI Investment in Debt Instruments (End-March) (Amount in ₹ lakh crore) Route/ 2023 2024 2025 Channel of Investment Limit Outstanding Utilisation Limit Outstanding Utilisation Limit Outstanding Utilisation (per cent (per cent (per cent of of limit) of limit) limit) 1 2 3 4 5 6 7 8 9 10 General Route^ 11.7 1.8 15.4 11.7 1.9 16.0 13.0 1.9 14.5 VRR^ 2.5 2.1 82.0 2.5 1.8 70.1 2.5 2.1 82.1 FAR# 28.0 0.8 2.8 39 1.7 4.5 43.4 3.1 7.1 ^: Includes central government securities (G-secs), state government securities (SGSs) and corporate bonds. #: Available only for the specified securities included under the route. Source: CCIL and NSDL. of 6.87 per cent amid rise in US treasury yields. three channels of investment – the general Thereafter, yields broadly trended downward route36; the voluntary retention route (VRR); and on account of liquidity management measures, FAR (Table II.5.1). In aggregate, FPIs invested viz., daily variable rate repo (VRR) auctions on ₹1.5 lakh crore in debt instruments in 2024-25. all working days, OMO purchases of government 4. Corporate Bond Market securities, longer tenor VRR auctions and USD/ INR buy-sell swap auctions. OMO purchases II.5.14 Corporate bond yields softened during aggregating ₹2.83 lakh crore and USD/INR buy- 2024-25, mirroring G-sec yields. The monthly sell swaps amounting to ₹2.18 lakh crore were average yield on AAA-rated 3-year bonds of conducted during the quarter34. In the February public sector undertakings (PSUs), financial bi-monthly meeting, the MPC unanimously institutions (FIs) and banks; non-banking financial decided to cut the policy repo rate by 25 bps. The companies (NBFCs); and corporates fell by 15 10-year generic G-sec yield closed at 6.58 per bps, 28 bps and 33 bps, respectively, in March cent as at end-March 2025, 18 bps lower than its 2025 vis-à-vis March 2024 (Table II.5.2). level as at end-December 2024. During 2024-25, II.5.15 The spread on AAA-rated 3-year bond the domestic yield curve bull steepened as the yields over G-sec yields of corresponding 10-year generic G-sec yield softened by 48 bps maturity, however, increased during 2024- while the 5-year generic G-sec yield softened by 25, as the pace of softening in corporate bond 61 bps. yields trailed that in G-sec yields. The increase II.5.13 With the introduction of the fully accessible in spreads was evident across tenors and the route (FAR)35 effective April 1, 2020, FPIs have rating spectrum. Average daily turnover37 in the 34 See Monetary Policy Report, April 2025 for details. 35 Under FAR, certain categories of central government securities are open fully for non-resident investors without any restrictions, apart from being available to domestic investors as well. 36 Erstwhile medium-term framework (MTF). 37 Daily average turnover is calculated as total trades settled during the year divided by the number of trading days. 59ANNUAL REPORT 2024-25 Table II.5.2: Corporate Bonds* - Yields and Spread Entity Yields Spread (bps) (per cent) [over corresponding risk-free rate] March 2024 March 2025 Change (bps) March 2024 March 2025 Change (bps) 1 2 3 4 (=3-2) 5 6 7 (=6-5) (i) PSUs, FIs and Banks 7.63 7.48 -15 44 83 39 (ii) NBFCs 7.98 7.70 -28 80 106 26 (iii) Corporates 7.95 7.62 -33 77 98 21 *: AAA-rated 3-year bonds. Note: Yields and spreads are computed as monthly averages. Source: FIMMDA. secondary market on corporate bonds increased the approved limits, however, declined to 15.8 to ₹7,645 crore during 2024-25 from ₹5,722 crore per cent as at end-March 2025 from 16.2 per during the previous year (Chart II.5.5). cent as at end-March 2024, as the absolute II.5.16 Primary issuances of listed corporate limits for FPI investments in corporate bonds bonds on domestic stock exchanges rose during increased. 2024-25 along with an increase in mobilisation 5. Equity Market through overseas issuances (Table II.5.3). II.5.17 In 2024-25, the Indian equity market Private placements remained the preferred channel, accounting for 99.2 per cent of total witnessed fresh highs in the first half whereas the resources mobilised through the domestic bond second half exhibited sharp correction on account market. Investments by FPIs in corporate bonds of a set of factors, viz., shifting expectations on increased during the year. The utilisation of global monetary policy trajectory, tariff policies in the US and lingering geopolitical tensions in Chart II.5.5: Turnover and AAA-rated 3-Year Yield Spread in Corporate Bond Market the Middle East and Europe. Overall, the BSE Sensex gained 5.1 per cent to close at 77,415 Table II.5.3: Corporate Bond Market Item Amount Variation (₹ lakh crore) (Col. 3 over Col. 2) [per 2023-24 2024-25 cent] 1 2 3 4 (i) Primary Corporate 8.6 9.9 16.1 Bond Issuances (ii) Outstanding Corporate 45.5 51.6 13.3 Bonds (end-December) (iii) Investments by FPIs in Corporate Bonds 1.08 1.21 11.4 (end-March) Source: SEBI and FIMMDA. Source: SEBI and NSDL. 60 erorc ₹ stniop sisaB 50,000 160 45,000 140 40,000 35,000 120 30,000 100 25,000 80 20,000 15,000 60 10,000 40 5,000 0 20 Daily Turnover in Corporate Bonds Spread of NBFCs (RHS) Spread of PSUs, FIs and Banks (RHS) Spread of Corporates (RHS) 42-raM-92 42-rpA-11 42-rpA-42 42-yaM-70 42-yaM-02 42-nuJ-20 42-nuJ-51 42-nuJ-82 42-luJ-11 42-luJ-42 42-guA-60 42-guA-91 42-peS-10 42-peS-41 42-peS-72 42-tcO-01 42-tcO-32 42-voN-50 42-voN-81 42-ceD-10 42-ceD-41 42-ceD-72 52-naJ-90 52-naJ-22 52-beF-40 52-beF-71 52-raM-20 52-raM-51 52-raM-82ECONOMIC REVIEW Chart II.5.6: Equity Market a. Movement in BSE Sensex and Nifty 50 b. Return on Global Equity Indices during 2024-25 at end-March 2025 (Chart II.5.6). Resource II.5.19 In Q3, Indian equity markets exhibited mobilisation in the primary markets through a declining trend on FPI selling amidst public and rights issues, preferential allotments geopolitical tensions, concerns over domestic and qualified institutional placements (QIPs) equity valuations and weaker-than-expected maintained robust growth, particularly in H1: corporate earnings results and domestic GDP 2024-25. print in Q2:2024-25. Some of the declines were reversed in late November and early December II.5.18 Equity markets started on a positive note on favourable global cues. Benchmark indices in Q1:2024-25 amidst encouraging domestic declined further in Q4 amidst sustained FPI and global macroeconomic data releases, selling on tariff announcements by the US interspersed by brief correction due to flaring against major economies, weak domestic growth up of geopolitical tensions in the Middle East. outlook based on the GDP estimates for 2024- During Q2, the market continued the upward 25, and mixed corporate earnings in Q3:2024-25. trajectory with the BSE Sensex crossing the Markets, however, pared some of the losses in 80,000 mark in July with headwinds in early the second half of March amidst FPI buying and August following the release of weaker economic expectations of further monetary policy easing. data from the US and large-scale unwinding of the Yen carry trade post-rate hike by the Bank II.5.20 The broader market indices, viz., the BSE of Japan. After remaining range bound in the MidCap and BSE SmallCap, increased by 5.6 per first half of September, the BSE Sensex rallied cent and 8 per cent, respectively, while sectoral sharply to breach the 85,000 mark - touching indices exhibited a mixed trend in 2024-25 (Chart a new high of 85,836 on September 26, 2024, II.5.7a). FPIs made net sales of ₹1.4 lakh crore supported by expectations of an imminent US in the domestic equity market during 2024-25 as Fed policy pivot. against net purchases of ₹2.1 lakh crore in the 61 xednI xednI 89,000 27,000 86,000 26,000 83,000 25,000 23,519 80,000 24,000 77,000 23,000 74,000 22,000 77,415 71,000 21,000 BSE Sensex Nifty 50 (RHS) Source: BSE, NSE and Bloomberg. 4202-rpA 4202-yaM 4202-nuJ 4202-luJ 4202-guA 4202-peS 4202-tcO 4202-voN 4202-ceD 5202-naJ 5202-beF 5202-raM Hong Kong 39.8 Germany 19.9 South Africa 19.1 China 9.7 UK 7.9 US 6.8 India 5.1 Brazil 1.7 Malaysia -1.5 France -5.1 Mexico -8.5 Indonesia -10.7 Japan -11.8 Thailand -16.0 -20 -10 0 10 20 30 40 50 Per centANNUAL REPORT 2024-25 Chart II.5.7: Broader Markets and Institutional Flows a. Return on BSE Sectoral Indices b. Net Investment in Equity by Institutional Investors Source: SEBI, NSDL and Bloomberg. previous year (Chart II.5.7b). Mutual funds made fund schemes rose to ₹4.2 lakh crore from net purchases of ₹4.7 lakh crore in 2024-25 as ₹1.8 lakh crore during the previous year. Debt- against ₹2.0 lakh crore in the previous year. oriented schemes witnessed net inflows of ₹1.4 lakh crore during 2024-25 as compared with net Primary Market Resource Mobilisation outflows of ₹0.3 lakh crore during the previous II.5.21 In the primary segment of the equity year. Average monthly contribution to mutual market, resource mobilisation through funds through the systematic investment plan preferential allotments and qualified institutional (SIP) route increased to ₹24,113 crore in 2024- placements (QIPs) rose to ₹2.2 lakh crore during 25 from ₹16,602 crore during the previous year 2024-25 from ₹1.1 lakh crore during the previous (Chart II.5.8b). year. Resource mobilisation through initial public 6. Foreign Exchange Market offerings (IPOs), follow-on public offers (FPOs) and rights issues also increased to ₹2.1 lakh II.5.23 The INR, after remaining steady during crore from ₹0.8 lakh crore during the previous H1:2024-25, came under pressure in the year (Chart II.5.8a and Appendix Table 5). second half amid adverse external shocks and Issuances by small and medium enterprises spillovers and closed the year lower - depreciating (SMEs) remained robust, raising ₹9,961 crore by 2.4 per cent. During Q1, the INR traded in during 2024-25 as compared to mobilisation of a range bound manner, supported by a fall in ₹6,122 crore in the previous year. crude oil prices and net FPI inflows, amid II.5.22 Net resources mobilised by mutual funds rise in the DXY and hardening US treasury increased to ₹8.2 lakh crore during 2024-25 yields. Overall, the INR closed almost flat from ₹3.6 lakh crore during the previous year. at ₹83.38 per US dollar by end-June 2024 Net mobilisation by equity-oriented mutual (Chart II.5.9). 62 erorc ₹ 1,00,000 80,000 60,000 40,000 20,000 0 -20,000 -40,000 -60,000 -80,000 -1,00,000 Foreign Portfolio Investors Mutual Funds 42-rpA 42-yaM 42-nuJ 42-luJ 42-guA 42-peS 42-tcO 42-voN 42-ceD 52-naJ 52-beF 52-raM Healthcare 18.2 Financial Services 12.2 Bankex 11.3 Communication 9.7 Metal 9.3 Telecom 5.8 Consumer Durables 4.0 Industrials 3.3 Capital Goods 2.9 Information Technology 1.3 FMCG 0.7 Consumer Discretionary -0.3 Services -0.3 PSU -0.7 Power -1.7 Auto -2.9 Utilities -3.4 Realty -7.1 Oil and Gas -9.1 Energy -9.7 -20 -10 0 10 20 Per centECONOMIC REVIEW Chart II.5.8: Resource Mobilisation a. Resource Mobilisation in Equity Markets b. Average Monthly SIP Contribution in Mutual Funds Source: SEBI and AMFI. II.5.24 The INR traded under depreciation II.5.25 The depreciation bias continued during pressure for most of Q2:2024-25 on reported Q3:2024-25 amid the surge of the DXY, which unwinding of carry trades and recessionary rose by 7.7 per cent during the quarter – the fears in the US leading to safe haven demand. highest quarterly rise since Q4:2014-15. Most of However, the fall in crude oil prices and continuing the Asian currencies traded under pressure with FPI inflows post inclusion of Indian sovereign MSCI Emerging Market Currency Index declining bonds in J.P. Morgan bond indices kept the INR by 3.6 per cent during the quarter – the largest supported. Overall, the INR closed the Q2 at quarterly fall since Q2:2022-23. Equity segment ₹83.79 per US dollar, lower by 0.5 per cent from witnessed net FPI outflow of more than US$ 11 its level at end-June 2024. billion during October 2024. Overall, the INR closed the quarter at ₹85.62 per US dollar, lower by 2.1 per cent from its level at end-September 2024. II.5.26 The INR continued to trade under pressure during most of Q4:2024-25 amid global uncertainties, tariff related announcements and FPI related outflows. During this period, outflows from the equity segment exceeded US$ 13 billion. However, INR appreciated in March amid softening in the DXY and debt related inflows. Overall, the INR closed at ₹85.46 per US dollar on March 28, 2025, 0.2 per cent higher from its level at end-December 2024. 63 erorc ₹ erorc ₹ 30,000 25,000 24,113 20,000 15,000 10,000 5,000 0 IPOs, FPOs and Rights QIPs and Preferential Allotments 091,01,2 186,91,2 12-0202 22-1202 32-2202 42-3202 52-4202 2,50,000 2,00,000 1,50,000 1,00,000 50,000 0 12-0202 22-1202 32-2202 42-3202 52-4202 Chart II.5.9: Movement in Rupee, US Dollar, Crude Oil Price and EM Currency Index Source: Bloomberg. )001 = 4202 hcraM-dnE( xednI xednI 110 1800 105 1780 100 1760 95 1740 90 1720 85 1700 80 1680 75 1660 USD/INR US Dollar Index Brent Crude Oil Price MSCI EM Currency Index (RHS) 42-raM 42-rpA 42-yaM 42-nuJ 42-luJ 42-guA 42-peS 42-tcO 42-voN 42-ceD 52-naJ 52-beF 52-raMANNUAL REPORT 2024-25 II.5.27 During 2024-25, the forward premia II.6 GOVERNMENT FINANCES trended largely flat during the first half of the year. II.6.1 During 2024-25, the central and state It rose subsequently, led by shorter tenors, amid governments pursued fiscal consolidation global policy uncertainty and widening interest supported by robust tax collections. For 2025- rate differential before paring some of those 26, both the Centre and states have placed movements in Q4. greater thrust on capital expenditure. Against this II.5.28 The 40-currency nominal effective backdrop, sub-sections 2 and 3 elaborate on the exchange rate (NEER) and real effective fiscal position of the Union government in 2024- exchange rate (REER) appreciated (y-o-y) by 0.3 25 and 2025-26, respectively. Sub-sections 4 per cent and 1.5 per cent, respectively, during and 5 focus on state government finances during 2024-25. 2024-25 and 2025-26, respectively, followed by the finances of the general government for 2024- 7. Conclusion 25 (BE) in sub-section 6. The final sub-section II.5.29 During 2024-25, global financial sets out the concluding remarks. markets remained volatile over protracted 2. Central Government Finances in 2024-25 geopolitical tensions and persisting uncertainty II.6.2 During 2024-25 (RE), the Union over the quantum and pace of monetary government contained the gross fiscal deficit policy normalisation by the US Fed and other (GFD) to 4.7 per cent of GDP – 0.2 per cent major systemic central banks. Amidst the below budget estimates (BE) – primarily through global headwinds, Indian financial markets containment of revenue and capital expenditure demonstrated resilience and orderly movements. (Table II.6.1 and Chart II.6.1)38. Money market rates generally remained aligned with the policy repo rate. G-sec yields softened II.6.3 Revenue expenditure rose by 5.8 per cent during the year and exhibited lower volatility in 2024-25 (RE), broadly in line with BE. In 2024- than global and emerging market peers. The INR 25 (RE), interest payments and outgo on major witnessed depreciating bias in the latter half of subsidies as per cent of GDP declined by 0.1 per the year amidst stronger US dollar and portfolio cent and 0.2 per cent, respectively, as compared equity outflows. The Indian equity market scaled to 2023-24. Food subsidy was also below its BE fresh highs in the first half although it witnessed by ₹7,830 crore, partly due to cost savings on significant correction in the second half of 2024- account of off-loading of wheat and rice in the 25 due to domestic and global factors. Despite open market. The expenditure on pensions and moderation in Q4, resource mobilisation in the retirement benefits increased to 0.83 per cent primary market remained robust in 2024-25. of GDP in 2024-25 (RE) from 0.79 per cent in 38 The GDP data used for central government finances for 2024-25 (RE) pertain to the Second Advance Estimates for 2024-25 released by National Statistical Office on February 28, 2025. 64ECONOMIC REVIEW Table II.6.1: Central Government’s Fiscal Performance (Per cent of GDP) Item Average of 2019-20 2020-21 2021-22 2022-23 2023-24 2024-25 2025-26 2015-16 to (RE) (BE) 2018-19 1 2 3 4 5 6 7 8 9 I. Non-debt Receipts 9.1 8.7 8.5 9.4 9.1 9.3 9.5 9.8 II. Gross Tax Revenue (a+b) 11.0 10.0 10.2 11.5 11.4 11.5 11.6 12.0 a) Direct Tax 5.7 5.2 4.8 6.0 6.2 6.5 6.8 7.1 b) Indirect Tax 5.3 4.8 5.5 5.5 5.2 5.0 4.9 4.9 III. Net Tax Revenue 7.1 6.7 7.2 7.6 7.8 7.7 7.7 7.9 IV. Non-tax Revenue 1.5 1.6 1.0 1.5 1.1 1.3 1.6 1.6 V. Non-debt Capital Receipts 0.5 0.3 0.3 0.2 0.3 0.2 0.2 0.2 VI. Total Expenditure 12.6 13.4 17.7 16.1 15.6 14.8 14.2 14.2 VII. Revenue Expenditure 10.9 11.7 15.5 13.6 12.8 11.6 11.2 11.0 VIII. Capital Expenditure 1.7 1.7 2.1 2.5 2.8 3.2 3.1 3.1 IX. Revenue Deficit 2.4 3.3 7.3 4.4 4.0 2.5 1.8 1.5 X. Gross Fiscal Deficit 3.5 4.6 9.2 6.7 6.5 5.5 4.7 4.4 BE: Budget Estimates. RE: Revised Estimates. Source: Union Budget documents. the previous year, while grants-in-aid to states II.6.4 Capital expenditure undershot the BE by declined to 1.6 per cent of GDP from 1.8 per cent ₹92,682 crore and was placed at 3.1 per cent during the same period. of GDP in 2024-25 (RE) as against 3.2 per cent of GDP in 2023-24 (Table II.6.1). The growth in Chart II.6.1: Contribution to Fiscal Consolidation in 2024-25 RE vis-à-vis BE both capital outlay39 and loans and advances experienced moderation. Effective capital expenditure grew by 5.2 per cent and stood at 4.0 per cent of GDP. II.6.5 In 2024-25 (RE), the gross tax revenue exceeded its BE by ₹13,285 crore, rising to 11.6 per cent of GDP from 11.5 per cent in 2023- 24. Strong performance of income tax and goods and services tax (GST) bolstered tax receipts. While growth in custom duty slowed down, that of Union excise duty recovered (Chart II.6.2). 39 Capital expenditure less loans and advances. 65 PDG fo tnec reP BE: Budget Estimates. RE: Revised Estimates. Note: Negative contribution denotes decline in receipts or increase in expenditure or a downward revision in GDP from BE to RE as these contribute to slippage from the budgeted fiscal deficit target. Conversely, positive contribution denotes higher receipts or lower expenditure from BE to RE, as these contribute to attainment of budgeted fiscal deficit target. Source: Union Budget documents and RBI staff estimates. xaT teN euneveR xat-noN euneveR tbed-noN latipaC stpieceR euneveR erutidnepxE latipaC erutidnepxE ot euD noisiveR PDG ni 0.30 0.28 0.25 0.20 0.15 0.10 0.07 0.05 0.03 0.00 -0.05 -0.04 -0.10 -0.06 -0.08 -0.15ANNUAL REPORT 2024-25 Chart II.6.2: Performance of Major Taxes Source: Union Budget documents. II.6.6 Net tax revenue to the Centre grew by consolidation. On the expenditure side, interest 9.9 per cent, lower than the growth of gross tax payments are expected to rise by 12.2 per cent. revenue owing to higher growth in devolution While the subsidy outgo for fertiliser and petroleum of taxes to the states. Driven by the surplus has been budgeted to decline by ₹3,411 crore transfer from the Reserve Bank, the non-tax and ₹2,600 crore, respectively, food subsidy is revenue grew by 32.2 per cent in 2024-25 (RE) expected to increase by ₹6,000 crore in 2025-26 over 2023-24. Miscellaneous non-debt capital (BE). Revenue expenditure on pension and other receipts (including disinvestment receipts) were, retirement benefits is budgeted to fall by 0.06 per however, below their BE by ₹17,000 crore. Total cent of GDP in 2025-26 (BE) as compared to that non-debt receipts of the Centre recorded a in 2024-25 (RE). Moreover, grants-in-aid to the healthy growth of 12.8 per cent, on top of 13.6 states – driven by a substantial growth of 23.5 per cent growth attained in 2023-24. per cent – is expected to increase to 1.8 per cent 3. Central Government Finances in 2025-26 of GDP. II.6.7 The Union Budget 2025-26 continued II.6.8 Capital expenditure is budgeted to grow with the government’s commitment towards by 10.1 per cent and is estimated at 3.1 per cent fiscal consolidation by targeting a GFD of 4.4 per of GDP in 2025-26 (BE). The capital support to cent of GDP (Table II.6.1 and Appendix Table 6). the states through the 50-year interest-free loan Fiscal consolidation is expected to be driven by has been enhanced to ₹1.5 lakh crore in 2025-26 moderation in the revenue expenditure to 11.0 (BE) from ₹1.3 lakh crore in 2024-25 (RE). With per cent of GDP in 2025-26 (BE) from 11.2 per the grants-in-aid for creation of capital assets cent in the previous year. Enhanced tax and non- rising to 1.2 per cent of GDP in 2025-26 (BE), tax receipts are also expected to support this the effective capital expenditure would be 4.3 per 66 tnec reP tnec reP a. Growth b. Per cent of GDP 30 20 10 0 -10 -20 Corporation Tax Income Tax Customs Duty Union Excise Duty Goods and Services Tax 32-2202 42-3202 52-4202 )ER( 62-5202 )EB( 4 3.8 3.3 3.0 3 2 0.9 1 0.7 0 noitaroproC xaT emocnI xaT smotsuC ytuD noinU esicxE ytuD dna sdooG xaT secivreS 2022-23 2023-24 2024-25 (RE) 2025-26 (BE)ECONOMIC REVIEW Chart II.6.4: Trends in Tax Revenues of Centre cent of GDP as compared with 4.0 per cent in the is budgeted to reach its peak of 12.0 per cent previous year. The ratio of revenue expenditure of GDP in 2025-26 (BE), highest post 2007-08 to capital outlay (RECO) continues to remain low (Chart II.6.4). at 4.4, reflective of the thrust on the quality of II.6.10 Gross market borrowings, as per cent of government expenditure (Chart II.6.3). GDP, are expected to slightly decline in 2025-26 II.6.9 The buoyancy of gross tax revenue is (BE) [Chart II.6.5a]. Market borrowings, followed budgeted at 1.1 in 2025-26 (BE), with direct taxes at 1.2 [1.5 in 2024-25 (RE)] and indirect taxes at by small savings, remain the main sources of 0.8 [0.7 in 2024-25 (RE)]. The gross tax revenue financing the GFD (Chart II.6.5b). 67 PDG fo tnec reP 13 12 12.0 11 10 9 7.9 8 7 7.1 6 5 4.9 4 3 Gross Tax Revenue Indirect Tax Direct Tax Net Tax Revenue Source: Union Budget documents. 91-8102 02-9102 12-0202 22-1202 32-2202 42-3202 )ER( 52-4202 )EB( 62-5202 Chart II.6.3: Trends in Capital Outlay and RECO PDG fo tnec reP oitaR 3.0 10 9 2.5 2.5 8 7 2.0 6 4.4 5 1.5 4 1.0 3 Source: Union Budget documents. 31-2102 41-3102 51-4102 61-5102 71-6102 81-7102 91-8102 02-9102 12-0202 22-1202 32-2202 42-3202 )ER( 52-4202 Capital Outlay )EB( 62-5202 RECO (RHS) Chart II.6.5: Market Borrowings and GFD Financing Note: 1. Net market borrowing for 2024-25(RE) includes buy back of securities. 2. From 2023-24 onwards, market borrowings have been adjusted for switching of securities. Source: Union Budget documents. PDG fo tnec reP tnec reP a. Market Borrowings and GFD b. Sources of GFD Financing 10 9 8 7 6 4.4 5 4 4.2 3 2 3.2 1 0 Net Market Borrowings Gross Market Borrowings Gross Fiscal Deficit 91-8102 02-9102 12-0202 22-1202 32-2202 42-3202 )ER( 52-4202 )EB( 62-5202 120 100 27.3 21.9 80 26.2 60 40 71.3 68.5 73.5 20 0 -20 2023-24 2024-25 (RE) 2025-26 (BE) Net Market Borrowings Deposits and Advances Net Treasury Bills External Assistance Drawdown of Cash Balances Others Securities Against Small SavingsANNUAL REPORT 2024-25 4. State Finances in 2024-25 II.6.12 On the expenditure front, revenue expenditure growth picked up during April II.6.11 States had budgeted a GFD of 3.2 2024-February 2025, while capital expenditure per cent of GDP in 2024-25 (Table II.6.2). As during the same period remained lower than its per provisional accounts data of 20 states level a year ago. available from the Comptroller and Auditor General (CAG) of India for April 2024-February 5. State Finances in 2025-26 2025, states’ GFD stood at 64.2 per cent of their II.6.13 Based on information available for budget estimates, higher than the level recorded all states/UTs, their consolidated GFD-GDP a year ago (58 per cent). Revenue receipt growth ratio for 2025-26 is budgeted at 3.3 per cent moderated on account of deceleration in tax (Table II.6.3). The gross transfers to states have revenue growth and decline in grants from the been budgeted to increase by 12.5 per cent in centre. Within states’ own tax revenues, states’ 2025-26 from 2024-25 (RE), largely on account of GST (SGST) growth slowed down while sales transfers under centrally sponsored schemes tax/value-added tax (VAT) collections recovered and special assistance to states for capital from a contraction during the same period in the expenditure. The scheme of 50-year interest free previous year. loans for capital expenditure to states would be Table II.6.2: Fiscal Position of States/UTs (Amount in ₹ lakh crore) 2020-21 2021-22 2022-23 2023-24 (RE) 2024-25 (BE) 1 2 3 4 5 6 I. Revenue Receipts 25.9 32.3 36.5 42.1 46.7 (13.0) (13.7) (13.6) (14.3) (14.3) II. Non-debt Capital Receipts 0.2 0.2 0.1 0.4 0.4 (0.1) (0.1) (0.04) (0.1) (0.1) III. Revenue Expenditure 29.6 33.3 37.2 43.5 47.5 (14.9) (14.1) (13.8) (14.7) (14.6) IV. Capital Expenditure 4.6 5.7 6.7 9.3 10.0 (2.3) (2.4) (2.5) (3.2) (3.1) a. Capital Outlay 4.1 5.3 6.0 8.7 9.2 (2.1) (2.3) (2.2) (2.9) (2.8) b. Loans and Advances by States 0.4 0.4 0.7 0.7 0.9 (0.2) (0.2) (0.3) (0.2) (0.3) V. Fiscal Deficit 8.0 6.5 7.2 10.4 10.4 (4.1) (2.8) (2.7) (3.5) (3.2) VI. Revenue Deficit 3.7 1.0 0.6 1.4 0.8 (1.9) (0.4) (0.2) (0.5) (0.2) VII. Primary Deficit 4.2 2.3 2.6 5.2 4.8 (2.1) (1.0) (1.0) (1.8) (1.5) Note: Figures in parentheses are per cent of GDP. Source: Budget documents of state governments. 68ECONOMIC REVIEW Table II.6.3: State Government Finances remained low at 2.5 per cent of GDP (Chart 2025-26*: Key Deficit Indicators II.6.6a and Appendix Table 7). (Per cent of GDP) II.6.15 Fiscal consolidation of the general Item 2023-24 2024-25 (RE) 2025-26 (BE) government was supported by rise in tax 1 2 3 4 revenues to 18.8 per cent of GDP in 2024-25 Revenue Deficit 0.3 0.6 0.2 (BE) from 18.1 per cent in the previous year and Gross Fiscal Deficit 3.0 3.6 3.3 Primary Deficit 1.3 1.8 1.5 moderation in total expenditure to 30.0 per cent *: Data pertain to all states/UTs that have presented their final of GDP from 30.2 per cent in the previous year. budgets for 2025-26. Even with containment of total expenditure, the Source: Budget documents of state governments. capital expenditure to GDP ratio stood at 5.9 per continued in 2025-26, with total outlay of ₹1.5 cent in 2024-25 (BE), as compared to 5.8 per cent in the previous year (Chart II.6.6b). lakh crore – an increase of 20 per cent over 2024-25 (RE) levels. II.6.16 As per the International Monetary Fund (IMF) projections for the period 2025 to 2030, 6. General Government Finances India’s general government debt will be on a II.6.14 In 2024-25 (BE), the GFD of the general declining trend in contrast to its peers and the government moderated to 7.6 per cent of GDP40 average position of emerging market and middle- from 8.8 per cent in 2023-24 (RE). General income economies and advanced economies government debt stood at 81.9 per cent of GDP (Chart II.6.7a). The overall balance of the in 2024-25 (BE) as compared to 81.8 per cent general government is also projected to improve in 2023-24 (RE). External liabilities of the Centre significantly (Chart II.6.7b). Chart II.6.6: Key Fiscal Indicators of General Government Source: RBI and Union Budget documents. 40 The GDP data used for general government finances for 2024-25 (BE) has been taken from the Union Budget documents for 2024-25. 69 PDG fo tnec reP PDG fo tnec reP PDG fo tnec reP a. Debt and Deficit Indicators b. Trends in Tax Revenue and Expenditure External Debt Gross Fiscal Deficit (RHS) Internal Debt 4.97 90 14 85 12 80 75 10 70 65 8 60 7.6 6 55 50 4 31-2102 41-3102 51-4102 61-5102 71-6102 81-7102 91-8102 02-9102 12-0202 22-1202 32-2202 )ER( 42-3202 )EB( 52-4202 35 30.0 30 25 20 18.8 15 10 5.9 5 0 31-2102 41-3102 51-4102 61-5102 71-6102 81-7102 91-8102 02-9102 12-0202 22-1202 32-2202 )ER( 42-3202 )EB( 52-4202 Tax Revenue Capital Expenditure Total ExpenditureANNUAL REPORT 2024-25 Chart II.6.7: Cross-country Fiscal Performance 7. Conclusion levels. However, with net capital inflows falling short of CAD, there was a decline in foreign II.6.17 Fiscal consolidation, through exchange reserves on a balance of payments rationalisation of revenue expenditure and (BoP) basis during April-December 2024. enhanced revenue generation, remained a key focus of the Union Budget 2025-26. While II.7.2 Against this backdrop, sub-section 2 focusing on rebuilding its fiscal buffers, the Union presents a brief overview of global economic and government has also maintained its expenditure financial conditions, followed by an analysis of India’s merchandise exports and imports in sub- quality by budgeting a robust growth in its capital section 3. The behaviour of invisibles is presented expenditure in 2025-26. in sub-section 4. Details on net capital flows are II.7 EXTERNAL SECTOR set out in sub-section 5 while external vulnerability II.7.1 India’s external sector exhibited resilience indicators are analysed in sub-section 6 followed by the concluding observations. during 2024-25 amidst a challenging global landscape marked by prolonged geopolitical 2. Global Economic Conditions tensions, rising geoeconomic fragmentations II.7.3 Global economic growth moderated to and heightened uncertainty related to global 3.3 per cent in 2024 (3.5 per cent in 2023) and is trade. India’s merchandise exports recovered; expected to be even lower in 2025 (2.8 per cent)41 with merchandise imports outpacing exports, [Chart II.7.1a]. Downside risks cloud the growth merchandise trade deficit widened. Nonetheless, outlook owing to heightened trade tensions and India’s buoyant services exports and strong elevated policy-induced uncertainty. Output private transfer receipts contained the current growth in advanced economies (AEs) increased account deficit (CAD) well within sustainable marginally to 1.8 per cent in 2024 as compared 41 World Economic Outlook, April 2025, International Monetary Fund (IMF). 70 PDG fo tnec reP PDG fo tnec reP a. Debt b. Overall Balance 130 120 110 100 90 80 70 60 Advanced Economies India Advanced Economies India Emerging Market and Middle-income Economies China Emerging Market and Middle-income Economies China South Africa Brazil South Africa Brazil Note: The data for India have been sourced from Fiscal Monitor Report, IMF, April 2025 to ensure comparability with rest of the countries. However, this data may be at variance with data reported in the Union Budget or the Reserve Bank publications due to differential treatment of certain items such as receipts from asset sale, non-tax revenue items and others by the Union government and the IMF. Source: Fiscal Monitor Report, IMF. April 2025. 0202 1202 2202 3202 4202 5202 6202 7202 8202 9202 0302 -2 -4 -6 -8 -10 -12 -14 0202 1202 2202 3202 4202 5202 6202 7202 8202 9202 0302ECONOMIC REVIEW a. Global GDP Growth Forecasts (IMF) [Successive Revisions] b. Global Trade Growth Forecasts (IMF) [Successive Revisions] *: Goods and services. Source: IMF. with 1.7 per cent in 2023, while that in emerging services) growth recovered from 1.0 per cent in market and developing economies (EMDEs) 2023 to 3.8 per cent in 2024 (Chart II.7.1b). moderated to 4.3 per cent from 4.7 per cent. The II.7.4 Emerging market economies (EMEs) gradual easing of global inflationary pressures recorded net portfolio inflows of US$ 255.7 prompted major central banks to cut their policy billion during 2024-25 as compared with US$ rates, although monetary policy stances still 220.1 billion during 2023-24 (Chart II.7.2). remain in restrictive territory in several jurisdictions. Global foreign exchange reserves increased With easing inflationary pressures and stable during 2024, reflecting valuation gains on global demand, world trade volume (goods and account of a rise in gold prices (Chart II.7.3). 71 tnec reP tnec reP Chart II.7.1: Real GDP and World Trade* Volume Growth 7.2- 3.3 2.3 2.3 2.3 3.3 2.3 3.3 8.2 8 6 4 2 0 -2 -4 8102 9102 0202 1202 2202 3202 4202 32-naJ 32-rpA 32-luJ 32-tcO 42-naJ 42-rpA 42-luJ 42-tcO 52-naJ 42-naJ 42-rpA 42-luJ 42-tcO 52-naJ 52-rpA Actuals/Estimates Forecasts for Forecasts for 2024 2025 Average Growth (2000-2019) Average Growth (2000-2019) 4.8- 8.3 4.3 6.3 3.3 4.3 4.3 2.3 7.1 12 10 8 6 4 2 0 -2 -4 -6 -8 -10 8102 9102 0202 1202 2202 3202 4202 32-naJ 32-rpA 32-luJ 32-tcO 42-naJ 42-rpA 42-luJ 42-tcO 52-naJ 42-naJ 42-rpA 42-luJ 42-tcO 52-naJ 52-rpA Actuals/Estimates Forecasts for Forecasts for 2024 2025 Chart II.7.2: Portfolio Investment Flows to EMEs noillib $SU 60 40 20 0 -20 -40 Debt Equity Total Source: Institute of International Finance. 22-raM 22-nuJ 22-peS 22-ceD 32-raM 32-nuJ 32-peS 32-ceD 42-raM 42-nuJ 42-peS 42-ceD 52-raM Chart II.7.3: Change in Global Foreign Exchange Reserves* *: Quarter-on-quarter change in official reserve assets. Source: IMF. noillib $SU 800 600 400 200 0 -200 -400 -600 -800 6102:2Q 6102:4Q 7102:2Q 7102:4Q 8102:2Q 8102:4Q 9102:2Q 9102:4Q 0202:2Q 0202:4Q 1202:2Q 1202:4Q 2202:2Q 2202:4Q 3202:2Q 3202:4Q 4202:2Q 4202:4QANNUAL REPORT 2024-25 3. Merchandise Trade II.7.5 India’s merchandise exports increased marginally by 0.1 per cent year-on-year (y-o-y) to US$ 437.4 billion in 2024-25, recovering from a contraction of 3.1 per cent witnessed in 2023- 24. Merchandise imports expanded by 6.2 per cent (y-o-y) to US$ 720.2 billion during 2024-25 vis-à-vis a contraction of 5.3 per cent during the previous year (Table II.7.1). II.7.6 The expansion in merchandise exports in 2024-25 was led by growth in electronic goods; Table II.7.1: India’s Merchandise Trade POL: Petroleum, oil and lubricants. Source: DGCI&S. Growth Rate Value in US$ billion (y-o-y, per cent) 2021- 2022- 2023- 2024- 2021- 2022- 2023- 2024- engineering goods; drugs and pharmaceuticals; 22 23 24 25 22 23 24 25 rice; and readymade garments (RMG) of all 1 2 3 4 5 6 7 8 9 textiles; while petroleum products; and gems and Exports jewellery witnessed a contraction (Charts II.7.4 Q1 95.5 121.0 103.9 110.1 85.7 26.6 -14.1 5.9 and II.7.5). Q2 102.7 110.7 107.2 103.5 38.5 7.8 -3.2 -3.4 II.7.7 Exports of engineering goods (accounting Q3 106.8 104.6 105.6 108.7 41.0 -2.1 1.0 3.0 Q4 117.0 114.8 120.4 115.1 29.3 -1.9 4.9 -4.4 for 26.7 per cent of the total merchandise exports) Annual 422.0 451.1 437.1 437.4 44.6 6.9 -3.1 0.1 Imports Q1 127.0 183.5 160.0 172.2 107.2 44.5 -12.8 7.6 Q2 147.5 189.0 170.3 186.7 62.7 28.1 -9.9 9.7 Q3 167.0 176.1 176.1 187.5 50.7 5.4 0.0 6.5 Q4 171.6 167.3 171.8 173.9 30.3 -2.5 2.7 1.2 Annual 613.1 716.0 678.2 720.2 55.4 16.8 -5.3 6.2 Trade Balance Q1 -31.4 -62.6 -56.2 -62.1 Q2 -44.8 -78.3 -63.1 -83.2 Q3 -60.2 -71.5 -70.5 -78.7 Q4 -54.6 -52.6 -51.4 -58.8 Annual -191.0 -264.9 -241.1 -282.8 Note: Quarterly figures may not add up to annual figures. Source: DGCI&S. 72 noillib $SU )tnec rep( htworG Chart II.7.4: India’s Merchandise Exports 500 50 450 40 400 350 30 300 250 20 200 10 150 100 0 50 0 -10 2020-21 2021-22 2022-23 2023-24 2024-25 POL Gems and Jewellery Non-oil Non-gems and Jewellery Total (RHS) Chart II.7.5: Relative Contribution of Major Sectors to Export Growth (2024-25 over 2023-24) Electronic Goods (32.5) 2.2 Engineering Goods (6.7) 1.7 Drugs and Pharmaceuticals (9.4) 0.6 Rice (19.7) 0.5 RMG of All Textiles (10.0) 0.3 Oil Meals (-21.6) -0.1 Organic and Inorganic Chemicals (-2.3) -0.2 Iron Ore (-46.8) -0.4 Gems and Jewellery (-8.8) -0.7 Petroleum Products (-24.7)-4.8 Percentage points Note: Figures in parentheses are y-o-y per cent change. Source: DGCI&S and RBI staff estimates.ECONOMIC REVIEW Chart II.7.6: India's Engineering Goods Exports - Chart II.7.7: India’s Rice Exports Relative Contribution (2024-25 over 2023-24) Aircraft, Spacecraft and Parts (114.7) 3.4 Electric Machinery and Equipment (16.3) 1.8 Motor Vehicle/Cars (9.1) 0.7 Other Miscellaneous Engineering Items (11.2) 0.5 Auto Components/Parts (6.3) 0.4 Mica and Mica Products (-14.5) 0.005 Office Equipment (-8.0) 0.02 Copper and Copper Products (-8.1) -0.2 Aluminium and Aluminium Products (-10.3) -0.7 Iron and Steel (-22.0) -2.4 Percentage points MEP: Minimum Export Price. Note: Data on agricultural exports at a disaggregated level are available up Note: Figures in parentheses are y-o-y per cent change. to February 2025. Source: DGCI&S and RBI staff estimates. Source: DGCI&S. increased by 6.7 per cent in 2024-25. The growth rose by 54.3 per cent (y-o-y) to US$ 21.0 billion in exports of engineering goods in 2024-25 (Chart II.7.8). was driven by aircraft, spacecraft and parts; II.7.10 Exports of drugs and pharmaceuticals, electric machinery and equipment; motor accounting for 7.0 per cent of India’s merchandise vehicles/cars; other miscellaneous engineering items; and auto components/parts. On the other exports, expanded by 9.4 per cent (y-o-y) in hand, export growth was dragged down by iron 2024-25. The growth in exports of drugs and and steel; aluminium and its products; copper and its products; office equipment; and mica and its products (Chart II.7.6). II.7.8 Agricultural exports rose by 6.4 per cent (y-o-y) in 2024-25 (up to February 2025). Rice exports remained robust after the phasing out of restrictions on rice exports in September and October 2024 (Chart II.7.7). On a cumulative basis, rice exports rose by 19.7 per cent (y-o-y) in 2024-25. II.7.9 Exports of electronic goods expanded by 32.5 per cent (y-o-y) in 2024-25. Mobile phones, contributing 61.7 per cent of electronic goods exports during 2024-25 (up to February 2025), 73 )ennot dnasuoht( emuloV )noillim $SU( eulaV Floor price on basmati rice removed in September 2024. MEP on non-basmati white rice and tariff on brown, parboiled 3,000 and paddy rice removed in 1,600 October 2024 that was imposed in September 2024. 1,400 2,500 1,200 2,000 1,000 1,500 800 600 1,000 400 500 200 0 0 Broken Rice Parboiled Rice Basmati Rice Non-Basmati White Rice Others Rice (RHS) 32-rpA 32-yaM 32-nuJ 32-luJ 32-guA 32-peS 32-tcO 32-voN 32-ceD 42-naJ 42-beF 42-raM 42-rpA 42-yaM 42-nuJ 42-luJ 42-guA 42-peS 42-tcO 42-voN 42-ceD 52-naJ 52-beF Chart II.7.8: Electronic Goods Exports Mobile Phones Rest of Electronic Goods Note: Data on mobile phone exports are available up to February 2025. Source: DGCI&S. noillib $SU 40 35 30 25 20 15 10 5 0 12-0202 22-1202 32-2202 42-3202 42-3202 )beF-rpA( 52-4202 )beF-rpA(ANNUAL REPORT 2024-25 a. Exports b. Trade Balance Source: DGCI&S and RBI staff estimates. pharmaceuticals in 2024-25 was buoyed by II.7.12 The expansion in merchandise imports robust growth in exports of drug formulations and in 2024-25 was led by gold; electronic goods; and petroleum, crude oil and products. Coal, biologicals (Chart II.7.9). coke and briquettes; pearls, precious and semi- II.7.11 Exports of petroleum products contracted precious stones; and iron and steel contributed by 24.7 per cent (y-o-y) in 2024-25 on account negatively to import growth (Charts II.7.11 and of easing oil prices and fall in volume (Chart II.7.12). II.7.10a). Among the top ten destinations for II.7.13 POL imports (25.8 per cent of total petroleum product exports, seven witnessed a merchandise imports) grew by 3.9 per cent (y-o-y) fall during 2024-25 (Chart II.7.10b). to US$ 185.8 billion in 2024-25, underpinned by 74 noillib $SU Chart II.7.9: Drugs and Pharmaceuticals 35 30 25 20 24.1 15 19.0 19.0 19.5 21.7 10 5 0 Surgicals Ayush and Herbal Products Surgicals Ayush and Herbal Products Drug Formulations, Biologicals Bulk Drugs, Drug Intermediates Drug Formulations, Biologicals Bulk Drugs, Drug Intermediates 12-0202 22-1202 32-2202 42-3202 52-4202 25 20 15 21.3 10 19.2 16.6 16.9 15.7 5 0 -5 noillib $SU 12-0202 22-1202 32-2202 42-3202 52-4202 a. Trend b. Major Destination Countries Source: DGCI&S and RBI staff estimates. ennot noilliM noillib $SU Chart II.7.10: India’s Exports of Petroleum Products 14 12 12 10 10 8 8 6 6 4 4 2 2 0 0 Volume, 2023-24 Volume, 2024-25 Value, 2023-24 (RHS) Value, 2024-25 (RHS) 2023-24 2024-25 rpA yaM nuJ luJ guA peS tcO voN ceD naJ beF raM 16 14 12 10 8 6 4 2 0 noillib $SU sdnalrehteN EAU eropagniS ailartsuA SU ainaznaT acirfA htuoS aisyalaM lapeN ogoTECONOMIC REVIEW Chart II.7.11: India’s Merchandise Imports Source: DGCI&S. volume growth of 6.8 per cent (Chart II.7.13a). per cent) even as total volume contracted While Russia was the top source, UAE’s share (Chart II.7.14). in India’s crude oil imports increased during the II.7.15 Imports of electronic goods expanded year, and that of Iraq and Saudi Arabia moderated by 12.4 per cent (y-o-y) to US$ 98.7 billion in (Chart II.7.13b). 2024-25 (Chart II.7.15). Even as exports of II.7.14 Value of gold imports rose by 27.4 per electronic goods were buoyant as noted earlier, cent (y-o-y) in 2024-25 to US$ 58.0 billion, trade balance for electronic goods widened driven by higher international prices (30.0 marginally to US$ 60.1 billion in 2024-25. The 75 noillib $SU )tnec rep( htworG Chart II.7.12: Relative Contribution of Major Sectors to Import Growth (2024-25 over 2023-24) 800 60 700 50 Gold (27.4) 1.8 40 Electronic Goods (12.4) 1.6 600 Petroleum, Crude and Products (3.9) 1.0 30 500 Machinery, Electrical and Non-electrical (9.6) 0.7 20 400 Non-ferrous Metals (15.0) 0.5 10 300 Silver (-11.2) -0.09 0 Dyeing/Tanning/Colouring -0.10 200 Materials (-13.4) -10 Iron and Steel (-4.6) -0.2 100 -20 Pearls, Precious and Semi-precious Stones (-24.4) -0.9 0 -30 2020-21 2021-22 2022-23 2023-24 2024-25 Coal, Coke and Briquettes, etc. (-20.0) -1.1 Percentage points POL Gold Non-POL and Non-gold Import Growth (RHS) Note: Figures in parentheses are y-o-y per cent change. Source: DGCI&S and RBI staff estimates. a. POL Imports b. Major Sources of Crude Oil Imports Source: DGCI&S. noillib $SU ennot noilliM )tnec rep( emulov ni erahS Chart II.7.13: POL 25 40 45 35 40 20 30 35 25 30 15 20 25 10 15 20 10 15 5 5 10 0 0 5 0 Russia Iraq Saudi UAE US Arabia Value Volume (RHS) 2023-24 2024-25 32-raM 32-yaM 32-luJ 32-peS 32-voN 42-naJ 42-raM 42-yaM 42-luJ 42-peS 42-voN 52-naJ 52-raMANNUAL REPORT 2024-25 II.7.16 Coal imports fell by 20.0 per cent (y-o-y) Chart II.7.14: Gold Imports in 2024-25, reflecting a decline in volume as well as lower import prices (Chart II.7.17). Higher domestic coal production and lower imports for blending purposes by thermal power plants42 led to a decline in coal imports. II.7.17 Merchandise trade deficit widened to US$ 282.8 billion in 2024-25 from US$ 241.1 billion a year ago. Oil deficit accounted for 43.3 per cent of the total trade deficit (Chart II.7.18a). Among the major trading partners, trade deficit with China, Russia and the UAE widened in 2024-25 while surpluses improved in respect of the US, the Netherlands, and the UK Source: DGCI&S. (Chart II.7.18b). deficit in electronic goods was driven by deficits in 4. Invisibles electronics components; and computer hardware II.7.18 Receipts pertaining to India’s and peripherals; while telecom instruments invisibles – consisting of cross-border recorded a trade surplus of US$ 3.7 billion transactions in services, income, and transfers (Chart II.7.16). – remained buoyant during 2024-25. Net 42 'Coal Imports During April 2024 to February 2025 Drops by 9.2% Compared to Same Period of FY 2023-24', May 13, 2025, PIB. 76 noillib $SU ennoT 14 200 180 12 160 10 140 120 8 100 6 80 4 60 40 2 20 0 0 Value Volume (RHS) noillib $SU 32-raM 32-yaM 32-luJ 32-peS 32-voN 42-naJ 42-raM 42-yaM 42-luJ 42-peS 42-voN 52-naJ 52-raM Chart II.7.15: Electronic Goods Imports Chart II.7.16: Electronics Trade Balance 120 100 80 60 36.8 40 34.4 25.1 20 0 2022-23 2023-24 2024-25 Telecom Instruments Electronics Instruments Electronics Components Electrodes Consumer Electronics Computer Hardware, Peripherals Accumulators and Batteries Source: DGCI&S. noillib $SU 10 0 -10 -20 -30 -21.0 -29.0 -40 -31.9 -50 -60 -70 2022-23 2023-24 2024-25 Telecom Instruments Electronics Instruments Electronics Components Electrodes Consumer Electronics Computer Hardware, Peripherals Accumulators and Batteries Source: DGCI&S.ECONOMIC REVIEW Chart II.7.17: Coal Imports and Price a. Coal Imports b. International Coal Price Source: World Bank and DGCI&S. services exports at US$ 135.5 billion grew at increase in global freight rates due to disruptions a robust pace of 12.9 per cent (y-o-y) during in key trade routes – the average Baltic Dry April-December 2024, aided by 14.5 per cent Index43 rose by 12.0 per cent during April- expansion in software and business services December 2024 over the corresponding period exports (accounting for around 74 per cent of of the previous year. Exports of travel services India’s services exports) [Chart II.7.19]. Amongst rose by 5.5 per cent (y-o-y), reflecting increased other services, transportation receipts increased spending by tourists. Private transfer receipts, by 19.5 per cent (y-o-y), largely driven by an mainly representing remittances by Indians 43 A shipping and trade index, created by the Baltic Exchange (London), which measures the cost of transporting dry bulk raw materials such as coal, iron and steel. 77 ennot noilliM noillib $SU ennot cirtem/$SU 500 300 60 450 49.7 250 50 400 38.9 350 200 40 300 31.1 150 30 250 200 100 20 150 50 10 100 104.0 50 0 0 2022-23 2023-24 2024-25 0 Indonesia Australia South Africa Russia Others Total Value (RHS) 22-rpA 22-peS 32-beF 32-luJ 32-ceD 42-yaM 42-tcO 52-raM Chart II.7.18: India’s Merchandise Trade Deficit a. Total TB and Oil TB b. Sources of Change in India's TB (2024-25 over 2023-24) TB: Trade Balance. Note: A positive ∆ export/∆ import implies higher exports/imports and vice versa. Source: DGCI&S and RBI staff estimates. noillib $SU Trade Balance Oil Trade Balance ∆ E xport ∆ Import ∆ TB noillib $SU 0 20 Improvement in TB: -50 Higher exports/lower imports 10 -100 0 -150 -10 -200 -20 -250 -300 2020-21 2021-22 2022-23 2023-24 2024-25 SU sdnalrehteN hsedalgnaB lapeN KU dnalreztiwS qarI EAU aissuR anihC Deterioration in TB: Lower exports/higher imports Trade Surplus Trade DeficitANNUAL REPORT 2024-25 Chart II.7.19: Composition of India's Services Exports *: Includes insurance services, communication services and government not included elsewhere, among others. Source: RBI. working overseas, posted a y-o-y growth of 16.2 global IT spending is expected to rise to US$ per cent during April-December 2024. 5.4 trillion in 2025 from US$ 5.1 trillion in 2024 II.7.19 In global commercial services trade, which augurs well for India’s software services India retained its position among the major exports. five exporting countries in terms of services II.7.20 India remained the top remittance export growth during 2024-25 (up to February 2025) [Chart II.7.20]. According to Gartner44, recipient in 2024 (Chart II.7.21a). India’s total 44 Gartner Inc. is an American technological research and consulting firm, known for its research and reports on the IT industry and forecasts on worldwide IT spending. 78 noillib$SU Chart II.7.20: Services Exports Growth in Major Services Exporting Economies 110 100 90 80 70 60 50 40 30 20 10 0 Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3 2020-21 2021-22 2022-23 2023-24 2024-25 Travel Transportation SoftwareServices BusinessServices FinancialServices Others* TotalServices *: Data for India pertain to April-March. **: Data for EU and UK pertain to April-January. Source: WTO and RBI. tnec reP 30 20.1 21.2 13.6 14.8 15 10.2 10.0 9.7 9.1 7.38.0 4.8 5.9 0 -0.7 -5.9 -15 2023-24 (April-February) 2024-25 (April-February) anihC *aidnI napaJ aeroK htuoS **KU **UE ASU Chart II.7.21: Inward Remittances a. Inward Remittances Across Major Recipient Countries b. Cost of Receiving Remittances (US$ 200) 140 120 100 80 60 40 20 0 *: Based on India’s BoP statistics. Source: RBI and World Bank. noillib $SU tpygE airegiN alametauG ynamreG hsedalgnaB natsikaP ecnarF senippilihP anihC ocixeM *aidnI 7.5 Bangladesh China 7.0 6.5 World 6.0 5.5 India Nigeria 5.0 Guatemala Mexico 4.5 Philippines 4.0 3.5 2023 Q3:2024 2022 2023 2024 tnec rePECONOMIC REVIEW remittance receipts stood at US$ 137.7 billion compared with US$ 30.7 billion (1.1 per cent of during 2024 (on a calendar year basis). The GDP) a year ago (Chart II.7.22). average cost of sending remittances of US$ 200 5. External Financing to India is estimated at 5.3 per cent in Q3:2024, below the global average of 6.6 per cent (Chart II.7.23 The global environment for international II.7.21b). investment continued to be challenging amidst volatile external financial conditions, heightened II.7.21 Net outgo in the primary income account global economic uncertainty and prolonged owing to dividend and interest incomes/ geopolitical tensions. In this backdrop, net payments45 stood at US$ 37.3 billion during capital inflows during April-December 2024 April-December 2024, higher than US$ 34.9 moderated from a year ago and fell short of billion during April-December 2023. This reflects the CAD, thus leading to a depletion in foreign the rise in interest outgoes on liabilities such exchange reserves of US$ 13.8 billion on a BoP as external commercial borrowings (ECBs), basis (excluding valuation effects) during April- external assistance and short-term credit, and payment of dividends and profits to non-resident December 2024 (Chart II.7.23 and Appendix shareholders during the same period. Table 8). II.7.22 The buoyancy in net services receipts and II.7.24 Among various capital flows, gross workers’ remittances largely offset the expansion foreign direct investment (FDI) inflows remained in merchandise trade deficit; accordingly, India’s resilient, rising by 13.7 per cent y-o-y to US$ CAD was contained at US$ 37.1 billion (1.3 81.0 billion during 2024-25. Globally, India per cent of GDP) in April-December 2024 as was placed fourth in terms of greenfield FDI Chart II.7.22: Composition of India's Current Account Balance (CAB) a. Amount b. Ratio Trade Deficit Services Transfers Trade Deficit Services Transfers Income CAB Income CAB Source: RBI. 45 Income on cross-border investments and compensation of employees that domestic resident entities earn from/pay to the rest of the world. 79 PDG fo tnec reP 300 150 0 -30.7 -150 -37.1 -300 -450 noillib $SU 02-9102 12-0202 22-1202 32-2202 42-3202 42-3202 )ceD-rpA( 52-4202 )ceD-rpA( 8 4 0 -4 -1.1 -1.3 -8 -12 02-9102 12-0202 22-1202 32-2202 42-3202 42-3202 )ceD-rpA( 52-4202 )ceD-rpA(ANNUAL REPORT 2024-25 Chart II.7.23: Financing of Current Account Deficit FDI FPI ECBs Trade Credit Banking Capital Others Increase (-)/Decrease (+) in Reserves CAB Source: RBI. capital investments announced during 2024-25 II.7.25 Services sector47 accounted for a major share of FDI equity flows into India during 2024- after the US, France and the UK, according to 25, followed by manufacturing, electricity and fDi Markets46. Net FDI flows at US$ 0.4 billion other energy, retail and wholesale trade, and during 2024-25 were, however, below US$ 10.1 transport (Appendix Table 9). Major source billion a year ago, dragged down by higher countries, viz., Singapore, Mauritius, the US, repatriation/disinvestment and net outward FDI the Netherlands, and the UAE contributed three- (Table II.7.2). fourth of the FDI flows (Chart II.7.24). Table II.7.2: Foreign Direct Investment Flows (US$ billion) Item 2021-22 2022-23 2023-24 2024-25 1 2 3 4 6 1. Net FDI (1.1 - 1.2) 38.6 28.0 10.1 0.4 1.1 Net Inward FDI (1.1.1 - 1.1.2) 56.2 42.0 26.8 29.6 1.1.1 Gross Inflows 84.8 71.4 71.3 81.0 1.1.2 Repatriation/Disinvestment 28.6 29.3 44.5 51.5 1.2 Net Outward FDI 17.6 14.0 16.7 29.2 Source: RBI. 46 fDi Markets is the leading online database tracking greenfield FDI in real-time across all markets and sectors globally since 2003. 47 Services sector includes computer services, communication services, financial services and business services. 80 PDG fo tnec reP 4 2 0 -2 -4 -6 02-9102 12-0202 22-1202 32-2202 42-3202 42-3202 )ceD-rpA( 52-4202 )ceD-rpA( Chart II.7.24: Source Country-wise Inflow of FDI (Equity) Source: RBI. noillib $SU 15 12 9 6 3 0 2023-24 2024-25 eropagniS suitiruaM SU sdnalrehteN EAU napaJ surpyC muigleB dnalreztiwS aeroK htuoSECONOMIC REVIEW II.7.26 According to the United Nations insurance and business services, manufacturing, Conference on Trade and Development and wholesale, retail trade, restaurants and (UNCTAD), India is emerging as a major source hotels were main sectors for India’s overseas of global FDI, ranking among the top 20 source direct investment during 2024-25. The economic countries in 2023. Major destinations for India’s size of the recipient country along with India’s outward FDI were Singapore, the US, the UAE, bilateral merchandise exports shape India’s FDI Mauritius, and the Netherlands. Financial, outflows (Box II.7.1). Box II.7.1 India’s Outward FDI Trends: Insights from the Gravity Model The global FDI landscape is experiencing a structural are amongst the key determinants of outward FDI flows transformation on the back of geopolitical alignments and (Cieślik et al., 2019; Kaushal, 2022). Economies also a rising share of services in global FDI (Casella et al., transition from being net FDI recipients to net outward 2024). EMEs are emerging as a major source of foreign investors, gaining benefits from economies of scale, investment, with the share of G20-Emerging Market (G20- enhanced competitiveness, and productivity spillovers to EM) countries in global FDI outflows increasing from 9.7 domestic enterprises (Herzer, 2010). per cent in 2009 to 16.5 per cent in 2023. In tandem with To explore the determinants of outward FDI flows from these trends, India’s outward investment has significantly India, quarterly data are used from Q1:2010 to Q1:2024 increased, particularly during the post-pandemic period (57 quarters) for India’s bilateral outward FDI flows to 14 (Chart 1a). Also, India’s outward investment has witnessed countries, which constitutes around 80 per cent of India’s a shift towards developed economies, with the average total outward FDI. An extended gravity model is estimated share rising to 51.1 per cent during 2019-2024 (Chart 1b). by applying the Poisson Pseudo-Maximum Likelihood Macroeconomic factors such as physical distance, tax (PPML) estimator, given its ability to handle zero-valued regimes, and availability of natural and strategic resources observations and heteroskedasticity in the data. Following 20 1.2 1.0 16 0.8 12 0.6 8 0.4 4 0.2 0 0.0 (Contd.) 81 noillib $SU 11-0102 21-1102 31-2102 41-3102 51-4102 61-5102 71-6102 81-7102 91-8102 02-9102 12-0202 22-1202 32-2202 42-3202 tnec reP 100 25 80 20 60 15 40 10 20 5 0 0 Net Outward FDI Net Outward FDI to GDP Ratio (RHS) tnec reP 11-0102 31-2102 51-4102 71-6102 91-8102 12-0202 32-2202 noillib $SU Chart 1: India’s Outward FDI Trend a. Trend in India's Outward FDI b. India's Gross Outward FDI Share of Developing Economies Share of Developed Economies Gross Outward FDI (RHS) Source: UNCTAD, RBI and RBI staff estimates.ANNUAL REPORT 2024-25 Cieślik et al. (2019) and Kaushal (2022), PPML regression Table 1: Estimated Gravity Model Using PPML Estimator is estimated as per the following generalised form: Dependent Variable: Log (Outward FDI) log (Outward FDI ) α β *log(Export ) β*log(Nominal it it 2 GDP it) β 3*log(Phy s =ical +Dis 1tance i) β 4* C +orporate Tax it Explanatory Variable^ Coefficients β*Natural Endowments β*i.country β*i.time Model 1 Model 2 5 + it 6 + 7 + 1 2 3 where, ‘i’ represents the+ host country+ and ‘t’ denotes the 0.45*** - Log (Export) time period. (0.04) - 0.54*** The regression results indicate that India’s outward FDI Log (Nominal GDP) (0.05) is positively impacted by the host country’s nominal GDP, - -0.06*** Corporate Tax (in per cent) emphasising the significance of market size (Table 1). (0.007) Exports to the host country show a strong positive impact on 0.20*** - Natural Endowments (in per cent) outward FDI, indicating that robust bilateral trade relations (0.05) strengthen economic linkages and foster investment. Log (Distance) -0.39*** -0.39*** (0.09) (0.11) The negative association with distance highlights the Number of Observations 798 798 importance of geographic and economic proximity in R-squared 0.50 0.53 outbound investments. The availability of natural resources ^: Physical distance is measured as geographical distance (in in host country boosts outward FDI bolstered by secured kilometres) between the capital cities, while natural endowments essential resources and stable supply chains. Further, are captured by percentage share of raw material export in total export of the host country. higher corporate tax rates in host economies act as a -: Not Applicable. deterrent for outward FDI. These findings emphasise the *** represents significance level at 1 per cent. interplay of economic, geographic and institutional factors Note: Figures in parentheses indicate robust standard errors. Source: RBI staff estimates. in shaping India’s outward FDI flows. References: 1. Casella, B., Bolwijn, R., and Casalena, F. (2024), ‘Global Economic Fracturing and Shifting Investment Patterns: A Diagnostic of Ten FDI Trends and Their Development Implications’. Vox EU, Centre for Economic Policy Research. 2. Cieślik, A., and Tran, G. H. (2019), ‘Determinants of Outward FDI from Emerging Economies’, Quarterly Journal of Economics and Economic Policy, 14(2), 209-231. 3. Herzer, D. (2010), 'Outward FDI and Economic Growth', Journal of Economic Studies, 37(5). 4. Kaushal, L. A. (2022), ‘Institutional and Economic Determinants of Indian OFDI’, Cogent Economics & Finance, 10(1), 2147648. II.7.27 During 2024-25, foreign portfolio the same period as against net inflows of US$ investment (FPI) registered a net inflow amounting 25.3 billion in 2023-24, mirroring trends in other to US$ 1.7 billion as compared to net inflows EMEs with rising risk-off sentiments leading to of US$ 41.6 billion during the previous year selloffs in the equity segment during April-May (Chart II.7.25). The debt segment witnessed 2024, October-November 2024 and January- steady FPI inflows amounting to US$ 17.4 billion February 2025. FPI equity outflows were largely on the back of inclusion of Indian sovereign bonds contributed by oil, gas and consumable fuels, fast in global bond indices. Equity FPI flows, however, moving consumer goods, automobile, and power recorded net outflows of US$ 15.7 billion during sectors, while inflows were primarily recorded 82ECONOMIC REVIEW (18.5 per cent as at end-March 2024). Of the Chart II.7.25: Net Foreign Portfolio Flows to India total value of specified central G-secs opened for non-resident investors under the fully accessible route (FAR), 7.1 per cent were held by FPIs as at end-March 2025, up from 4.5 per cent as at end-March 2024. II.7.28 During 2024-25, net ECB inflows to India rose significantly to US$ 18.7 billion from US$ 3.6 billion in 2023-24 (Chart II.7.26). Besides on- lending/sub-lending, disbursements were used for refinancing of earlier ECBs, new projects and working capital requirements (Chart II.7.27). The Equity Debt Total share of rupee denominated loans and bonds in Source: NSDL. the total agreement amount stood at 5.0 per cent in the financial services, telecommunication, during 2024-25 as compared with 5.3 per cent a healthcare, and consumer services sectors. year ago. Of the total ECB agreement amount Even as investment by FPIs in the debt market during 2024-25, 67.6 per cent was explicitly increased, the utilisation remains below the hedged, 5.2 per cent was from FDI parent available investment limits. As at end-March companies (excluding INR loans) and 5.0 per 2025, 15.7 per cent of the limits in central cent was denominated in the INR. The remaining government securities (G-secs) were utilised 22.3 per cent comprised other ECBs, including 83 noillib $SU 25 20 15 10 5 0 -5 -10 -15 -20 91-8102:1Q 91-8102:2Q 91-8102:3Q 91-8102:4Q 02-9102:1Q 02-9102:2Q 02-9102:3Q 02-9102:4Q 12-0202:1Q 12-0202:2Q 12-0202:3Q 12-0202:4Q 22-1202:1Q 22-1202:2Q 22-1202:3Q 22-1202:4Q 32-2202:1Q 32-2202:2Q 32-2202:3Q 32-2202:4Q 42-3202:1Q 42-3202:2Q 42-3202:3Q 42-3202:4Q 52-4202:1Q 52-4202:2Q 52-4202:3Q 52-4202:4Q Chart II.7.26: External Commercial Borrowings to India (Net) Source: RBI. noillib $SU 20 18.7 15 10 7.4 5 3.6 0.2 0 -5 -4.1 12-0202 22-1202 32-2202 42-3202 52-4202 Chart II.7.27: End Use of ECBs during 2024-25 (Share in Total Inflows) Loc. CG: Local Capital Goods. Source: RBI. tnec reP gnidnel-buS/gnidnel-nO reilraE fo gnicnanifeR BCE stcejorP weN latipaC gnikroW erutidnepxE eepuR GC.coL sdooG latipaC fo tropmI noitasinredoM eepuR fo gnicnanifeR snaoL erutcurtsarfnI tnempoleveD srehtO 50 45.3 40 30 20 16.3 9.9 10 6.1 6.3 3.5 3.5 3.3 2.7 1.9 0ANNUAL REPORT 2024-25 Table II.7.3: Flows under Non-Resident Deposit Accounts (US$ billion) Item 2021-22 2022-23 2023-24 2024-25 1 2 3 4 6 1. Non-Resident External (Rupee) Account 3.3 2.5 4.2 4.7 2. Non-Resident Ordinary Account 3.5 4.0 4.2 4.4 3. Foreign Currency Non-Resident (B) Account -3.6 2.4 6.4 7.1 Non-Resident Deposits (1+2+3) 3.2 9.0 14.7 16.2 Source: RBI. naturally hedged loans (i.e., borrowers’ business increased to US$ 16.2 billion during 2024-25 earnings in foreign currency). from US$ 14.7 billion a year ago (Table II.7.3). II.7.29 Short-term trade credit increased during 6. Vulnerability Indicators April-December 2024 in line with the rise in II.7.30 India’s external debt to GDP ratio merchandise imports, with a net inflow of US$ remained modest at 19.1 per cent as at end- 11.1 billion as compared with a net outflow of December 2024 (18.5 per cent as at end-March US$ 1.0 billion during the corresponding period a year ago. Around 32 per cent of the trade credit 2024), the lowest among emerging market peers was raised for imports of crude oil, gold, coal and (Table II.7.4). The share of short-term debt copper. Net inflows under non-resident deposits (residual maturity) in total external debt declined Table II.7.4: External Vulnerability Indicators (End-March) (Per cent, unless indicated otherwise) Indicator 2013 2022 2023 2024 End-December 2024 1 2 3 4 5 6 1. External Debt to GDP Ratio 22.4 19.9 19.1 18.5 19.1 2. Ratio of Short-term Debt (Original Maturity) to Total Debt 23.6 19.7 20.6 19.1 19.4 3. Ratio of Short-term Debt (Residual Maturity) to Total Debt 42.1 43.2 44.0 43.4 42.4 4. Ratio of Concessional Debt to Total Debt 11.1 8.3 8.2 7.4 6.8 5. Ratio of Reserves to Total Debt 71.3 98.1 92.7 96.7 88.6 6. Ratio of Short-term Debt (Original Maturity) to Reserves 33.1 20.0 22.2 19.7 22.0 7. Ratio of Short-term Debt (Residual Maturity) to Reserves 59.0 44.0 47.4 44.9 47.8 8. Reserve Cover of Imports (in Months)* 7.0 11.8 9.6 11.3 10.5 9. Debt Service Ratio (Debt Service to Current Receipts) 5.9 5.2 5.3 6.7 6.6 10. External Debt (US$ billion) 409.4 618.8 623.9 668.8 717.9 11. Net International Investment Position (NIIP) [US$ billion] -326.7 -358.1 -367.1 -361.2 -364.5 12. NIIP/GDP Ratio -17.8 -11.6 -11.3 -10.1 -9.8 13. CAB/GDP Ratio -4.8 -1.2 -2.0 -0.7 -1.3 *: Based on merchandise imports of latest four quarters, published in BoP statistics. Source: RBI and Government of India. 84ECONOMIC REVIEW to 42.4 per cent as at end-December 2024. 7. Conclusion Foreign exchange reserves continue to provide II.7.31 India’s external sector displayed resilience a strong buffer for mitigating external risks and in the face of global challenges. Supported by spillovers. As at end-December 2024, foreign sustained robust growth in services exports exchange reserves were more than two times and private transfer receipts, current account of short-term external debt (residual maturity). deficit remained manageable despite a widening Moreover, foreign exchange reserves as at end- merchandise trade deficit. Even as portfolio March 2025 provided a cover of 11 months of capital flows exhibited volatility, strong buffers in merchandise imports (on BoP basis) for 2024- the form of ample foreign exchange reserves and 25. Net international investment position (IIP) to modest external debt liabilities impart strength GDP ratio also recorded an improvement as at to the external sector, contributing to overall end-December 2024. macroeconomic and financial stability. 85THE ANNUAL REPORT ONA NTHNEU AWLO RREKPINOGR TO 2F0 T2H4-E2 5RESERVE BANK OF INDIA PART TWO: THE WORKING AND OPERATIONS OF THE RESERVE BANK OF INDIA III MONETARY POLICY OPERATIONS During 2024-25, headline inflation exhibited gradual easing, with the path of disinflation interrupted by volatile and elevated food inflation. The monetary policy committee (MPC) changed the stance from withdrawal of accommodation to neutral in October 2024 and subsequently reduced the policy repo rate by 25 basis points (bps) to 6.25 per cent in February 2025. To ease potential liquidity stress, the cash reserve ratio (CRR) of banks was reduced to 4.0 per cent of net demand and time liabilities (NDTL) in December 2024 along with several other measures to inject durable liquidity during January-March 2025. III.1 Headline inflation in terms of the consumer measures during January-March 2025 to inject price index (CPI) trended down during 2024-25, durable liquidity. Reflecting the reduction in the though the path of disinflation was interrupted by policy repo rate, short-term money market rates food price shocks (see Section 3 of Chapter II). softened. The transmission of policy repo rate Keeping in view the inflation-growth dynamics, changes to banks’ deposit and lending rates the MPC changed the monetary policy stance continued but at a slower pace during 2024-25. from withdrawal of accommodation to neutral The mandated external benchmark regime in October 2024 that provided it the flexibility to introduced in October 2019 for loan pricing monitor the progress and outlook on disinflation in select sectors strengthened the process of and growth and act in accordance with the monetary transmission. evolving situation. With inflation expected to III.3 Against the above backdrop, section 2 moderate further during 2025-26, the MPC presents the implementation status of the agenda reduced the policy repo rate by 25 basis points to 6.25 per cent in February 2025 after maintaining set for 2024-25 along with major developments status quo on the policy repo rate since February during the year, while section 3 sets out the 2023 at 6.50 per cent. agenda for 2025-26. Concluding observations are provided in the last section. III.2 During the year, system liquidity moved from surplus during July-November 2024 to 2. Agenda for 2024-25 deficit during December 2024-February 2025, III.4 The Department had set out the following before turning into surplus by end-March 2025. goals for 2024-25: To ease potential liquidity stress, the CRR of banks was reduced by 50 bps to 4.0 per cent ● Strengthening further the analysis of of NDTL in December 2024 followed by several transmission of policy impulses to lending 86MONETARY POLICY OPERATIONS rates of non-banking financial companies information management system (CIMS) of the (NBFCs) [Utkarsh 2.0] (Paragraph III.5); Reserve Bank. ● Measuring the sectoral credit flows of III.6 Additionally, studies were undertaken NBFCs (Utkarsh 2.0) [Paragraph III.5]; to analyse: (i) monetary policy transmission during the phase of monetary policy tightening ● Examining the feasibility of introduction since May 2022; (ii) the core-like properties of of the external benchmark-based lending food inflation such as volatility, persistence, rate (EBLR) system of loan pricing for spillovers and cyclical sensitivity; and (iii) the credit extended by NBFCs to select implication of high food inflation persistence on sectors (Paragraph III.5); inflation expectations and its spillovers to non- ● Computing a financial conditions index food components. for India (Paragraph III.5); Major Developments ● Studying behaviour of banks under varying reserve requirements (Paragraph Monetary Policy III.5); and III.7 When the MPC met for its first meeting ● Publishing CPI diffusion indices of 2024-25 in April, the global economy was (Paragraph III.5). exhibiting signs of resilience, and the domestic economy was gaining momentum buoyed by Implementation Status strong investment activity and a lower drag from III.5 In pursuit of the goals set for 2024-25, net external demand. Domestic headline inflation lending rates and sectoral credit data of NBFCs had softened from 5.7 per cent in December are being collected and analysed for policy inputs. 2023 to 5.1 per cent during January-February The introduction of the EBLR system of loan 2024. Food price uncertainties, frequent and pricing for credit extended by NBFCs to select overlapping adverse climate shocks and ongoing sectors was examined but was not found to be geopolitical tensions posed upside risks to the feasible at this juncture. A financial conditions inflation trajectory. Assuming a normal monsoon, index for India was developed using several CPI inflation for 2024-25 was projected at 4.5 per financial market indicators at daily frequency, cent with Q1 at 4.9 per cent, Q2 at 3.8 per cent, which captured the build-up of incipient stress in Q3 at 4.6 per cent and Q4 at 4.5 per cent with financial conditions during crisis episodes. The risks evenly balanced. The real GDP growth for study on daily reserve maintenance behaviour 2024-25 was projected at 7.0 per cent with Q1 at of banks found that the flexible inflation targeting 7.1 per cent; Q2 at 6.9 per cent; Q3 at 7.0 per cent; regime and automated sweep-in and sweep-out and Q4 at 7.0 per cent, reinforced by expectations facility have been associated with lower volatility of normal south-west monsoon (SWM), in daily reserve maintenance and a decline in sustained growth in manufacturing and services average daily excess reserves by scheduled sectors, and pick up in private consumption, commercial banks (SCBs). CPI diffusion indices although headwinds from geopolitical conflicts, are now being disseminated on the centralised volatility in international financial markets and 87ANNUAL REPORT 2024-25 geoeconomic fragmentation posed downside and Q4 at 4.3 per cent, with risks evenly balanced. risks to the outlook. The MPC decided to keep The MPC noted that the risks from volatile and the repo rate unchanged at 6.50 per cent elevated food prices remained high, which may with a 5-1 majority and remained focused on adversely impact inflation expectations and result withdrawal of accommodation to ensure that in spillovers to core inflation. Therefore, the MPC inflation progressively aligns to the target while decided to keep the repo rate unchanged by a supporting growth. 4-2 majority but unanimously reiterated its stance of withdrawal of accommodation. III.8 During the June 2024 policy meeting of the MPC, headline inflation had moderated III.10 On October 1, 2024, the central sequentially since February. CPI inflation government notified the reconstitution of the projection for 2024-25 was retained at 4.5 per MPC with the induction of new external members cent. Real GDP growth for 2024-25 was projected after the completion of tenure of the existing at 7.2 per cent on the back of expectations of external members. When the new MPC met in above-normal SWM, continued thrust on capital October 2024, domestic real GDP had registered expenditure by the government and sustained a growth of 6.7 per cent (y-o-y) in Q1:2024-25, momentum in manufacturing and services driven by private consumption and investment. activity. The MPC decided to keep the policy repo Headline inflation moderated in July and August rate unchanged at 6.50 per cent by a 4-2 majority as compared to June. CPI inflation and real GDP and maintained its stance on withdrawal of growth projections for 2024-25 were retained at accommodation, reiterating the need to continue 4.5 per cent and 7.2 per cent, respectively. The with the disinflationary stance until a durable MPC decided by a 5-1 majority to keep the policy alignment of the headline CPI inflation with the repo rate unchanged at 6.50 per cent. Buoyed by target is achieved. a well-balanced inflation-growth dynamics, the MPC unanimously decided to change the policy III.9 During the MPC meeting of August stance from withdrawal of accommodation to 2024, global activity was exhibiting stability neutral to provide it the flexibility to monitor the through uneven expansion and domestic activity progress of ongoing disinflation. remained steady. Real GDP growth projection for 2024-25 was retained at 7.2 per cent. In a III.11 In the run up to the December 2024 reversal of trend, headline inflation increased to meeting, real GDP growth registered a lower- 5.1 per cent in June 2024 after remaining steady than-expected growth of 5.4 per cent in at 4.8 per cent during April-May 2024 owing to Q2:2024-25. Consequently, real GDP growth stubborn food inflation. Taking into account the projection for 2024-25 was revised downwards expectations of food inflation easing due to pick- to 6.6 per cent. Headline inflation increased to up in the SWM and healthy progress in sowing 6.2 per cent in October breaching the upper coupled with strong buffer stocks of cereals and tolerance level, driven by a sharp pick-up in food softening global food prices, the CPI inflation inflation and uptick in core inflation. Though food projection for 2024-25 was retained at 4.5 per inflation was expected to ease by Q4:2024-25, cent with Q2 at 4.4 per cent, Q3 at 4.7 per cent adverse weather events and rise in international 88MONETARY POLICY OPERATIONS agricultural commodity prices posed upside turn, was expected to soften further due to risks to food inflation. In view of these factors, good kharif production. Adverse weather events CPI inflation projection for 2024-25 was revised and uncertainties in global financial markets, upwards to 4.8 per cent with Q3 at 5.7 per cent however, posed upside risks to inflation. CPI and Q4 at 4.5 per cent. Moreover, CPI inflation inflation projection for 2024-25 was retained at for Q1:2025-26 was projected at 4.6 per cent; 4.8 per cent with Q4 at 4.4 per cent. Assuming a and Q2 at 4.0 per cent. The MPC observed that normal monsoon, CPI for 2025-26 was projected the near-term inflation and growth outcomes had at 4.2 per cent with Q1 at 4.5 per cent; Q2 at 4.0 turned somewhat adverse since the October per cent; Q3 at 3.8 per cent; and Q4 at 4.2 per policy and it remained committed on restoring cent. Against this backdrop, the MPC, noting that the inflation-growth balance, keeping in view the the growth-inflation dynamics opened up policy overall interest of the economy. By a majority of space to support growth, unanimously voted to 4-2, the MPC decided to keep the policy repo rate reduce the policy repo rate by 25 bps to 6.25 unchanged at 6.50 per cent while unanimously per cent. The MPC, while being watchful, also deciding to continue with the neutral stance. decided unanimously to continue with the neutral stance, as excessive volatility in global financial III.12 The last meeting of the MPC for the markets, continued uncertainties about global financial year 2024-25 was held in February trade policies and adverse weather events pose 2025. As per the First Advance Estimates (FAE), risks to growth and inflation outlook. domestic real GDP was estimated to grow by 6.4 per cent in 2024-25, supported by a recovery III.13 The MPC’s rate decisions during 2024-25 in private consumption. For 2025-26, real GDP were marked with diversity barring the February growth was projected at 6.7 per cent. Headline 2025 rate cut action (Chart III.1). Moreover, given inflation eased in November-December 2024 the prevailing uncertainties, the MPC eschewed due to moderation in food inflation, which, in from providing forward guidance and continued 6 5 4 3 2 1 0 89 22-rpA 22-yaM 22-nuJ 22-guA 22-peS 22-ceD 32-beF 32-rpA 32-nuJ 32-guA 32-tcO 32-ceD 42-beF 42-rpA 42-nuJ 42-guA 42-tcO 42-ceD 52-beF Chart III.1: Monetary Policy Committee (MPC) Rate Action a. Policy Repo Rate b. Voting on Repo Rate Source: RBI. tnec reP srebmem CPM fo rebmuN 6.75 6.5 6.50 6.25 6.25 6.25 6.00 5.9 5.75 5.50 5.4 5.25 5.00 4.9 4.75 4.50 4.4 4.25 4.00 4.0 3.75 Pause (+) 35 Basis Points (+) 25 Basis Points (+) 40 Basis Points (+) 50 Basis Points (-) 25 Basis Points 22-beF 22-rpA 22-nuJ 22-guA 22-tcO 22-ceD 32-beF 32-rpA 32-nuJ 32-guA 32-tcO 32-ceD 42-beF 42-rpA 42-nuJ 42-guA 42-tcO 42-ceD 52-beFANNUAL REPORT 2024-25 to remain data-dependent in policymaking. In the December 14, 2024 and December 28, 2024. February 2025 meeting, the policy repo rate was This reduction released primary liquidity of reduced for the first time since February 2023, about ₹1.16 lakh crore to the banking system. In with greater confidence on the disinflation path. addition, the Reserve Bank undertook a slew of Inflation is expected to further moderate in 2025- liquidity measures in Q4:2024-25 including term 26, gradually aligning with the target. repo auctions, open market purchase operations and USD/INR Buy/Sell swaps to inject durable III.14 Globally, while many central banks liquidity into the banking system. pivoted to an easing cycle in 2024, they remained cautious, maintaining a restrictive stance due to Drivers and Management of Liquidity the lingering uncertainty about inflation aligning III.16 Volatile capital flows, pick-up in CiC sustainably with their targets. However, faced and Government of India (GoI) cash balances with exacerbated trade related uncertainties, emerged as the major drivers of liquidity during central banks remained guarded in their rate 2024-25 (Table III.1). The leakage in banking action in the first quarter of 2025, reducing rates system liquidity due to increase in currency either with caution or taking a pause (Chart III.2). demand and the Reserve Bank’s forex market The Operating Framework: Liquidity Management operations was partly offset by the drawdown of excess reserves, reduction in GoI cash balances III.15 With a view to ease the potential liquidity and OMO purchases during 2024-25. stress that may arise on account of higher tax outflows, increase in currency in circulation III.17 At the beginning of Q1:2024-25, liquidity (CiC) and volatility in capital flows, the CRR conditions remained in surplus during first of banks was reduced to 4.0 per cent of NDTL half of April due to an increase in government on December 6, 2024, in two equal tranches spending. Thereafter, liquidity conditions of 25 bps each, effective fortnights beginning turned into deficit in the latter half of April Chart III.2: Policy Rate Easing: 2024-2025 a. Advanced Economies b. Emerging Market Economies Source : Central banks’ websites. 90 stniop sisaB stniop sisaB 100 50 0 0 -25 -100 -75 -75 -100 -150 -150 -200 -175 -175 -225 -300 -300 -400 H1:2024 H2:2024 Q1:2025 H1:2024 H2:2024 Q1:2025 ailartsuA adanaC cilbupeR hcezC aerA oruE napaJ dnalaeZ weN yawroN aeroK htuoS nedewS dnalreztiwS KU SU 550 500 400 250 250 100 -50 -25 -35 -25 0 -50 -75 -75 -200 -225 -350 -325 -500 -425 lizarB aissuR aidnI anihC acirfA htuoS elihC yragnuH senippilihP aisenodnI aisyalaM ocixeM dnaliahTMONETARY POLICY OPERATIONS Table III.1: Liquidity – Key Drivers and Management (₹ crore) Item 2023-24 2024-25 Q1:2024-25 Q2:2024-25 Q3:2024-25 Q4:2024-25 1 2 3 4 5 6 7 Drivers (i) CiC [withdrawal (-) / return (+)] -1,37,244 -2,04,703 -47,237 80,789 -78,988 -1,59,267 (ii) Net Forex Purchases (+) / Sales (-) 3,39,528 -2,91,233 -13,016 83,418 -3,27,601 -34,034 (iii) GoI Cash Balances [build-up (-) / drawdown (+)] -2,75,156 34,737 -97,774 -52,720 1,06,873 78,358 (iv) Excess Reserves [build-up (-) / drawdown (+)] -11,961 38,340 58,523 -21,755 41,534 -39,962 Management (i) Net OMO Purchases (+) / Sales (-) -18,505 2,59,346 - -24,040 - 2,83,386 (ii) Required Reserves [including both change in -1,27,717 20,837 -30,413 -25,200 39,349 37,101 NDTL and CRR / I-CRR] Memo Item: Daily Net Injection (+) / Absorption (-) as at end-period 52,918 172 -31,379 -84,651 1,82,788 172 CiC: Currency in Circulation. GoI: Government of India. -: Nil. Note: 1. Inflow (+)/Outflow (-) to and from the banking system. 2. Data pertain to the last Friday of the respective period. Source: RBI. and remained so till June in the wake of: (i) III.18 Liquidity turned into surplus during seasonal expansion in CiC; (ii) build-up of GoI Q2:2024-25 with a pick-up in government cash balances amidst lower spending as the spending after the elections, net forex purchases model code of conduct became effective during by the Reserve Bank and return of currency to elections; (iii) advance tax payments and goods the banking system. The build-up of GoI cash and services tax (GST) related outflows; and balances due to advance tax collections and GST (iv) the increase in holding of precautionary payments tightened liquidity conditions between balances by banks in the form of excess reserves. September 21-25, 2024. Additionally, net sales As a result, average daily net injection under the through open market operations (OMOs) under liquidity adjustment facility (LAF) [including those the negotiated dealing system - order matching under the marginal standing facility (MSF)] stood (NDS-OM) absorbed durable liquidity amounting at ₹0.5 lakh crore in Q1:2024-25. With system to ₹0.24 lakh crore during the quarter. Average liquidity in surplus in the first half of April 2024 daily net absorption under the LAF was ₹1.27 lakh (up to April 19), the Reserve Bank conducted crore during Q2. The Reserve Bank conducted one main and seven fine-tuning variable rate five main and 44 fine-tuning VRRR auctions to reverse repo (VRRR) auctions. As liquidity turned absorb surplus liquidity. into deficit beginning the latter half of April, five main and 17 fine-tuning variable rate repo III.19 The liquidity surplus moderated in (VRR) auctions were conducted to ease liquidity Q3:2024-25 with average net absorption under tightness1. the LAF declining to ₹0.80 lakh crore from 1 During this period, three fine-tuning VRRR operations were conducted on May 6 and June 4, 2024. 91ANNUAL REPORT 2024-25 ₹1.27 lakh crore in the previous quarter. Except to ease the persistently tight liquidity conditions, for a brief period, system liquidity remained in the Reserve Bank undertook a slew of measures surplus during October-November on account in Q4, which included: (i) injection of ₹1.83 lakh of higher government spending, notwithstanding crore through three term VRR auctions of varying a significant increase in CiC due to festival maturities conducted in February 2025; (ii) OMO related demand in October and capital outflows purchase auctions of Government of India in November. Consequently, the Reserve Bank securities for an aggregate amount of ₹2.45 lakh conducted five main and 23 fine-tuning VRRR crore; and (iii) USD/INR Buy/Sell swap auction of operations during October 1-November 29, US$ 5 billion for a tenor of six months on January 20242. System liquidity turned into deficit during 31, 2025 and US$ 10 billion for a tenor of three the second half of December on account of years each on February 28, 2025 and March 24, advance tax payments and capital outflows. 20253. In addition, the Reserve Bank purchased government securities amounting to ₹38,825 III.20 Liquidity conditions remained in deficit in crore under the NDS-OM during the quarter that Q4:2024-25 due to capital outflows and currency augmented durable liquidity. outgo, with average net injection of ₹1.56 lakh crore under the LAF. In order to ease the liquidity III.21 During 2024-25, average absorption stress and the resultant pressure on the weighted under the standing deposit facility (SDF) at ₹0.94 average call rate (WACR), the Reserve Bank lakh crore constituted 78 per cent of average started conducting daily VRR auctions effective daily total absorption (₹1.21 lakh crore) under January 16, 2025 with reversal taking place on the LAF, while the remaining 22 per cent was the next working day. During Q4:2024-25, the absorbed through VRRR auctions – both main Reserve Bank conducted four main and 62 fine- and fine-tuning operations (Chart III.3). Banks’ tuning VRR auctions to inject liquidity. With a view recourse to the MSF remained low, with average Chart III.3: Liquidity Operations a. Liquidity Source: RBI and CCIL. 2 11 fine-tuning VRR auctions were conducted to alleviate occasional bouts of liquidity stress during this period. 3 USD/INR Buy/Sell swaps injected durable liquidity of approximately ₹2.16 lakh crore into the banking system. 92 erorchkal₹ b. Standing Facilities erorc hkal ₹ 1.6 1.4 1.2 1.0 0.8 0.6 0.4 0.2 0.0 SDF MSF 42-rpA 42-yaM 42-nuJ 42-luJ 42-guA 42-peS 42-tcO 42-voN 42-ceD 52-naJ 52-beF 52-raM 3.5 2.5 1.5 0.5 -0.5 -1.5 -2.5 -3.5 42-rpA-10 42-rpA-41 42-rpA-72 42-yaM-01 42-yaM-32 42-nuJ-50 42-nuJ-81 42-luJ-10 42-luJ-41 42-luJ-72 42-guA-90 42-guA-22 42-peS-40 42-peS-71 42-peS-03 42-tcO-31 42-tcO-62 42-voN-80 42-voN-12 42-ceD-40 42-ceD-71 42-ceD-03 52-naJ-21 52-naJ-52 52-beF-70 52-beF-02 52-raM-50 52-raM-81 52-raM-13 Variable Rate Reverse Repo MSF Daily SDF Total Absorption Variable Rate Repo/Fine-tuning Net LAFMONETARY POLICY OPERATIONS daily borrowing amounting to ₹0.07 lakh crore of capital outflows and forex operations of the during 2024-25 compared to ₹0.5 lakh crore in Reserve Bank. The Reserve Bank’s intervention 2023-24. Buyback of G-secs, which is part of an in the forex market is aimed at maintaining orderly market conditions by containing excessive active debt consolidation strategy, augmented volatility in the exchange rate without targeting systemic liquidity amounting to ₹0.5 lakh crore any exchange rate level or band, thereby allowing during 2024-25. monetary policy to primarily remain focused on III.22 The tightening of liquidity conditions in the domestic macroeconomic conditions and the latter half of Q3 and Q4 was mainly on account outlook (Box III.1). Box III.1 Liquidity Management Challenges from Forex Market Operations Divergent monetary policy trajectories across advanced Sterilisations are typically carried out through open market economies, lingering geopolitical tensions and rising trade operations (OMOs) – sale/purchase of government and policy uncertainties in recent years have rendered securities to modulate the domestic liquidity impact of capital flows highly volatile. Since its integration with the purchase/sale of foreign currency assets by the Reserve global economy, India has experienced episodes of surges Bank. This is reflected in an offsetting change in net and sudden stops/reversal in capital flows, posing trade- domestic assets (NDA) vis-à-vis any change in net foreign offs for monetary policy (Chart 1). The Reserve Bank assets (NFA) in the Reserve Bank’s balance sheet4. intervenes in the forex market to modulate excessive A change in NDA, in turn, may cause further change in exchange rate volatility and maintain orderly market NFA as sterilisation operations through OMOs may affect conditions, thereby allowing monetary policy to primarily domestic yields resulting in further capital in/out flows. This remain focused on domestic macroeconomic conditions. contrasting movement between NDA and NFA dampens The Reserve Bank’s spot interventions in the forex market entail changes in domestic liquidity conditions, which may the impact of sterilised intervention. Therefore, the Reserve necessitate sterilisation of such interventions, given the Bank carefully adjusts changes in NFA and NDA (Chart 2), monetary policy stance. keeping in mind the prevailing liquidity conditions and the 10 8 6 4 2 0 -2 -4 -6 -8 (Contd.) 4 The total monetary liability of the Reserve Bank, reflected in the quantum of reserve money in the economy, is the sum of NDA and NFA of the Reserve Bank. 93 erorc hkal ₹ 12-rpA 12-nuJ 12-guA 12-tcO 12-ceD 22-beF 22-rpA 22-nuJ 22-guA 22-tcO 22-ceD 32-beF 32-rpA 32-nuJ 32-guA 32-tcO 32-ceD 42-beF 42-rpA 42-nuJ 42-guA 42-tcO 42-ceD Chart 2: Reserve Bank’s NDA and NFA 25 20 15 10 5 0 -5 -10 -15 -20 -25 Y-o-Y Change in NDA Y-o-Y Change in NFA Note: NDA and NFA are adjusted for valuation change. Source: RBI staff estimates. noillib $SU 02-rpA 02-nuJ 02-guA 02-tcO 02-ceD 12-beF 12-rpA 12-nuJ 12-guA 12-tcO 12-ceD 22-beF 22-rpA 22-nuJ 22-guA 22-tcO 22-ceD 32-beF 32-rpA 32-nuJ 32-guA 32-tcO 32-ceD 42-beF 42-rpA 42-nuJ 42-guA 42-tcO 42-ceD Chart 1: Net Sales of Foreign Currency by the Reserve Bank and Net FPI Flows Net Sales of Foreign Currency Net FPI Flows Source: NSDL and RBI.ANNUAL REPORT 2024-25 stance of monetary policy, while preventing excessive monthly data from January 2010 to September 2024 using volatility in the exchange rate. a two-stage least squares (2SLS) framework (Table 1). The endogenous relationship between NDA and NFA In this framework (Ouyang and Rajan, 2008), the efficacy of is modelled using a central bank liquidity management the sterilised forex market interventions can be gauged by reaction function (∆NDA = α + β∆NFA + μX), and a net capital i i the sterilisation coefficient (to what extent the increase in flows equation (∆NFA = a + b∆NDA + θY), where β and b i i liquidity resulting from the increase in NFA is sterilised by a are the sterilisation and offset coefficients, respectively. corresponding decline in NDA), net of the offset coefficient X [nominal GDP: quarterly data interpolated to monthly, i (the extent of change in NDA that is partially neutralised money multiplier (MUL) and domestic spread (DS: spread by a sterilisation induced change in NFA). The estimated between the weighted average call rate and policy repo sterilisation coefficient of -0.78 implies that, on average, rate)] and Y [nominal GDP, MUL, international spread i about 78 per cent of the increase in rupee liquidity resulting (IS: spread between the weighted average call rate and from an increase in NFA is absorbed through sterilisation effective Fed Funds rate) and real effective exchange rate (REER)] are control variables in the equations for NDA and operations. The high offset coefficient of -0.71, however, NFA, respectively (Raj et al., 2018). Appropriate instrument dampens the impact of sterilisation operations. Overall, variables are used to tackle endogeneity – IS and REER the findings demonstrate the continued effectiveness of for NFA and DS for NDA. The model is estimated based on sterilised intervention in managing capital flows. Table 1: Sterilisation and Offset Coefficients Dependent Variable: ∆NDA Dependent Variable: ∆NFA Explanatory Variable Coefficient p-value Explanatory Variable Coefficient p-value 1 2 3 1 2 3 Constant 0.01 0.79 Constant -0.00 0.99 ∆NFA -0.78 0.00 ∆NDA -0.71 0.01 ∆GDP -0.03 0.41 ∆GDP -0.02 0.70 ∆MUL -0.18 0.00 ∆MUL -0.16 0.00 ∆DS 0.01 0.19 ∆IS -0.00 0.69 AR(1) 0.68 0.00 ∆REER 0.03 0.76 AR(2) 0.19 0.05 AR(1) 0.74 0.00 Instrument Variables IS; REER AR(2) 0.13 0.12 Adjusted R-sqaured 0.94 Instrument Variable DS DW Statistic 1.99 Adjusted R-squared 0.91 DW Statistic 1.97 Note: All variables are considered in their first difference form (12-month variation); GDP and REER are taken in log form; NDA and NFA are adjusted for valuation changes and are scaled by the reserve money of the previous year; ∆NFA is 80 per cent winsorised; Transformed variables are found to be stationary; Newey-West correction method has been used for heteroskedasticity and autocorrelation-consistent standard errors. Source: RBI staff estimates. References: 1. Ouyang, A.Y., and Rajan, R.S. (2008), ‘Reserve Stockpiling and Managing its Monetary Consequences: The Indian Experience’, Macroeconomics and Finance in Emerging Market Economies, 1(1), 75-91. 2. Raj, J., Pattanaik, S., Bhattacharya, I., and Abhilasha (2018), ‘Forex Market Operations and Liquidity Management’, RBI Bulletin, 72(8), 13-22. 94MONETARY POLICY OPERATIONS III.23 During 2024-25, two-way fine-tuning III.25 Overnight rates in the collateralised operations were the key instrument to manage segment moved in tandem with the WACR frictional liquidity. During this period, fine-tuning (Table III.2). In the short-term money market, and main VRRR operations elicited average offer- average yield on 3-month treasury bills (T-bills) cover ratios of 0.50 and 0.16, respectively. Banks softened by 26 bps in September 2024 from June were reluctant in parting with liquidity for longer 2024 on account of lower short-term borrowing tenors, as evident from the lower offer-cover ratios requirements of the government, as reflected in of main operations vis-à-vis fine-tuning operations. the cancellation of T-bill auctions in the second In contrast, the market was more responsive to half of September. Yields declined further in March fine-tuning and main VRR operations as reflected 2025. Similarly, yields on 3-month commercial in much higher bid-cover ratios. papers (CPs) of NBFCs and certificates of deposit III.24 Reflecting the liquidity dynamics, the (CDs) softened from March 2024, taking cues from WACR – the operating target of monetary policy Table III.2: Interest Rates – remained broadly within the LAF corridor (Per cent) during 2024-25.5 It, however, moderated after Indicator Average for the introduction of daily VRR operations and the Mar- Jun- Sep- Mar- 2024 2024 2024 2025 reduction in the policy repo rate by 25 bps on 1 2 3 4 5 February 7, 2025. The WACR, on an average, Rates WACR 6.60 6.59 6.54 6.32 remained 6 bps above the policy repo rate in Tri-party Repo 6.54 6.51 6.43 6.17 2024-25 as against 13 bps in 2023-24 Market Repo 6.61 6.53 6.52 6.32 3-Month T-bill 6.92 6.84 6.58 6.47 (Chart III.4). 3-Month CP 8.18 7.79 7.68 7.81 3-Month CD 7.70 7.15 7.28 7.55 Chart III.4: Policy Corridor and Weighted AAA Corporate 7.66 7.68 7.49 7.44 Average Call Rate Bond - 5-year 7.00 G-sec Yield - 7.07 7.00 6.71 6.57 5-year 6.75 G-sec Yield - 7.06 6.99 6.80 6.67 10-year 6.50 Spreads CP - T-bill 126 95 110 134 (bps) AAA 5-year - 59 68 78 87 6.25 G-sec 5-year Memo Items: 6.00 Liquidity Net LAF -29,323 -45,406 1,08,706 -1,14,640 (₹ crore) 5.75 Global US 10-year 4.20 4.30 3.73 4.28 Indicators G-sec Yield (Per cent) Crude Oil Price 84 83 74 72 (Indian Basket) [US $ per barrel] Source: RBI and CCIL. Source: CCIL, RBI and Bloomberg. 5 Temporary liquidity tightness resulted in overnight rates breaching the ceiling of the policy corridor (MSF rate) occasionally during the year. 95 tnec reP 42-rpA-10 42-rpA-41 42-rpA-72 42-yaM-01 42-yaM-32 42-nuJ-50 42-nuJ-81 42-luJ-10 42-luJ-41 42-luJ-72 42-guA-90 42-guA-22 42-peS-40 42-peS-71 42-peS-03 42-tcO-31 42-tcO-62 42-voN-80 42-voN-12 42-ceD-40 42-ceD-71 42-ceD-03 52-naJ-21 52-naJ-52 52-beF-70 52-beF-02 52-raM-50 52-raM-81 52-raM-13 6.88 Weighted Average Call Rate Repo Rate SDF Rate MSF RateANNUAL REPORT 2024-25 domestic developments such as the transition of domestic term deposit rates (WADTDRs) on systemic liquidity to surplus and moderation in fresh and outstanding deposits increased by 3 the wedge between deposit and credit growth. bps and 14 bps, respectively, in 2024-25, with a The decline in short-term rates prompted banks rising proportion of deposits getting renewed at to increase CD issuances to meet rising credit higher rates. The pace and extent of monetary transmission to lending and deposit rates of demand amidst sluggish deposit growth. G-sec SCBs has strengthened in recent years, reflecting yields also remained benign throughout the year the Reserve Bank’s sustained efforts to impart (see Section 5 of Chapter II). Overall, monetary transparency and flexibility to the interest rate policy changes impact short-term interest rates structure.7 more than long-term rates in the Indian context (Patra et al., 2024)6. III.27 During the tightening cycle (May 2022-January 2025), banks revised their repo- Monetary Policy Transmission linked lending rates upwards by 250 bps and III.26 The transmission of policy repo rate 1-year marginal cost of funds-based lending rate changes to banks’ deposit and lending rates (MCLR) by 178 bps, resulting in an increase in the continued during 2024-25 albeit at a slower pace. WALR on fresh rupee loans and on outstanding The weighted average lending rates (WALRs) loans. The WADTDRs on fresh term deposits and on fresh and outstanding rupee loans of SCBs outstanding term deposits also increased during declined by 2 bps and 8 bps, respectively, during this period (Table III.3). The increase in term 2024-25. In case of deposits, weighted average deposit rates on fresh deposits was mainly driven Table III.3: Transmission from the Policy Repo Rate to Deposit and Lending Rates of SCBs (Variation in basis points) Period Repo Term Deposit Rates Lending Rates (April-March) Rate WADTDR WADTDR 1-year EBLR WALR WALR Fresh Outstanding MCLR Fresh Outstanding Deposits Deposits (Median) Rupee Rupee Loans Loans 1 2 3 4 5 6 7 8 2022-23 250 236 113 150 250 169 98 2023-24 0 14 73 30 0 5 13 2024-25 -25 3 14 10 -25 -2 -8 Memo Items: February 2019 to March 2022 (Easing Cycle) -250 -259 -188 -155 -250 -232 -150 May 2022 to January 2025 (Tightening Cycle) 250 253 199 178 250 181 115 February 2025 to March 2025 (Easing Cycle) -25 8 1 0 -25 3 -10 WADTDR: Weighted Average Domestic Term Deposit Rate. WALR: Weighted Average Lending Rate. MCLR: Marginal Cost of Funds-based Lending Rate. EBLR: External Benchmark-based Lending Rate. Note: Data on EBLR pertain to domestic banks. Source: RBI. 6 Patra, M. D., Bhattacharyya, I., John, J., and Kumar, A. (2024), ‘Monetary Policy Transmission in India: The Recent Experience’, RBI Monthly Bulletin, October. 7 The introduction of external benchmark-based lending rate (EBLR) for floating rate loans was a major initiative in October 2019. 96MONETARY POLICY OPERATIONS Chart III.5: Transmission to Lending and Deposit Rates Across Bank-Groups a. Tightening Cycle (May 2022 - January 2025) b. Easing Cycle (February - March 2025) Source: RBI. by bulk deposit rates, although retail deposit of foreign banks, facilitated by their low-cost rates also exhibited significant transmission, deposits and a higher proportion of EBLR-linked especially in H1:2024-25. loans8. During February-March 2025, WALR on outstanding rupee loans declined across all III.28 In response to the 25 bps cut in policy bank-groups. repo rate during the February policy meeting, banks have reduced their repo linked external External Benchmark-based Loan Rates benchmark lending rate (EBLR) by a similar III.30 The EBLR regime has strengthened magnitude. The MCLR, having a longer reset and quickened the pace of transmission. The period and being linked to the cost of funds, may proportion of EBLR-linked loans in outstanding undergo adjustments with some lag. floating rate rupee loans of SCBs increased Consequently, the WALR on outstanding rupee further during 2024-25. Concomitantly, the share loans declined by 10 bps during the easing cycle of the MCLR-linked loans fell during the year (February-March 2025). In case of fresh loans, (Table III.4). however, it has increased by 3 bps. III.29 Across bank-groups, increase in the Table III.4: Outstanding Floating Rate Rupee Loans of SCBs across Interest Rate WADTDR on outstanding deposits and WALR on Benchmarks fresh rupee loans were higher for public sector (Per cent to total) banks (PSBs) relative to private banks (PVBs) Month Base MCLR EBLR Others Total during May 2022-January 2025 (Chart III.5). Rate The transmission to WALR on outstanding rupee 1 2 3 4 5 6 loans, however, was lower for PSBs reflecting March 2023 3.1 45.4 49.6 1.9 100.0 a comparatively higher share of internal March 2024 2.2 39.2 56.6 2.0 100.0 December 2024 1.6 35.9 60.6 1.9 100.0 benchmark-based lending rates, viz., MCLR Source: RBI. and others. Transmission was highest in case 8 Foreign banks had 92.2 per cent share of EBLR-linked loans in total outstanding floating rupee loans as at end-December 2024. 97 402 971 672 281 761 023 79 031 831 571 581 571 30 350 20 300 20 12 250 10 7 2 1 0 0 200 0 150 -10 -8-10 -5 100 -20 -19 50 -30 0 -40 -34 WADTDR WALR WALR 1-Year (Outstanding (Fresh Rupee (Outstanding Median Deposits) Loans) Rupee Loans) MCLR Public Sector Banks Private Banks Foreign Banks stniop sisaB stniop sisaB WALR WALR WADTDR WADTDR (Fresh Rupee (Outstanding (Fresh (Outstanding Loans) Rupee Loans) Deposits) Deposits) Public Sector Banks Private Banks Foreign BanksANNUAL REPORT 2024-25 Chart III.6: Share of Various Benchmark-based Loans in Total Outstanding Floating Rate Loans a. Public Sector Banks Source: RBI. III.31 The share of EBLR-linked loans in total over the repo rate) was highest for education outstanding floating rate loans of PSBs stood at loans followed by micro, small and medium 44.6 per cent, whereas it was 85.9 per cent for enterprise (MSME) loans and vehicle loans. PVBs as at end-December 2024 (Chart III.6). Among the domestic bank-groups, the spreads The share of MCLR and other legacy rate loans charged by PSBs for housing, vehicle, education was significantly higher in PSBs as compared to and other personal loans were lower than those PVBs. Thus, the predominance of legacy factors, of PVBs, whereas the spread on MSME loans viz., base rate, MCLR and others in PSBs’ was broadly similar between the two groups portfolios have resulted in lower transmission to (Table III.5). WALR on outstanding rupee loans of PSBs vis- à-vis PVBs. Sectoral Lending Rates III.32 In case of loans linked to the policy III.33 The WALRs on fresh rupee loans rose repo rate, the spread of fresh rupee loans (WALR for vehicle, rupee export credit, and education Table III.5: Loans Linked to External Benchmark – Spread of WALR (Fresh Rupee Loans) over Repo Rate (March 2025) (Percentage points) Bank Group Personal Loans MSME Loans Housing Vehicle Education Other Personal Loans 1 2 3 4 5 6 Public Sector Banks 2.13 2.63 3.56 2.92 3.31 Private Sector Banks 2.56 4.84 5.48 4.24 3.31 Domestic Banks 2.39 3.14 4.66 3.09 3.31 Source: RBI. 98 tnec reP b. Private Banks Base Rate MCLR EBLR Others tnec reP 100 90 80 70 60 50 40 30 20 10 0 Base Rate MCLR EBLR Others 91-peS 91-ceD 02-raM 02-nuJ 02-peS 02-ceD 12-raM 12-nuJ 12-peS 12-ceD 22-raM 22-nuJ 22-peS 22-ceD 32-raM 32-nuJ 32-peS 32-ceD 42-raM 42-nuJ 42-peS 42-ceD 100 90 80 70 60 50 40 30 20 10 0 91-peS 91-ceD 02-raM 02-nuJ 02-peS 02-ceD 12-raM 12-nuJ 12-peS 12-ceD 22-raM 22-nuJ 22-peS 22-ceD 32-raM 32-nuJ 32-peS 32-ceD 42-raM 42-nuJ 42-peS 42-ceDMONETARY POLICY OPERATIONS Table III.6: Sector-wise WALR of SCBs (Excluding RRBs) - Fresh Rupee Loans (Per cent) Month Agriculture Industry MSMEs Infrastructure Trade Professional Personal Loans Rupee (Large) Services Export Housing Vehicle Education Credit Card Credit 1 2 3 4 5 6 7 8 9 10 11 12 Mar-23 10.12 8.34 9.84 8.56 8.87 8.80 9.02 10.47 10.26 37.06 8.09 Mar-24 10.18 8.39 9.99 8.74 8.53 9.58 8.65 9.21 10.45 37.72 7.21 Jun-24 9.89 8.12 9.87 8.51 8.62 9.13 8.91 10.47 10.19 38.10 7.31 Sep-24 10.07 8.19 10.05 8.71 8.56 9.08 8.96 10.93 10.84 37.51 7.53 Dec-24 10.12 8.06 9.93 8.52 8.60 8.88 8.69 10.47 10.65 37.48 8.06 Mar-25 10.02 8.33 9.69 8.56 8.45 9.18 8.55 10.37 10.47 37.72 8.07 Variation (Percentage Points) 2023-24 0.06 0.05 0.15 0.18 -0.34 0.78 -0.37 -1.26 0.19 0.66 -0.88 2024-25 -0.16 -0.06 -0.30 -0.18 -0.08 -0.40 -0.10 1.16 0.02 0.00 0.86 Source: RBI. segments during 2024-25, while they declined 2024-25. On the other hand, the WALRs on loans to professional services, MSMEs, on loans to trade, MSMEs, large industry, infrastructure, agriculture, housing, trade, and housing, professional services, education and large industry (Table III.6). infrastructure segments declined during the same period (Table III.7). III.34 In case of outstanding loans, the WALRs on credit cards, rupee export credit, III.35 With a view to strengthen the assessment vehicle, and agriculture loans increased during of monetary policy transmission, monthly data on Table III.7: Sector-wise WALR of SCBs (Excluding RRBs) - Outstanding Rupee Loans (Per cent) Month Agriculture Industry MSMEs Infrastructure Trade Professional Personal Loans Rupee (Large) Services Export Housing Vehicle Education Credit Card Credit 1 2 3 4 5 6 7 8 9 10 11 12 Mar-23 9.84 8.78 10.28 8.96 9.49 9.29 8.86 9.36 10.20 30.44 7.71 Mar-24 10.16 8.69 10.31 9.11 9.46 9.54 8.90 9.48 10.46 28.84 7.96 Jun-24 10.20 8.63 10.28 9.14 9.40 9.46 9.10 9.93 10.56 28.91 7.94 Sep-24 10.25 8.57 10.21 9.05 9.43 9.43 9.05 9.96 10.57 29.28 8.03 Dec-24 10.23 8.53 10.20 9.05 9.35 9.35 8.93 9.99 10.49 29.38 8.20 Mar-25 10.21 8.44 10.01 9.02 9.13 9.39 8.72 9.96 10.31 29.42 8.52 Variation (Percentage Points) 2023-24 0.32 -0.09 0.03 0.15 -0.03 0.25 0.04 0.12 0.26 -1.60 0.25 2024-25 0.05 -0.25 -0.30 -0.09 -0.33 -0.15 -0.18 0.48 -0.15 0.58 0.56 Source: RBI. 99ANNUAL REPORT 2024-25 ● Review of the monetary policy framework; Chart III.7: Monetary Policy Transmission to Outstanding Lending Rates of NBFCs ● Revisiting optimal level of system liquidity 280 for effective monetary policy transmission; 230 225 ● Spatial and cross-sectional analysis of 180 National Sample Survey Organisation’s household consumption expenditure 130 data; and 105 80 ● Collection of credit deployment data from housing finance companies (HFCs) for 30 38 improved assessment of sectoral credit -20 by NBFCs. 4. Conclusion III.37 During 2024-25, headline inflation Source: RBI. exhibited further moderation, though the path lending rates of major NBFCs covering various of disinflation was interrupted by volatile and sectors of the economy were examined. The elevated food inflation. System liquidity conditions interest rates charged by NBFCs tend to be transited from surplus during August-November 2024 to deficit in December-February. The higher as compared to SCBs, inter alia, reflecting Reserve Bank reduced the policy rate by 25 bps their liability structure and the risk profile of as growth-inflation dynamics opened up policy their borrowers. The degree of monetary policy space for supporting growth and proactively transmission, thus, differs between NBFCs and conducted a suite of market operations to SCBs (Chart III.7). provide durable liquidity in the system. As a result, system liquidity returned to surplus by 3. Agenda for 2025-26 end-March 2025. Going forward, domestic III.36 The Department would support the economic activity is expected to strengthen from the lows of H1:2024-25. Headline inflation is conduct and formulation of monetary policy by expected to ease and move further towards the providing (i) high quality inputs on the assessment target in 2025-26. Monetary policy is committed and outlook of inflation and growth; (ii) analysing towards achieving durable price stability, which and refining forecast of liquidity conditions; is a necessary prerequisite for high growth on a (iii) studying the monetary policy transmission sustained basis. The Reserve Bank will undertake process; and (iv) evaluating credit conditions liquidity management operations in sync with the and sectoral flows. Against this backdrop, monetary policy stance and keep system liquidity the Department would focus on the following adequate to meet the needs of the productive initiatives: sectors of the economy. 100 stniop sisaB 22-yaM 22-luJ 22-peS 22-voN 32-naJ 32-raM 32-yaM 32-luJ 32-peS 32-voN 42-naJ 42-raM 42-yaM 42-luJ 42-peS 42-voN 52-naJ 52-raM Policy Repo Rate SCBs NBFCsCREDIT DELIVERY AND FINANCIAL INCLUSION CREDIT DELIVERY AND IV FINANCIAL INCLUSION The Reserve Bank continued with its endeavour to deepen financial inclusion in the country as envisaged under the National Strategy for Financial Inclusion (NSFI). Steps were undertaken for the formulation of the next iteration of the NSFI for the period 2025-30. RBI90Quiz was conducted for enhancing financial literacy among youth. The Centre for Financial Literacy (CFL) project was scaled up in a phased manner to cover the entire country in 2024. IV.1 The Reserve Bank continued with its competition, RBI90Quiz, for undergraduate focus on ensuring availability of banking services students across the country was conducted to all sections of society across the country, during the year. including strengthening the credit delivery system IV.2 Against this backdrop, the rest of the to cater to the needs of productive sectors of chapter is structured into three sections. The the economy, particularly agriculture, and micro implementation status of the agenda for 2024-25 and small enterprises (MSEs). During 2024- along with the performance of credit flow to 25, a number of initiatives were taken such as priority sectors and developments with respect initiation of process for formulation of the next to financial inclusion and financial literacy are iteration of the NSFI for the period 2025-30, presented in section 2. The agenda for 2025-26 is review of priority sector lending (PSL) guidelines, provided in section 3 with concluding observations extension of expanding and deepening of digital in section 4. payments ecosystem (EDDPE) programme 2. Agenda for 2024-25 in all districts [except two districts of Union Territory (UT) of Andaman and Nicobar Islands IV.3 The Department had set the following and one district of Manipur] and bolstering the goals for 2024-25: credit availability for micro, small and medium ● Formulation of the next iteration of the enterprises (MSMEs). Moreover, the composite NSFI for the period 2025-30 (Utkarsh 2.0) financial inclusion index (FI-Index) registered a [Paragraph IV.4]; year-on-year (y-o-y) growth of 6.8 per cent to ● Review of priority sector lending guidelines 64.2 in March 2024, with expansion across all (Utkarsh 2.0) [Paragraph IV.5]; sub-indices. The CFL project was scaled up to 2,421 CFLs across the country to provide greater ● Achieving 100 per cent coverage in 50 per stimulus to the financial literacy programme. cent districts across the country by March A nationwide general knowledge-based quiz 2025, under EDDPE1 (Paragraph IV.6); 1 Providing every eligible individual in the identified districts at least one mode of digital payment, viz., debit/RuPay cards, net banking, mobile banking, UPI, unstructured supplementary service data (USSD), Aadhaar enabled payment system (AePS), etc. 101ANNUAL REPORT 2024-25 ● Enhancing the effectiveness of Lead IV.7 A comprehensive review of the LBS Bank Scheme (LBS) for greater financial is underway with a view to enhancing the inclusion (Paragraph IV.7); and effectiveness of the scheme in deepening financial inclusion through improved access, usage, and ● Strengthening the regulatory framework quality of financial services for all sections of the to bolster credit availability for MSMEs population. (Paragraph IV.8). IV.8 Access to credit is critical for the Implementation Status growth and sustainability of MSMEs. Some IV.4 The work relating to formulation of the of the common challenges faced by MSMEs next iteration of NSFI for the period 2025-30 is in in accessing formal credit include information progress. asymmetry, excess documentation and lack of IV.5 The PSL guidelines were comprehensively transparency. To address these challenges, the reviewed and revised Master Directions on PSL following instructions were issued to banks on were issued on March 24, 2025 which became June 11, 2024: effective from April 1, 2025. The revised directions a) Scheduled commercial banks (SCBs) include, inter alia, enhancement of several loan have been advised to have a uniform limits under PSL categories, broadening of the turnaround time (TAT) of 14 days for purposes based on which loans may be classified loans up to ₹25 lakh for micro and small under ‘Renewable Energy’, revision of overall enterprises (MSE) borrowers to ensure PSL target for urban co-operative banks (UCBs) faster disposal of such loan applications, from 75 per cent to 60 per cent, fixation of target and clearly display all credit related for non-corporate farmers, etc. The enhanced information under a separate tab on their coverage of the revised guidelines is expected websites. to facilitate better targeting of bank credit to the b) It was reiterated to banks to implement a priority sectors of the economy. credit proposal tracking system (CPTS) IV.6 The EDDPE programme was extended and inform the MSME borrowers in to all districts (except two districts of UT of writing, the main reason/s of rejection of Andaman & Nicobar Islands and one district loan applications, furnish them with an of Manipur) in August 2023. As on March indicative checklist of documents required 31, 2025, 100 per cent coverage has been at the time of loan application, and display achieved in more than 60 per cent districts (514 the pendency position of loan applications districts) across the country. This includes all on their websites. districts in 15 states, viz., Kerala, Telangana, Andhra Pradesh, Tripura, Tamil Nadu, Madhya c) The guidelines on cluster financing were Pradesh, Rajasthan, Bihar, Himachal Pradesh, reviewed to provide a clear definition of Karnataka, Jharkhand, Gujarat, Goa, Uttar clusters and address their credit needs. Pradesh, Odisha and six UTs, viz., Delhi, MSE clusters have now been defined Chandigarh, Lakshadweep, Dadra and Nagar as those identified by the Ministry of Haveli and Daman and Diu, Ladakh and MSME, Government of India and state Puducherry. governments. Lead banks are required 102CREDIT DELIVERY AND FINANCIAL INCLUSION to promote credit linkage in all clusters Table IV.1: Achievement of Priority Sector in their districts directly/with other banks, Lending Targets (Amount in ₹ lakh crore) to create awareness among the MSE units and incorporate the credit needs of Financial Year Public Private Foreign SCBs Sector Sector Banks clusters in the branch/block level credit Banks Banks plans. 1 2 3 4 5 2023-24 31.9 24.1 2.5 58.5 Major Developments (42.6) (47.4) (41.6) (44.4) Credit Delivery 2024-25* 36.0 27.1 2.7 65.7 (42.4) (44.3) (42.0) (43.1) Priority Sector *: Data are provisional. Note: Figures in parentheses are percentage to ANBC or CEOBSE, IV.9 SCBs’ priority sector lending as on whichever is higher. March 31, 2025 stood at 43.1 per cent2 of Source: Priority sector returns submitted by SCBs. adjusted net bank credit (ANBC)/credit equivalent of off-balance sheet exposure (CEOBSE), outstanding amount increased by 4.5 per cent whichever is higher. Each of the bank groups (Table IV.2). achieved the prescribed 40 per cent overall PSL target during 2024-25 (Table IV.1). Enhancement of Collateral-free Agriculture Loan Limit Flow of Credit to Agriculture IV.11 Keeping in view the rise in agricultural IV.10 The Kisan Credit Card (KCC) is a single input costs and overall inflation, the limit for window facility for providing working capital as collateral-free agriculture loans was raised from well as investment credit to farmers for cultivation, animal husbandry and fisheries. The number ₹1.6 lakh to ₹2 lakh per borrower in December of operative KCCs declined by 2.7 per cent 2024 to further enhance credit availability for during 2024-25 over the previous year, while the small and marginal farmers. Table IV.2: Kisan Credit Card (KCC) Scheme (Number in lakh, Amount in ₹ crore) Financial Year Number of Outstanding Outstanding Outstanding Total Operative Crop Loan Term Loan Loan for Animal KCCs# Husbandry and Fisheries 1 2 3 4 5 6 2023-24 298.1 4,93,362 46,332 35,279 5,74,974 2024-25* 290.2 5,07,821 55,047 38,107 6,00,975 *: Data are provisional. #: The number of operative KCC accounts does not include non-performing asset (NPA) accounts. Source: Public sector banks, private sector banks and small finance banks. 2 Pertains to public sector banks, private sector banks and foreign banks. 103ANNUAL REPORT 2024-25 Table IV.3: Bank Credit to MSMEs (Number in lakh, Amount in ₹ lakh crore) Financial Year Micro Enterprises Small Enterprises Medium Enterprises MSMEs Number of Amount Number of Amount Number of Amount Number of Amount Accounts Outstanding Accounts Outstanding Accounts Outstanding Accounts Outstanding 1 2 3 4 5 6 7 8 9 2022-23 194.4 10.5 15.7 7.5 3.2 4.6 213.3 22.6 2023-24 231.9 13.3 21.3 8.6 3.8 5.3 257.0 27.3 2024-25* 225.8 15.1 15.5 9.9 4.0 6.3 245.3 31.3 *: Data are provisional. Source: Priority sector returns submitted by SCBs. Bank Credit to the MSME Sector per cent of the identified villages/hamlets across the country have been covered. Efforts are IV.12 Increasing the flow of credit to the MSMEs underway to achieve the target for the remaining has been a policy priority of the Reserve Bank few villages/hamlets. and the Government of India. SCBs’ outstanding credit to the MSMEs increased by 14.8 per cent Financial Inclusion Plan (FIP) (y-o-y) during 2024-25 (Table IV.3). IV.15 The progress made by the banks in the financial inclusion sphere as captured Financial Inclusion through various indicators under the FIP as at Assignment of Lead Bank Responsibility end-December 2024 is set out in Table IV.4. IV.13 The assignment of lead bank responsibility The aggregate balance in Basic Savings Bank to a designated bank in every district is Deposit Accounts (BSBDA) increased by 11.9 undertaken by the Reserve Bank. At present, 12 per cent (y-o-y) in December 2024. public sector banks and two private sector banks Financial Inclusion Index (FI-Index) (Jammu & Kashmir Bank and ICICI Bank) have IV.16 The Reserve Bank has constructed a been assigned lead bank responsibility, covering composite FI-Index to measure and evaluate the 782 districts across the country. extent of financial inclusion across the country. It Universal Access to Financial Services in Every has three sub-indices, viz., FI-access, FI-usage Village and FI-quality. The index incorporates granular IV.14 Providing banking access to every village data on banking, investments, insurance, postal within a 5 km radius/hamlet of 500 households in as well as the pension sector collated from the hilly areas is one of the milestones of the NSFI: government and sectoral regulators. The FI- 2019-24, which has been fully achieved in 27 Index for March 2024 increased to 64.2 from states and eight UTs as on March 31, 2025. 99.99 60.1 in March 2023, with growth witnessed 104CREDIT DELIVERY AND FINANCIAL INCLUSION Table IV.4: Financial Inclusion Plan: A Progress Report Particulars March December December 2010 2023 2024$ 1 2 3 4 Banking Outlets in Villages - 33,378 53,893 56,579 Branches BC Outlets in Villages > 2000* 8,390 13,15,004 10,82,650 BC Outlets in Villages < 2000* 25,784 2,77,594 2,72,941 Total BC Outlets in Villages 34,174 15,92,598 13,55,591 Urban Locations Covered 447 3,58,167 3,67,712 Through BCs BSBDA - Through Branches 600 2,780 2,743 (Number in lakh) BSBDA - Through Branches 4,400 1,35,628 1,45,883 (Amount in crore) BSBDA - Through BCs 130 4,274 4,458 Note: Figures in parentheses indicate weights in per cent in FI-Index. Source: RBI. (Number in lakh) BSBDA - Through BCs 1,100 1,36,558 1,58,832 (Amount in crore) National Strategy for Financial Inclusion (NSFI): BSBDA - Total 730 7,054 7,201 2019-24 (Number in lakh) BSBDA - Total 5,500 2,72,186 3,04,715 IV.17 NSFI: 2019-24, released in January (Amount in crore) 2020, has facilitated the deepening of financial OD Facility Availed in BSBDAs 2 53 45 (Number in lakh) inclusion in the country. The strategy envisaged OD Facility Availed in BSBDAs 10 579 548 providing access to formal financial services in (Amount in crore) an affordable manner, broadening and deepening KCC - Total (Number in lakh) 240 507 520 KCC - Total (Amount in crore) 1,24,000 8,11,906 8,85,068 GCC - Total (Number in lakh) 10 55 22 GCC - Total (Amount in crore) 3,500 53,690 36,312 ICT-A/Cs-BC-Total 270 27,294 29,944 Transactions (Number in lakh)# ICT-A/Cs-BC-Total 700 9,86,236 10,73,073 Transactions (Amount in crore)# BCs: Business Correspondents. BSBDAs: Basic Savings Bank Deposit Accounts. OD: Overdraft. KCC: Kisan Credit Card. GCCs: General Credit Cards. ICT: Information and Communication Technology. $: Data are provisional. *: Village Population. #: Transactions during the financial year. Source: FIP returns submitted by public sector banks, private sector banks and regional rural banks. across all sub-indices, mainly contributed by FI- usage (Charts IV.1 and IV.2). 105 xednI xednI Chart IV.1: FI-Index and Sub-Indices (end-March) 90 70 64.2 80 60.1 56.4 60 53.1 53.9 70 49.9 46.0 50 60 43.4 50 40 40 30 30 20 20 2017 2018 2019 2020 2021 2022 2023 2024 FI-Access (35) FI-Usage (45) FI-Quality (20) FI-Index (RHS) Note: 1. Figures in parentheses indicate weights in per cent in FI-Index. 2. Negative contribution by FI-Quality during 2021 was due to reduced financial literacy activities. Source: RBI. stniop egatnecreP Chart IV.2: Contribution of Sub-Indices to the Growth of FI-Index (end-March) 10 8 6 4 2 0 -2 2018 2019 2020 2021 2022 2023 2024 FI-Access (35) FI-Usage (45) FI-Quality (20)ANNUAL REPORT 2024-25 financial inclusion, promoting financial literacy also carried out localised campaigns. Banks and consumer protection. were also advised to disseminate information IV.18 Five of the 18 milestones under NSFI were and create awareness amongst their customers envisaged to be achieved during 2024. These and the general public. include: (a) leveraging developments in FinTech Centre for Financial Literacy (CFL) space for strengthening outreach through virtual IV.20 The CFL pilot project on financial literacy modes; (b) moving towards an increasingly digital was initiated by the Reserve Bank in 2017 in and consent-based architecture for customer nine states across 80 blocks in collaboration with on-boarding; (c) focusing on process literacy eight sponsor banks and six non-governmental along with concept literacy; (d) expanding the organisations (NGOs) for a three-year period, reach of CFLs at every block in the country; with funding support from Financial Inclusion and (e) articulating the responsibilities of Fund (FIF) of the National Bank for Agriculture respective stakeholders to ensure convergence and Rural Development (NABARD) and the of action. These milestones have been achieved respective sponsor banks. The CFL project in 2024. was scaled up in a phased manner to cover the entire country by 2024 with each CFL covering Financial Literacy about three blocks. As on March 31, 2025, a Observing Financial Literacy Week 2025 total of 2,421 CFLs3 have been operationalised across the country. The financial literacy camps IV.19 The Financial Literacy Week (FLW) conducted by these CFLs aim to achieve certain is an initiative of the Reserve Bank to spread end-outcomes such as opening/reactivation of awareness among the masses/various sections bank accounts, pension and insurance linkages, of the population on key topics through a focused etc. campaign every year. FLW 2025 was observed RBI90Quiz between February 24 – 28, 2025 on the theme of IV.21 As part of the series of events to ‘Financial Literacy – Women’s Prosperity’, with mark the 90th year of the Reserve Bank, a a focus on creating financial awareness among nation-wide general knowledge-based quiz women. During the week, the Reserve Bank competition, RBI90Quiz, was organised for undertook a centralised mass media campaign undergraduate students. The quiz was held to disseminate essential financial awareness in multiple stages starting with online mode messages on the theme among the general and culminating in a national final. The quiz public. The financial awareness messages were attracted participation of 79,103 teams (1,58,206 also made available in Indian Sign Language students) from 13,961 colleges across the (ISL). The Regional Offices of the Reserve Bank country. 3 https://www.rbi.org.in/FinancialEducation/FLCs_CFLs_Details.aspx 106CREDIT DELIVERY AND FINANCIAL INCLUSION Activities Conducted by Financial Literacy ● Achieving 100 per cent coverage in 80 per Centres (FLCs) cent districts across the country by March 4 2026, under EDDPE . IV.22 As on December 31, 2024, there were 4. Conclusion 1,508 FLCs in the country, which conducted a IV.24 The Reserve Bank endeavoured to total of 1,31,220 financial literacy camps during achieve the agenda set for the year by April-December 2024. undertaking various measures to improve 3. Agenda for 2025-26 financial inclusiveness and enhance the flow of credit to priority sectors. The implementation of IV.23 The Department has set the following the strategy adopted under the NSFI:2019-24 goals for 2025-26: document led to significant improvement in financial inclusion. Further, Master Directions on ● Review of Financial Inclusion Index priority sector lending were updated to harmonise (FI-Index); the various instructions. Going forward, sustained ● Strengthening Micro, Small and Medium efforts will continue towards further deepening Enterprises outreach and inclusion; and financial inclusion. 4 Refer to footnote 1 of this Chapter. 107ANNUAL REPORT 2024-25 FINANCIAL MARKETS AND V FOREIGN EXCHANGE MANAGEMENT During 2024-25, the Reserve Bank continued its efforts towards further strengthening of various segments of the financial markets by broadening participation, easing access and rationalising regulations. Regulations pertaining to foreign exchange management have been rationalised in tune with evolving business practices with a focus on being more principle-based, reducing compliance burden and promoting the ease of doing business. Efforts are also underway to promote Indian Rupee (INR) as an international currency. V.1 During 2024-25, the Reserve Bank of doing business to facilitate external trade and sustained its efforts to further develop and deepen investment. Accordingly, the Foreign Exchange financial markets by streamlining regulations and Department (FED) is currently reviewing several fostering innovations. The Financial Markets extant guidelines relating to external commercial Regulation Department (FMRD) initiatives in borrowings (ECB), export of goods and services, this regard included issuance of framework supervisory framework for Authorised Persons for recognition of self-regulatory organisations (APs), liberalised remittance scheme (LRS), (SROs) for financial markets regulated by the inward remittance scheme and settlement of Reserve Bank; putting in place requirements cross-border transactions in INR and local/ for exchange of initial margin for non-centrally national currencies. cleared over-the-counter (OTC) derivative trades; V.3 Against this backdrop, the rest of the introduction of forward contracts in government chapter is structured into four sections. The securities; expanding access of the Negotiated development and regulation of financial markets Dealing System - Order Matching (NDS-OM), are covered in section 2. The Reserve Bank’s inter alia, to SEBI-registered non-bank stock market operations are discussed in section brokers; consolidation of operational instructions 3. In section 4, the focus is on external trade pertaining to investments by non-residents in debt and payments, and measures relating to instruments; permitting trading of sovereign green liberalisation and development of external bonds (SGrBs) issued by the Government of India financial flows. Concluding observations are (GoI) in the International Financial Services Centre provided in section 5. (IFSC); and putting in place reporting requirements for all foreign exchange transactions. The liquidity 2. FINANCIAL MARKETS REGULATION management operations of the Reserve Bank DEPARTMENT (FMRD) evolved in sync with its monetary policy stance, V.4 FMRD in pursuance of its mandate of while ensuring orderly financial market conditions development, regulation and surveillance of amidst volatility in global financial markets. money, government securities (G-secs), interest V.2 The Reserve Bank remained focused rate derivatives, foreign exchange and credit on simplifying regulations, promoting derivative markets, undertook various initiatives internationalisation of INR, and enhancing ease towards attainment of objectives set for 2024-25. 108FINANCIAL MARKETS AND FOREIGN EXCHANGE MANAGEMENT Agenda for 2024-25 and enhanced customer outreach, a need was felt to develop better industry standards for V.5 The Department had set out the following self-regulation. Accordingly, a framework for goals for 2024-25: recognition of SROs in financial markets regulated ● Better aggregation and transparency by the Reserve Bank was issued on August 19, under the legal entity identifier (LEI) 2024. requirements for reporting of OTC Major Initiatives derivative transactions; global identifiers for OTC derivative transactions (e.g., Hedging of Gold Price Risk in Overseas Markets unique transaction identifier) [Utkarsh 2.0] (OTC Derivatives) (Paragraph V.6); V.9 As announced in the Statement on ● Review of the regulatory framework Developmental and Regulatory Policies of the for electronic trading platform (ETP) Reserve Bank (February 8, 2024), resident entities were permitted to hedge their exposures to price authorisation for financial market risk of gold using OTC derivatives in the IFSC, instruments regulated by the Reserve in addition to the exchange-traded derivatives, to Bank in sync with the evolution of provide flexibility to resident entities. domestic financial markets and global best practices (Paragraph V.7); and Unauthorised Foreign Exchange Transactions ● Development of a framework for SROs V.10 In view of the proliferation of unauthorised for financial markets regulated by the entities offering forex trading facilities to Indian Reserve Bank (Paragraph V.8). residents, Authorised Dealer Category-I (AD Cat-I) banks were advised on April 24, 2024 to Implementation Status be more vigilant and exercise greater caution V.6 A concept paper for implementation to prevent the misuse of banking channels of unique transaction identifier (UTI) in India in facilitating unauthorised forex trading. AD was prepared and shared with market bodies Cat-I banks were also advised to sensitise their for their feedback. Based on the feedback customers and increase their awareness about and assessment of implementation of UTI by extant advisories on the issue. advanced economies, the implementation of UTI Facilitating Participation of Standalone Primary domestically will be taken up. Dealers (SPDs) in the Foreign Exchange Market V.7 Based on the feedback received from V.11 The Master Direction on risk management stakeholders, the revised regulatory framework and inter-bank dealings was amended on May for ETP authorisation is being finalised. 3, 2024 to extend and clarify the applicability of V.8 With an increase in the number of financial the provisions to the SPDs authorised as AD market participants, growing scale of operations, Cat-III under Section 10(1) of Foreign Exchange increasing adoption of innovative technologies Management Act (FEMA), 1999. 109ANNUAL REPORT 2024-25 Exchange of Initial Margin for Non-centrally participate in the primary auctions of SGrBs and Cleared Derivatives transact in the secondary market for SGrBs in the IFSC. V.12 With a view to strengthen the resilience of OTC derivative markets and in the backdrop of Expanding Access to NDS-OM the G20 recommendations on OTC derivatives, V.15 In order to widen the access to NDS-OM the Directions mandating the exchange of initial platform (the sole/primary trading platform for all margin between counterparties of non-centrally G-secs transactions), revised Directions were cleared OTC derivative transactions were issued issued on October 18, 2024 so as to provide direct on May 8, 2024. The scope of the Directions access to a larger set of regulated entities and to extends to interest rate and foreign exchange harmonise the access with that of other facilities, and credit derivative transactions and will be viz., centralised payment systems offered by the applicable to the financial entities based on the Reserve Bank. extent of their participation in the OTC derivative Reporting of Foreign Exchange Cash/Tom/Spot markets. Simultaneously, the Directions on Transactions to Trade Repository margin for derivative contracts were revised, inter V.16 With a view to putting in place a centralised alia, to facilitate the exchange of margin within repository of all transactions in financial markets and outside India by market participants from a regulated by the Reserve Bank, in particular, the FEMA, 1999 perspective, enabling them to enter foreign exchange market, and facilitate greater into and adhere to global margining arrangements. transparency and effective oversight, Authorised Fully Accessible Route (FAR) for Investment by Dealers (ADs) were mandated on November 8, Non-residents in G-secs 2024 to report foreign exchange cash/tom/spot trades in a phased manner to the trade repository V.13 Non-residents were permitted to invest (TR) of Clearing Corporation of India Limited in specified categories of G-secs (viz., G-secs (CCIL). of 5-year, 7-year, 10-year, 14-year and 30- year tenors) without any restrictions under the Reporting of Transactions Undertaken to Hedge FAR, w.e.f. April 1, 2020. In consultation with Price Risk of Gold the government, it was decided to exclude all V.17 To facilitate regulatory monitoring and help new G-secs of 14-year and 30-year tenors from shape policy stance on the subject as well as to the FAR on July 29, 2024. Moreover, the list of increase transparency, reporting of transactions specified securities under the FAR was expanded in gold derivatives undertaken by banks and their on November 7, 2024 to include all SGrBs of 10- customers/constituents to the TR of CCIL was year tenor issued by the GoI in H2:2024-25. mandated, w.e.f. February 1, 2025. Trading of SGrBs Issued by the GoI in the IFSC Non-resident Investment in Debt Instruments in India V.14 With a view to facilitate wider non-resident participation in SGrBs, eligible foreign investors V.18 To improve ease of doing business, in IFSC were permitted on August 29, 2024 to operational instructions contained in all the 110FINANCIAL MARKETS AND FOREIGN EXCHANGE MANAGEMENT relevant circulars pertaining to investments by Agenda for 2025-26 non-residents in debt instruments (63 circulars V.22 For the year 2025-26, the Department has issued during 2008-2024) were consolidated set the following goals: under a single Master Direction1. ● Continuing with its efforts towards better Access of SEBI-registered Non-bank Brokers to aggregation and transparency under the NDS-OM LEI requirements for reporting of OTC derivative transactions, global identifiers V.19 With a view to widening access, non-bank for OTC derivative transactions (e.g., UTI) brokers registered with SEBI have been granted shall be implemented in India in line with direct access to NDS-OM for secondary market global developments (Utkarsh 2.0); and transactions in government securities on behalf of their clients. These brokers may access NDS- ● To expand the reach of FX-Retail platform OM subject to the regulations and conditions laid and enhance user experience, the linking down by the Reserve Bank in this regard. of this platform with Bharat Connect (formerly Bharat Bill Payment System) Government Securities Transactions Between a operated by the NPCI Bharat Connect Primary Member (PM) of NDS-OM and its Own shall be facilitated. In the first phase, a Gilt Account Holder (GAH) or Between Two GAHs pilot facilitating purchase of USD against of the Same PM the Indian Rupee by individuals and sole V.20 To bring uniformity in the trading and proprietors shall be implemented. settlement norms for government securities 3. FINANCIAL MARKETS OPERATIONS transactions, the facility of clearing and settlement DEPARTMENT (FMOD) through CCIL has been extended to transactions between a PM and its own GAH or between V.23 FMOD is primarily responsible for the conduct of liquidity management2 operations two GAHs of the same PM which are bilaterally towards implementing the Reserve Bank’s negotiated and reported to NDS-OM, on an monetary policy objectives and ensuring orderly optional basis. conditions in the foreign exchange market through Introduction of Forward Contracts in Government both onshore and offshore market operations. Securities Agenda for 2024-25 V.21 To enable long-term investors such as V.24 During the year, the Department had set insurance funds to manage their interest rate risk out the following goals: across interest rate cycles, forward contracts in government securities have been introduced, ● Technological upgradation to facilitate which will also facilitate efficient pricing of smoother and more flexible liquidity derivatives that use bonds as underlying management operations (Paragraph instruments. V.25-V.28); 1 Master Direction - Reserve Bank of India (Non-resident Investment in Debt Instruments) Directions, 2025 dated January 7, 2025. 2 Details relating to liquidity management operations are covered in Chapter III of this Report. 111ANNUAL REPORT 2024-25 ● Issuance of consolidated instructions on module is being developed in e-Kuber 2.0 for the liquidity adjustment facility (Paragraph conducting the foreign exchange swap auctions V.29); and in which banks would be able to submit their bids for processing and allocation. ● Policy-oriented research and analysis on financial markets to guide market V.29 The Reserve Bank is in the process operations strategies on an ongoing basis of reviewing the extant liquidity management (Utkarsh 2.0) [Paragraph V.30]. framework which has been in operation since February 14, 2020. Consolidated instructions on Implementation Status liquidity management operations will be issued V.25 With effect from June 21, 2024, an option post completion of the review of the framework. has been provided under the automated sweep-in V.30 The Department continued to conduct and sweep-out (ASISO) facility through which the policy-oriented research and analysis related to eligible participants can set/modify minimum and financial markets during 2024-25. These studies maximum balance limits for future dates. This included decentralised finance and the financial has helped the banks in better management of system; real effective exchange rate and India’s their liquidity and cash reserve requirement over trade balance; and foreign exchange reserve weekends and holidays. trends during high volatility episodes. V.26 Under the Reserve Bank’s liquidity Agenda for 2025-26 adjustment facility (LAF), the valuation of V.31 During 2025-26, the Department plans to various government securities collateral is done achieve the following goals: on the basis of daily market rates published by the Financial Benchmarks India Private Limited ● Review of the liquidity management (FBIL). To enhance system robustness and framework; operational efficiency, an auto-upload facility ● Undertake foreign exchange operations has been deployed in e-Kuber 2.0, in which the to curb excessive volatility in the USD/INR market rates of government securities are directly exchange rate; and fetched from the FBIL website on straight-through ● Conduct policy-oriented research and processing (STP) basis. analysis on financial markets to guide V.27 Multiple bids upload facility in open market market operations strategies on an operation (OMO) auctions is being developed in ongoing basis (Utkarsh 2.0). e-Kuber 2.0, which would enable the participants to submit multiple bids in OMO auctions through 4. FOREIGN EXCHANGE DEPARTMENT (FED) a single file upload. The facility is in the advanced V.32 FED is entrusted with the responsibility stage of development. of fulfilling the objectives of facilitating external V.28 Foreign exchange swap auctions are trade and payments and promoting the orderly one of the instruments available in the Reserve development and maintenance of foreign Bank’s toolkit for managing durable liquidity. A exchange market in India, as envisaged under 112FINANCIAL MARKETS AND FOREIGN EXCHANGE MANAGEMENT the Foreign Exchange Management Act (FEMA), ● Internationalisation of INR (Paragraph 1999. Accordingly, the Department continued its V.41-V42): endeavour to frame simple, comprehensive, time o Permitting opening of INR accounts consistent and more principle-based policies to outside India by persons resident facilitate external trade and payments; further outside India (PROIs) [Utkarsh 2.0]; rationalise the rules and regulations relating to o INR lending by Indian banks to PROIs; external sector transactions; and promote the increasing use of INR for international cross- and border transactions. o Enabling foreign direct investment (FDI) and foreign portfolio investment Agenda for 2024-25 (FPI) through special accounts [viz., V.33 The Department had set out the following special non-resident rupee (SNRR) goals for 2024-25: account and special rupee vostro ● Review of the authorisation framework account (SRVA)]; for APs under FEMA, 1999 (Utkarsh 2.0) ● Making a framework for a comprehensive [Paragraph V.34]; integrated reporting of forex transactions ● Rationalisation of ECB framework (Paragraph V.43); (Paragraph V.35); ● Measures to improve the role of GIFT City3 ● ‘Go-live’ for phase I of software platform at Gandhinagar, Gujarat vis-à-vis other for ECBs and trade credits reporting and international financial services centres approval (SPECTRA) project (Paragraph (Paragraph V.44): V.36); o Encouraging the trading of foreign ● Rationalisation of regulations for export currency (FCY)-INR pairs, for different of goods and services (Utkarsh 2.0) foreign currencies; and [Paragraph V.37]; o Review of the IFSC Regulations ● Review of the supervisory framework for APs (Paragraph V.38); under FEMA, 1999. ● Rationalisation of Foreign Exchange ● Review of Compounding Proceedings Management (Guarantees) Regulations Rules, 2000 (as amended from time to (Paragraph V.39); time) under FEMA, 1999 (Utkarsh 2.0) [Paragraph V.45]; ● Rationalisation of Foreign Exchange Management (Mode of Payment and ● Rationalisation of the Liberalised Reporting of Non-Debt Instruments) Remittance Scheme (LRS) [Utkarsh 2.0] Regulations (Paragraph V.40); (Paragraph V.46); and 3 Gujarat International Finance Tec-City. 113ANNUAL REPORT 2024-25 ● Rationalisation of inward remittance sought vide press release dated July 2, 2024. schemes, viz., Money Transfer Service Based on the feedback and further consultations Scheme (MTSS) and Rupee Drawing with various stakeholders, the draft regulations Arrangement (RDA) [Utkarsh 2.0] and Directions were revised further and placed (Paragraph V.47). on the Reserve Bank’s website on April 4, 2025, seeking comments/feedback. The emphasis of Implementation Status the revised regulations is on enhancing ease of V.34 In light of progressive liberalisation under doing business and bringing all instructions into a FEMA, along with significant increase in APs single document. and emergence of new business models, the V.38 A revised risk-based supervisory extant authorisation framework is being reviewed framework for inspecting full-fledged money to address potential misuse, plug regulatory changers (FFMCs) and non-bank AD Cat- gaps, enhance ease of doing business and II entities based on a risk rating model was encourage innovation while ensuring safeguards. introduced on June 11, 2024 to evaluate Accordingly, the draft framework for APs under FEMA was placed on the Reserve Bank’s website entities based on operations, governance and for feedback from the stakeholders. Based on compliance. In the revised framework, inspection the feedback, the revised framework is being frequency has been linked to the risk ratings, prepared. to prioritise high-risk entities. The risk rating framework has been designed in such a manner V.35 In terms of liberalisation measures that entities with inadequate know your customer pertaining to the ECB framework, a (KYC)/anti-money laundering (AML) compliance comprehensive review of the Schedule I of or those involved in non-compliant transactions Foreign Exchange Management (Borrowing and are subjected to focused inspections, regardless Lending) Regulations, 2018 (as amended from of their overall or other category risk ratings. time to time), is in process. V.39 A comprehensive review of Foreign V.36 Post in-principle approval of the revised Exchange Management (Guarantees) Phase I implementation of SPECTRA project in Regulations, 2000 has been undertaken in June 2024, the necessary final approvals and vendor confirmations for rolling out of the project view of the evolving business needs/practices are underway. and macroeconomic conditions. The revised regulations propose to simplify and rationalise the V.37 To rationalise and simplify the existing guarantees issued/obtained. The draft regulations regulatory framework for trade transactions, trade are being reviewed. guidelines are being rationalised. Accordingly, comments/feedback from the public on draft V.40 The framework relating to mode of regulations and draft Directions to the ADs on payment and reporting of non-debt instruments, export and import of goods and services were currently prescribed4 under Foreign Exchange 4 Reserve Bank notification number FEMA.395/2019-RB dated October 17, 2019. 114FINANCIAL MARKETS AND FOREIGN EXCHANGE MANAGEMENT Management (Mode of Payment and Reporting V.45 Foreign Exchange (Compounding of Non-Debt Instruments) Regulations, 2019 Proceedings) Rules, 2024 have been notified by (as amended from time to time), is being the Government of India in consultation with the reviewed. Department on September 12, 2024, superseding erstwhile Foreign Exchange (Compounding V.41 In order to promote the settlement of cross-border transactions in INR and local/ Proceedings) Rules, 2000. The new framework, national currencies, the amended notifications/ inter alia, enhanced the monetary ceilings revised regulations under FEMA were notified in for sum involved in contravention that can be the official gazette on January 15, 2025, enabling compounded by officers of various ranks at the the provisions for the following: Reserve Bank, enabled electronic and other online modes of payment for compounding ● Permitting PROIs to open SNRR application fee and the sum for which accounts with overseas branches of AD contravention is compounded, and brought banks, for payments and settlement of all permissible current and capital account out provisions for treatment of cases involving transactions with persons resident in India various stages of investigation/adjudication by (PRIs), and all bona fide transactions with Directorate of Enforcement. Pursuant to the other PROIs; and notification, the Department has issued fresh Directions on compounding to all AD Cat-I ● Enabling foreign investment (including banks. FDI and portfolio investment) through various repatriable INR accounts. V.46 A comprehensive review to address various issues in the extant LRS covering, inter V.42 In order to provide INR liquidity alia, the legal framework, annual limit, permitted for facilitating use of INR for cross-border transactions, a comprehensive set of measures purposes (inclusion/exclusion) and payment has been initiated. modes/currencies under the scheme has been undertaken. Consequently, the revised scheme V.43 A Committee has been constituted to along with the necessary amendments to Foreign review the existing reporting systems, identify Exchange Management (Current Account gaps and overlaps, and suggest necessary Transactions) Rules and Foreign Exchange improvements for streamlining reporting and Management (Permissible Capital Account facilitate analytics for more informed policy Transactions) Regulations, is in process. formulation. The report of the Committee is under preparation. V.47 A comprehensive review process of V.44 Inputs/comments were solicited from MTSS and RDA schemes is underway. Key within the Reserve Bank to review the extant areas of the review include the expansion of IFSC regulations under FEMA. Based on the permitted transactions, the rationalisation of the inputs received, a review is being undertaken by guidelines to make them more principle-based, the Department. and to reduce the compliance burden. 115ANNUAL REPORT 2024-25 Major Initiatives that such issuances by investment vehicles prior to the above amended notification may be V.48 Pursuant to an amendment to the FEM regularised through compounding proceedings (NDI)5 Rules, 2019 dated January 24, 2024 by under FEMA. Accordingly, the Department issued the Department of Economic Affairs, Ministry of Directions on May 21, 2024 for implementation of Finance, GoI to enable listing of Indian companies the same. on stock exchanges in permissible jurisdictions other than India, the Department on April 23, 2024 V.51 On review of the SRVA scheme (with prescribed guidelines for transactions pertaining effect from July 11, 2022), for promotion of to listing of Indian companies on International Indian exports and increased usage of INR in exchanges by an amendment to Foreign settlement, the facility of opening an additional Exchange Management (Mode of Payment and special current account by the AD Cat-I banks Reporting of Non-Debt Instruments) Regulations, (maintaining SRVAs) for their constituents has 2019 (as notified by the Reserve Bank on October been extended for settlement of their import 17, 2019). transactions (in addition to the existing provision for export transactions) since June 11, 2024. V.49 Under FEMA, 1999, banks in India were not permitted earlier to exchange margins with V.52 In order to improve ease of compliance, non-residents (in FCY) or post/collect margin the limit imposed on outbound remittances based overseas, leading to constraints in dealing with on ‘online’ submission of Form A2 has been done non-residents. To address this issue, Foreign away with, w.e.f. July 3, 2024. All AD Cat-I and AD Exchange Management (Margin for Derivative Cat-II persons have been permitted to facilitate all Contracts) Regulations, 20206 enabled exchange remittances, irrespective of transaction value, on of margin for permitted derivative contracts submission of either an online or a physical Form between a person resident in India and a person A2 and other related documents, as applicable resident outside India. Accordingly, Foreign [subject to the conditions laid down in Section Exchange Management (Deposit) Regulations, 10(5) of FEMA, 1999]. 20167 were amended to allow a PROI to open, V.53 To enable resident individuals to remit hold and maintain an interest-bearing account in funds under LRS to IFSCs for any permissible INR and/or FCY for posting/collecting margin in current and/or capital account transaction under India since May 6, 2024. FEMA as well as use funds in their foreign V.50 Pursuant to amendment to FEM (NDI) currency accounts in IFSCs for transaction(s) in Rules, 2019 dated March 14, 2024, enabling another jurisdiction and in order to provide parity issuance of partly paid units to PROIs by for IFSCs vis-à-vis other foreign jurisdictions, investment vehicles in India, it was clarified w.e.f. July 10, 2024, APs have been permitted 5 Foreign Exchange Management (Non-debt Instruments). 6 Reserve Bank notification number FEMA.399/RB-2020 dated October 23, 2020. 7 Reserve Bank notification number FEMA.5(R)/2016-RB dated April 1, 2016. 116FINANCIAL MARKETS AND FOREIGN EXCHANGE MANAGEMENT to facilitate remittances for all permissible the applicable realisation and repatriation purposes under LRS to IFSCs for (a) availing provisions. The rationale of this amendment is to financial services or financial products as per the support exporters who receive payments in local International Financial Services Centres Authority currencies and may require such foreign currency Act, 2019 within IFSCs; and (b) all current or accounts to hold these currencies and to pay for capital account transactions, in any other foreign imports from that territory, this would encourage jurisdiction (other than IFSCs) through a foreign settlement of trade transactions in local currencies currency account held in IFSCs. with trade partner countries. V.54 Through an amendment to the FEM (NDI) V.57 Bilateral transactions with the Maldives, a Rules, w.e.f. August 16, 2024, Indian companies member of the ACU, were hitherto being settled have been enabled to issue equity instruments or within the ACU framework in terms of extant transfer equity instruments of an investee Indian receipt and payment regulations, as amended company in exchange for equity capital of foreign from time to time. On November 21, 2024, the company, effectively enabling cross-border swaps Reserve Bank and the Maldives Monetary of equity instruments/equity capital, subject to Authority (MMA) signed a memorandum of prior government approval, if applicable. understanding (MoU) for establishing a framework V.55 The Department in consultation with the to promote the use of local currencies, viz., INR GoI and Securities and Exchange Board of India and the Maldivian Rufiyaa (MVR) for cross- on November 11, 2024 finalised an operational border transactions. Therefore, settlement of framework for reclassification of foreign portfolio bilateral trade transactions with the Maldives in investment made by foreign portfolio investors local currencies, which was not permitted under (FPI) to FDI under FEM (NDI) Rules, 2019. The the FEMA framework thus far, has been enabled, said framework for reclassification has been w.e.f. March 17, 2025, in addition to the extant implemented in case of any breach of investment ACU mechanism. limit by FPIs concerned, to provide flexibility to the foreign investors and enhance the ease of doing Agenda for 2025-26 business in India. Accordingly, FPI investing in V.58 The primary focus of the Department breach of the prescribed limit shall have the option will be on rationalising various guidelines while of reclassifying such holdings as FDI in addition ensuring continuous synchronisation of the to the earlier option of divesting their holdings. FEMA operating framework with the evolving V.56 Vide an amendment to Foreign Exchange macroeconomic environment. To achieve this, Management (Foreign Currency Accounts by a the Department has set the following goals for person resident in India) Regulations, 2015, all 2025-26: resident exporters (as opposed to only exporters ● Rationalisation of FEM (Guarantees) undertaking project exports earlier) are now Regulations; permitted to open FCY accounts overseas for settling trade transactions, subject to ensuring ● Rationalisation of the LRS; 117ANNUAL REPORT 2024-25 ● Review Directions on borrowing and strengthening the regulatory framework and lending transactions in INR with a view surveillance, and streamlining regulations, to rationalise and merge them into the including consolidation of directions on non- Master Direction - External Commercial resident investment in Indian debt instruments. Borrowings, Trade Credit and Structured Proactive measures were undertaken to ensure Obligations; orderly market conditions, and anchor market ● Review of the authorisation framework for expectations, amidst formidable global spillovers. APs under FEMA, 1999; The Reserve Bank also undertook various measures to promote the increasing use of the INR ● Rationalisation of FEM (Non-Debt and local currencies of partner trading countries Instruments) Rules; for international cross-border transactions and ● Review of Insurance Regulations, 2015; focused on rationalising various regulatory, ● Review of Deposit Regulations, 2016; and supervisory and authorisation frameworks for ease of undertaking forex transactions. A ● Review of FEM (Establishment in India framework for the comprehensive reporting of of a branch office or a liaison office or forex transactions to further strengthen regulatory a project office or any other place of reporting is also underway. Going forward, the business) Regulations, 2016. liquidity operations would continue to be in sync 5. CONCLUSION with the stance of monetary policy, while the V.59 During 2024-25, the Reserve Bank foreign exchange operations would be guided by continued to focus on further developing the objective of ensuring orderly movements in and deepening of financial markets through the exchange rate of the INR. 118REGULATION, SUPERVISION AND FINANCIAL STABILITY REGULATION, SUPERVISION AND VI FINANCIAL STABILITY Preserving financial stability while building a resilient and sound financial system continued to remain as the primary objective of regulatory and supervisory initiatives during the year. Accordingly, several regulatory and supervisory measures were undertaken in line with global best practices towards further strengthening governance and risk management practices and regulatory reporting system. Harnessing technology for effective supervision along with a focus on enhancing cyber security, strengthening fraud detection mechanism and consumer protection were also pursued as concurrent objectives. VI.1 The domestic financial system remained VI.3 The FinTech Department expanded sound and resilient during the year. The Reserve the scope and coverage of central bank digital Bank continued with concerted endeavours currency (CBDC) pilots by testing use cases to fortify the financial system and promote of programmability and offline functionalities responsible innovations amidst emerging and distribution of CBDC wallets by select non- challenges from technological disruptions, cyber banks in CBDC-retail (CBDC-R); addition of risks and climate change. As part of the overall standalone primary dealers to CBDC-wholesale objective of aligning the regulatory/supervisory (CBDC-W) ecosystem and upgradation in framework with global best practices, significant technical architecture; scaled up the ongoing strides in the areas of risk management, regulatory pilot on unified lending interface (ULI) to include compliance and enforcement, and consumer more lenders, data service providers and loan education and protection were undertaken during journeys; released framework for self-regulatory the year. organisations (SROs) for FinTech sector and recognised an Association as SRO; and launched VI.2 The Department of Regulation (DoR) FinTech and EmTech repositories. issued guidelines, inter alia, on key facts statement (KFS) on loans and advances; eligibility VI.4 The Department of Supervision (DoS) criteria for voluntary transition of small finance initiated measures to further strengthen and banks (SFBs) to universal bank; harmonisation integrate both onsite and offsite supervision, of regulations applicable to housing finance including cyber/information technology (IT) companies (HFCs) and non-banking financial related risk assessment, emphasis on fraud risk companies (NBFCs); submission of information management and know your customer (KYC)/ to credit information companies (CICs) by asset anti-money laundering (AML) supervision; reconstruction companies (ARCs); operational guidelines on prompt corrective action (PCA) risk management and operational resilience; framework for urban cooperative banks and prudential treatment to be followed while (UCBs); enhancing cross-border supervisory implementing debt relief schemes. engagements with overseas authorities in 119ANNUAL REPORT 2024-25 key global jurisdictions; and development of and promoting financial sector development. The supervisory data quality index (sDQI). The FSD brings out half-yearly Financial Stability Consumer Education and Protection Department Report (FSR), highlighting key macrofinancial (CEPD) continued with its efforts towards vulnerabilities along with results of macro-stress augmenting consumer awareness on safe tests under various risk scenarios. banking practices and extant customer service Agenda for 2024-25 regulations and protection; and strengthening grievance redress mechanism. VI.7 The Department had set out the following goals for 2024-25: VI.5 This chapter discusses regulatory and supervisory measures undertaken during 2024- • Implementation of recommendations of 25 to strengthen the financial system and to the peer review (Utkarsh 2.0) [Paragraph preserve financial stability. The rest of this chapter VI.8]; is divided into five sections. Section 2 deals • Development of a non-banking stability with the mandate and functions of the Financial map/index (Utkarsh 2.0) [Paragraph Stability Department (FSD). Section 3 dwells upon VI.9]; and regulatory measures undertaken by the DoR along with activities of the FinTech Department. Section • Enhancement of single-factor stress tests 4 covers supervisory measures undertaken by (Utkarsh 2.0) [Paragraph VI.9]. the DoS and enforcement actions carried out by Implementation Status the Enforcement Department (EFD). Section 5 highlights the role played by CEPD and Deposit VI.8 Based on the recommendations of the Insurance and Credit Guarantee Corporation peer review, the macro-stress testing framework (DICGC) in protecting consumer interests, for scheduled commercial banks (SCBs) has spreading awareness and upholding consumer been revised and includes: (i) projection of confidence. The agenda of these departments for internally consistent adverse macrofinancial 2025-26 are covered in the respective sections scenarios by performing simulations using vector of this chapter. Concluding observations are set autoregression with exogenous variables (VARX) out in the last section. model; (ii) projection of slippage ratio, interest 2. FINANCIAL STABILITY DEPARTMENT (FSD) income and interest expense at bank level using panel regression models; (iii) incorporation VI.6 The FSD monitors risks to macrofinancial of market risk in the solvency stress testing stability and evaluates the resilience of the framework; and (iv) increasing the scenario financial system by undertaking macroprudential horizon of macro-stress test from currently one surveillance. It also functions as the secretariat to the Sub-Committee of the Financial Stability and year to 1.5 - 2.0 years and generating projections Development Council (FSDC), an inter-regulatory of key financial ratios as at end of the ensuing institutional forum for preserving financial stability financial years. 120REGULATION, SUPERVISION AND FINANCIAL STABILITY VI.9 To make an overall assessment of the 3. REGULATION OF FINANCIAL risk factors that have a bearing on the stability INTERMEDIARIES of the NBFC sector, a non-banking stability map/ Department of Regulation (DoR) index has been developed. Further, based on the VI.11 DoR is the nodal Department for regulation recommendation of the International Monetary of commercial banks, cooperative banks, NBFCs, Fund (IMF) peer review, the Department has CICs and all-India financial institutions (AIFIs)1. replaced the erstwhile liquidity stress test of The regulatory design and implementation is SCBs by operationalising liquidity coverage aligned to the evolving requirements of the ratio (LCR)-based liquidity stress test as part of Indian economy while adapting to international enhancing single factor stress tests. best practices. Agenda for 2025-26 Agenda for 2024-25 VI.10 In the year ahead, FSD will focus on the VI.12 The Department had set out the following following: goals for 2024-25: • To enhance the stress testing framework • Review of guidelines on valuation of further, a liquidity stress test framework properties based on international best for NBFCs will be developed in-house. practices (Utkarsh 2.0) [Paragraph VI.13]; Further, the extension of macro stress test • Regulatory framework for web- to the UCBs sector (Tier-3 and Tier-4) will aggregation of loan products (Paragraph be explored. In addition to extending the VI.14); stress testing framework, the Department • With a view to strengthen the extant also plans to assess the impact of climate regulatory framework governing project transition risk on major carbon intensive finance and to harmonise the instructions sectors and its impact on balance sheets across all regulated entities (REs), the of banks having exposure to emission extant prudential norms for projects under intensive sectors; and implementation were reviewed, and a • ‘Growth-at-Risk’ model will be developed comprehensive regulatory framework for understanding how financial conditions applicable for all REs is proposed to be and the level of financial vulnerabilities issued (Paragraph VI.15); contribute to the possibility of future • A discussion paper on introduction of episodes of weak economic growth by Expected Credit Loss (ECL) framework linking current macrofinancial conditions for provisioning by banks was issued on to the distribution of future growth. January 16, 2023, soliciting comments 1 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). 121ANNUAL REPORT 2024-25 from stakeholders. While comments on (Overseas Investment) Rules, 2022, a the discussion paper are being examined, review of extant guidelines on overseas an external working group - comprising investments by NBFCs and CICs shall be domain experts from academia, industry undertaken (Paragraph VI.17); and select major banks - was constituted • In April 2021, an external committee was in October 2023 to holistically examine set up by the Reserve Bank to review the and provide independent comments existing legal and regulatory framework on some of the technical aspects. The applicable to ARCs and recommend guidelines on the subject are being measures to enhance their efficacy. Major finalised by incorporating the feedback recommendations of the Committee were received on the discussion paper and the implemented vide circular dated October recommendations of the working group 11, 2022. Remaining recommendations which submitted its report in February of the Committee shall be examined and 2024 (Paragraph VI.15); implemented during 2024-25 (Paragraph • The extant regulations on interest rates VI.18); on advances vary across REs. In order • Standalone primary dealers (SPDs) to harmonise the same, a comprehensive are placed in middle layer of the scale- review of the extant regulatory instructions based regulatory framework for NBFCs. is underway (Paragraph VI.16); However, unlike NBFCs, the SPDs are • Delineating the role of various subject to guidelines on minimum capital committees (viz., Audit Committee of the requirements for market risk in view of Board, Nomination and Remuneration their exposure to government securities Committee, and Risk Management and other market related products and Committee) in NBFCs as mentioned in are also eligible to undertake various core the scale-based regulatory framework and non-core activities which an NBFC issued on October 22, 2021 (Paragraph is not allowed to undertake. A review of VI.17); the framework for market risk for SPDs • Reviewing the requirement of obtaining would be undertaken to bring about prior approval of the Reserve Bank for convergence with Basel III standards for change in management of NBFCs/HFCs, banks (Paragraph VI.18); and which would result in change in more than • Connected lending can involve moral 30 per cent of the directors, excluding hazard issues leading to compromise independent directors (Paragraph VI.17); in pricing and credit management. The • In view of the operationalisation of extant guidelines on the issue are limited a new overseas investment regime in scope and are not applicable uniformly under Foreign Exchange Management to all REs. As announced in the Reserve 122REGULATION, SUPERVISION AND FINANCIAL STABILITY Bank’s Statement on Developmental offers available to the borrowers from the willing and Regulatory Policies (December 8, lenders over their digital lending apps (DLAs). 2023), a unified regulatory framework The digital view shall at least include details on connected lending for all the REs will such as name of the RE, amount of loan, the be put in place for which a draft circular annual percentage rate (APR), tenor and other will be issued for public comments associated terms and conditions. LSPs, while (Paragraph VI.18). displaying all available options, shall not use any ‘dark patterns’2 in their user interface to nudge Implementation Status the borrowers in choosing a particular loan offer VI.13 In the process of lending, institutions which may not be suited to their requirements. create charge on various primary or collateral The final guidelines incorporating the feedback securities with a view to secure their exposures. received from various stakeholders have been Most of such securities are non-financial in issued as part of ‘Reserve Bank of India (Digital nature such as land, building, plants, machinery Lending) Directions, 2025’. and inventories. While there are explicit VI.15 Based on a comprehensive review of standards and regulations on objective valuation experience of banks with regard to financing of of financial securities, the extant instructions on project loans and the structural issues prevalent valuation of non-financial securities are relatively in the sector, the draft guidelines on the prudential broad in nature and vary across REs. With a norms for projects under implementation were view to harmonise the regulations in this regard issued on May 3, 2024. The draft guidelines across REs and to bring more consistency in the aim to bring the norms in alignment with a more valuation process, a comprehensive review is principle-based approach to resolution of such currently underway. exposures, while ensuring that the REs recognise VI.14 Presently, most lending service providers risks in a timely manner and build adequate (LSPs) make available web-aggregation service buffers to absorb any future shocks that may arise by partnering with multiple lending partners. from such exposures. The revised guidelines, Generally, LSPs exercise discretion in choosing taking into account the feedback received from a suitable lender for a given borrower and the stakeholders, are being finalised. These seldom display all the available loan offers to guidelines will also be brought in alignment the borrower for making an informed choice. with the proposed provisioning regime based In line with the objective of customer centricity on expected credit loss (ECL), the draft circular in digital lending, it was proposed vide a draft on which is also under finalisation, incorporating circular dated April 26, 2024 to mandate REs the feedback received on the discussion paper to ensure that all LSPs having arrangements issued earlier and the recommendations of the with multiple REs present a digital view of loan external working group. 2 Dark patterns are design interfaces and tactics used to trick users into desired behaviour. 123ANNUAL REPORT 2024-25 VI.16 Extensive consultations3 have been and Companies Act, 2013. Accordingly, the draft undertaken internally as well as with key circular is under preparation and will be issued stakeholders regarding the approach to be for public comments. adopted relating to the framework on interest Major Developments4 rates on advances, considering the objectives of Regulatory Principles for Management of Model monetary transmission, risk pricing and conduct Risks in Credit related aspects. In order to solicit wider public feedback, it is proposed to issue a discussion VI.19 REs use models for variety of activities paper delineating the various imperatives of to facilitate and enhance decision making. The moving to a harmonised regime for interest rates application of rule-based algorithms and machine on loans and advances across all REs. learning (ML) have increased the reliance on such models. With a view to ensuring prudence VI.17 The draft guidelines on functions and and to impart robustness in usage of such responsibilities of the board committees in models, a draft circular on ‘Regulatory Principles NBFCs and HFCs are under consideration. The for Management of Model Risks in Credit’ was extant regulatory requirement for NBFCs/HFCs issued on August 5, 2024, which provides broad to obtain prior approval of the Reserve Bank for regulatory principles to be followed for model management changes involving more than 30 risk management. The draft framework covers per cent of the directors, excluding independent aspects related to governance and oversight, directors, is also being reviewed. The draft model development and deployment, and model circular on overseas investments by NBFCs and validation framework. In light of the feedback CICs for seeking public comments is underway. received during the consultation period, the VI.18 Appropriate guidelines on remaining Reserve Bank will issue the finalised guidelines, recommendations of the ARC committee shall be which will encompass a broader scope to include issued in 2025-26. The market risk framework for models deployed across all relevant functional SPDs would be reviewed based on the revised and operational domains. market risk framework for banks, which is Creation of a Directory of Digital Lending Apps currently underway. Connected lending or loans (DLAs) to related parties have inherent moral hazard issues. A comprehensive review of connected VI.20 Although the guidelines on digital lending lending has been undertaken after considering issued in September 2022 cover the entire gamut the extant instructions and definition of related of digital lending activities of REs, the issue of parties in statutes such as Income Tax Act, illegal lending apps has recently been gaining 1961, Insolvency and Bankruptcy Code, 2016, attention with reported harassment by such 3 Annex II of this Report provides a list of regulatory measures undertaken post public consultations during April 2022 to March 2025. 4 This sub section highlights the major circulars/guidelines issued by the DoR. Annex I of this Report provides a comprehensive department- wise chronology of policy announcements during April 2024 to March 2025. 124REGULATION, SUPERVISION AND FINANCIAL STABILITY illegal apps. In many cases, these illegal apps amount; (ii) intra-day CME to the counterparty falsely advertise their relationship with REs, with shall be subject to large exposure limits; and some entities creating a fake website of NBFC (iii) in case any exposure remains outstanding at for listing their app as a partner app of the NBFC. the end of ‘T+1’, capital will have to be maintained Accordingly, to aid the customers in verifying as per the extant norms. the claim of DLAs’ association with REs, the Gold Monetisation Scheme (GMS), 2015 - Reserve Bank has issued instructions regarding Amendment operationalisation of the public directory of DLAs VI.23 Government of India, vide press release directing REs to furnish the details of their DLAs dated March 25, 2025 regarding GMS, decided through the Centralised Information Management to discontinue the medium-term and long-term System (CIMS) portal of the Reserve Bank. REs government deposit (MLTGD) components of have time till June 15, 2025 to report the initial GMS effective March 26, 2025. Accordingly, data on the portal. any gold deposits tendered at the designated Key Facts Statement (KFS) on Loans and collection and purity testing centre (CPTC)/ Advances GMS mobilisation, collection and testing agent (GMCTA)/designated bank branches towards VI.21 As announced in the Reserve Bank’s MLTGD component of GMS shall not be Statement on Developmental and Regulatory accepted after March 25, 2025. The designated Policies (February 8, 2024), a circular regarding banks, at their discretion, may offer short KFS on loans and advances applicable to term bank deposits (STBD) under GMS. The retail, and micro, small and medium enterprise MLTGD mobilised till March 25, 2025 shall (MSME) loans extended by all REs was issued continue till redemption as per the extant on April 15, 2024. REs are required to provide guidelines. their borrowers a statement containing the key Climate Risks and Sustainable Finance information regarding loan agreement, including all-in cost of the loan, in a simple and easy to VI.24 During the year, the Reserve Bank understand format. continued to foster an ecosystem of sustainable and green finance, and comprehensive Banks’ Exposure to Capital Market - Issue of assessment of climate change risks, besides Irrevocable Payment Commitments (IPCs) capacity building via conducting two workshops VI.22 The settlement cycle for equities has been for the middle management level staff of the REs revised to ‘T+1’ from ‘T+2’ (‘T’ being the trade covering several aspects of climate risk mitigation day) by the stock exchanges. Accordingly, the and finance, risk assessment and management, risk mitigation measures for intra-day exposures scenario analysis and stress testing. The Reserve of banks arising out of issuance of IPCs have Bank also hosted the annual plenary and steering been revised vide circular dated May 3, 2024 as committee meetings of the Network for Greening follows: (i) capital market exposures (CME) shall the Financial System (NGFS) and organised a be computed at 30 per cent of the settlement national level policy seminar on ‘Climate Change 125ANNUAL REPORT 2024-25 Risks and Finance’ for exchange of ideas Government Debt Relief Schemes (DRS) between the various stakeholders. VI.26 DRS generally entails funding by a fiscal Creation of Reserve Bank - Climate Risk authority to cover either part or the entire debt Information System (RB-CRIS) obligations of the borrower and may also cast obligations on lending institutions to sacrifice/ VI.25 In October 2024, the Reserve Bank waive the remaining loan exposure. This has announced the creation of RB-CRIS (data implications from a credit discipline standpoint repository) to bridge data related gaps for undertaking climate risk assessments by REs. and potentially creates moral hazard and It is proposed to set up a web-based directory, prudential concerns, including delays in receipt listing various data sources, which will be publicly of funds; mismatch between the claims admitted/ accessible on the Reserve Bank’s website, submitted by the REs and accepted by the along with a data portal comprising datasets government; and mandatory requirement to (i.e., processed data in standardised formats) sanction fresh credit. Accordingly, a circular on accessible to the REs (Box VI.1). government debt relief schemes was issued Box VI.1 Reserve Bank - Climate Risk Information System (RB-CRIS) Climate change is emerging as one of the significant risks G20 Data Gap Initiative (DGI), and the Net-Zero Data Public to the financial system. It is crucial for REs to undertake Utility (NZDPU) to establish sources for comprehensive, proper assessment, quantification and mitigation of climate consistent and comparable data; these initiatives need change risks. One of the major challenges by the REs in fine-tuning from a developing country perspective. this regard is to have a comprehensive assessment of its Against the above backdrop, the Reserve Bank has financial impact, which is constrained due to lack of high announced the creation of a data repository, viz., RB- quality data, besides modelling challenges. CRIS, comprising two parts: (i) web-based directory, listing Climate change risks are generally of two types, viz., various data sources (meteorological and geospatial) which physical risk and transition risk. The estimation of physical will be publicly accessible on the Reserve Bank’s website; risks requires hazard data in the form of susceptibility of and (ii) data portal comprising datasets (processed data in geographical locations to events such as flood, drought, standardised formats), accessible to the Reserve Bank’s REs. Essentially, RB-CRIS is proposed to bridge and cyclone, sea-level rise and vulnerability data, i.e., financial standardise three data gaps : (i) physical risk; (ii) transition loss data. The final assessment regarding climate risk risk; and (iii) carbon emission. Bridging these data gaps would rest on the quality of such data. will ensure comprehensive assessment of the financial Similarly, the assessment of transition risk faces issues impact due to climate change risks, which will facilitate relating to data gaps in terms of estimation of carbon informed decision and policy making for the broader prices, sectoral benchmark pathways and emission financial system. intensities. The data gaps are characterised by lack of Reference: uniform methodology, fragmentation in accessibility, lack of uniformity in publication of data and differences in metrics, Li, B., and Kroese, B. (2022), ‘Bridging Data Gaps Can units and formats. Although there are initiatives like NGFS, Help Tackle the Climate Crisis’, IMF Blog, November 28. 126REGULATION, SUPERVISION AND FINANCIAL STABILITY on December 31, 2024, containing, inter alia, Voluntary Transition of SFBs to Universal Banks the prudential treatment to be followed by the VI.29 On April 26, 2024, the Reserve Bank REs while implementing DRS. The circular also issued eligibility criteria for SFBs to transition contains model operating procedure (MOP) into universal banks. The eligibility criteria for consideration of state governments while require SFBs to have scheduled status, along designing and implementing such schemes with a satisfactory track record of performance through a consultative approach and in line with for a minimum period of five years and its shares the expectations of the stakeholders involved, listed on a recognised stock exchange. Further, including the government, lenders and borrowers. SFBs are required to have a minimum net worth of ₹1,000 crore as at the end of the previous Exposures of SCBs to NBFCs quarter and meet their prescribed capital to risk- VI.27 To address the concerns on post-COVID weighted assets ratio (CRAR) of 15 per cent. risk build-up in certain segments of consumer Moreover, they are mandated to have net profits credit and NBFCs’ growing reliance on SCBs in the preceding two financial years with gross for funding, a circular was issued on November non-performing asset (GNPA) and net non- 16, 2023 which, inter alia, increased the risk performing asset (NNPA) ratios of less than or weights by 25 percentage points for certain equal to 3 per cent and 1 per cent, respectively. consumer credit exposures of SCBs and NBFCs. Additionally, the eligible SFBs will be required to Additionally, risk weight on SCB’s exposure to furnish a detailed rationale for the transition. NBFCs was increased by 25 percentage points Formats of Financial Statements of Cooperative in cases where the existing risk weight based on Banks external ratings was below 100 per cent. On a VI.30 The current format of the financial review, vide a circular dated February 25, 2025, statements of cooperative banks was notified in it was decided to restore the risk weight on SCBs 1981 under the Banking Regulation Act, 1949. funding to NBFCs to the risk weight associated Since then, there have been several developments with the given external rating of NBFCs (where in the financial market as well as accounting the extant risk weight as per external rating of standards and practices. Accordingly, the Reserve NBFCs is below 100 per cent). Bank had undertaken a review of the format and Rupee Interest Rate Derivative Products - Small released draft format on January 7, 2025 for public Finance Banks (SFBs) comments. The Reserve Bank is in the process of comprehensively reviewing the draft formats VI.28 In order to provide greater flexibility based on the comments/feedback received. and expand the avenues available for hedging Forms of Business and Prudential Regulation for interest rate risk in the balance sheet and Investments commercial operations more effectively, SFBs were permitted to deal in permissible rupee VI.31 In order to streamline the activities interest rate derivative products. undertaken by banks and their group entities 127ANNUAL REPORT 2024-25 and provide more operational freedom to banks a track of borrowers’ credit history after transfer and non-operative financial holding companies of loans by banks and NBFCs to ARCs, a circular (NOFHCs) for equity investments and setting up on submission of information to CICs by ARCs group entities, respectively, a draft circular on was issued on October 10, 2024, the salient ‘Forms of Business and Prudential Regulation for features of which include: (i) advising ARCs to Investments’ was placed on the Reserve Bank’s become members of all four CICs; (ii) stipulating website on October 4, 2024, seeking feedback the submission of data by ARCs to CICs on a from stakeholders. Final guidelines would be fortnightly basis or shorter intervals as agreed issued based on the feedback received. between the ARC and the CICs; (iii) prescription Harmonisation of Regulations Applicable to for rectification of rejected data within seven HFCs and NBFCs days of receipt of rejected data from CICs; and (iv) extension of best practices regarding regular VI.32 Post the transfer of regulation of submission/updation of data and customer HFCs from NHB to the Reserve Bank, various grievance redressal to ARCs. regulations have been issued treating HFCs as a category of NBFCs, duly considering their Guidelines on Settlement of Dues of Borrowers specialised nature. To ensure smooth regulatory by ARCs transition, further harmonisation between the VI.34 Earlier guidelines on one-time settlement regulations of HFCs and NBFCs is being taken up (OTS) of dues by ARCs, inter alia, required in a phased manner. Accordingly, post a review, evaluation of all OTS proposals by an independent certain regulations of HFCs pertaining to deposit advisory committee (IAC) of professionals, directions, diversification of activities, hedging followed by a review by the Board of Directors avenues, technical specifications for account comprising at least two independent directors. aggregator ecosystem and other miscellaneous Based on the feedback received, a comprehensive regulations have been harmonised with NBFC review of the OTS guidelines applicable to ARCs regulations vide circular dated August 12, 2024, was undertaken and revised guidelines were which became effective from January 1, 2025. issued on January 20, 2025, which, inter alia, Further, the guidelines on private placement of prescribe that: (i) settlement should be done with non-convertible debentures (NCDs) with maturity the borrower after all possible ways to recover the period of more than one year by HFCs were dues have been examined and OTS is considered reviewed and have been completely aligned to be the best option available; (ii) settlement of with NBFC regulations on the same vide circular accounts having aggregate outstanding value dated January 29, 2025. of more than ₹1 crore as well as of all accounts Submission of Information to Credit Information classified as fraud or wilful defaulter should be Companies (CICs) by ARCs done after the proposal is examined by an IAC VI.33 With a view to align the CIC related followed by a review by the Board of Directors guidelines for ARCs with the guidelines comprising at least two independent directors; applicable to banks and NBFCs, and to maintain and (iii) settlement of accounts having aggregate 128REGULATION, SUPERVISION AND FINANCIAL STABILITY outstanding value of less than ₹1 crore shall be as well as feedback received from stakeholders. done as per Board approved policy subject to Subsequently, the final Master Direction was the condition that any official who was part of the issued on July 30, 2024 after incorporating acquisition of the concerned financial asset shall public comments received on draft Directions. not be part of processing/approving the OTS The Master Direction serves as a comprehensive proposal of the same financial asset. document delineating the regulatory framework and procedures for classification of borrowers as NBFC - Peer to Peer (NBFC-P2P) Lending wilful defaulters. The guidelines are applicable to Platform (Reserve Bank) Directions, 2017 SCBs; scheduled UCBs; AIFIs; NBFC - Middle VI.35 During the course of supervisory and above Layers as per the scale-based examinations, several concerns were observed regulatory framework; non-scheduled UCBs in the operations of NBFC-P2Ps, which were not falling under Tier 3 and 4 according to the revised in conformity with the regulatory prescriptions. regulatory framework; local area banks (LABs); To ensure proper understanding of regulatory and regional rural banks (RRBs). The process of guidelines, certain clarifications were issued classification of wilful defaulters has been refined on August 16, 2024 which, inter alia, include: by introducing disclosure of all materials and (i) lenders’ funds should not be deployed in information on which show-cause notice is based; any manner other than specified; (ii) funds of a provision for written representation against the lender should not be utilised for replacement of order of identification committee to the review other lender(s); (iii) objective pricing policy and committee; and a provision for personal hearing disclosure of the fees liable to be charged at the for the borrower by the review committee. For time of lending itself; such fees should be a fixed early detection of wilful default, review of all amount, or a fixed proportion of the principal NPA accounts for identification of wilful default amount involved in the lending transaction and within six months of their classification as NPA should not be dependent upon the repayment has been prescribed. The Directions also provide by the borrower(s); (iv) funds transferred into clarity on the treatment of wilful default accounts the escrow accounts should not remain in the subsequent to undergoing resolution under the accounts for a period exceeding ‘T+1’ day, where ‘T’ is the date on which the funds are transferred IBC process or on loan assignment. to these escrow accounts; and (v) disclosure Credit Information Reporting of the portfolio performance on the NBFC-P2P VI.37 The extant instructions on reporting of website in respect of losses borne by the lenders credit information issued to REs have been and non-performing assets (NPAs). consolidated in a single direction to establish Wilful Defaulters and Large Defaulters a standardised framework for reporting and VI.36 The existing instructions on wilful dissemination of credit information, safeguarding defaulters were reviewed, taking into the confidentiality and security of sensitive credit consideration various judgments/orders from the data, providing mechanisms for consumers to Hon’ble Supreme Court and Hon’ble High Courts, access their credit information and grievance 129ANNUAL REPORT 2024-25 redressal on the related matters. The Master have been issued with a view to reducing credit Direction in this regard has been issued on concentration risk, reducing exposures to January 6, 2025. sensitive sectors, and enhancing provisioning requirements for relatively riskier exposures. Enhancing Operational Risk Management and These norms, inter alia, include the stipulations Operational Resilience relating to small value loans, exposure ceilings on VI.38 To align the Reserve Bank of India’s housing and real estate loans, and provisioning regulatory guidance with the Basel Committee requirements for investment in security receipts on Banking Supervision (BCBS) principles, (SRs). With a view to rationalising these norms, viz., (a) revisions to the principles for the sound and thereby allowing greater operational management of operational risk; and (b) principles flexibility to UCBs without diluting the regulatory for operational resilience (both issued in March objectives, the above prudential norms have been 2021), a ‘Guidance Note on Operational Risk reviewed vide circular dated February 24, 2025. Management and Operational Resilience’ was The review includes increase in the dynamic and issued on April 30, 2024. It provides overarching static upper limit of small value loans from 0.2 guidance to REs5 to strengthen their operational per cent of Tier-I capital to 0.4 per cent of Tier-I risk management framework and enhance their capital and ₹1 crore to ₹3 crore, respectively; operational resilience enabling them to deliver rationalisation of aggregate exposure limits for critical operations even through disruption. housing loans to individuals with reference to It has been built on three pillars (consisting of total loans and advances instead of total assets 17 principles), viz., prepare and protect6, build and a stricter limit for real estate loans; enhanced resilience7, and learn and adapt8. The guidance monetary ceiling on individual housing loans for note provides operational flexibility to ensure Tier-3 and Tier-4 UCBs; and further extension smooth implementation across REs of various of the five year glide-path allowed to UCBs to sizes, nature, complexity, geographic location provide for the valuation differential on the SRs and risk profile of their business. held against the assets transferred by them to ARCs by additional two years till 2027-28. Review and Rationalisation of Prudential Norms – UCBs Review of Risk Weights on Microfinance Loans VI.39 The Reserve Bank has, from time to VI.40 As per circular on ‘Regulatory Measures time, prescribed various prudential norms for Towards Consumer Credit and Bank Credit to UCBs for enhancing their financial soundness NBFCs’ dated November 16, 2023, the risk and resilience. Some of these prudential norms weight on consumer credit, excluding housing, 5 Commercial banks, primary UCBs/State Cooperative Banks (StCBs)/ Central Cooperative Banks (CCBs), AIFIs and NBFCs (including HFCs). 6 Focussing on governance and operational risk management. 7 Consisting of areas such as business continuity, incident management and cyber security for ensuring delivery of critical operations in case of disruptions. 8 For the creation of a feedback loop through disclosures and lessons learnt exercises. 130REGULATION, SUPERVISION AND FINANCIAL STABILITY education, vehicle loans, and loans secured on April 9, 2025 and final guidelines are by gold was increased to 125 per cent. It has proposed to be issued post examination been decided, vide circular dated February 25, of the same; 2025, that the microfinance loans in the nature • Draft guidelines on Expected Credit Loss of consumer credit shall be risk weighted at (ECL) framework; 100 per cent. Other microfinance loans may be • The final phase of Basel III implementation: classified under regulatory retail portfolio (RRP) (a) Issuance of draft guidelines on and assigned risk weight of 75 per cent, provided Standardised Approach for credit risk; that the banks put in place appropriate policies (b) Issuance of final guidelines on market to ensure fulfilment of the qualifying criteria of risk; and (c) Updating Pillar 3 disclosure RRP. Further, all microfinance loans extended by requirements in alignment with the Basel RRBs and LABs shall attract a risk weight of 100 III framework of BCBS; per cent. • Issuance of guidelines on standardised Agenda for 2025-26 approach to counterparty credit risk (SA- CCR); VI.41 During 2025-26, the Department will focus on the following key deliverables: • Regulatory principles on model risk management; • Issuance of harmonised regulations on ‘Income Recognition, Asset Classification • Issuance of prudential guidelines on and Provisioning Pertaining to Advances’ climate risk for banks. This includes to REs; issuance of final guidelines on disclosure of climate related financial risks and • Comprehensive review of all non-fund guidance on climate scenario analysis based contingent facilities issued by and stress testing; lending institutions; • Operationalisation of the data repository - • A draft regulatory framework for all forms Reserve Bank - Climate Risk Information of co-lending arrangements among REs System (RB-CRIS); was issued for public comments on • Issuance of principles for effective April 9, 2025. Final guidelines would be management and supervision of climate issued post examination of the comments related financial risks; received; • Review of the framework for acceptance • Framework for Securitisation of Stressed of green deposits; Assets: Discussion Paper was issued in • Guidelines on sustainability linked loans; January 2023, on which suggestions were received from the various stakeholders. • Suitable guidelines to address mis-selling Based on the same, the draft framework of financial products and services by REs has been issued for public comments (their own as well as third-party); 131ANNUAL REPORT 2024-25 • Issuance of ‘Frequently Asked Questions of assets as well as new designs, (FAQs)’ on the Master Direction on know technological considerations and more your customer (KYC); participants (Paragraph VI.44); • Review of regulations on internet and • Exploring commencing CBDC pilots on mobile banking for all banks; cross-border payments both on bilateral and multilateral basis to overcome key • Differentiated regulatory framework for challenges related to turnaround time Type I – NBFCs, i.e, NBFCs without (TAT), efficiency and transparency, public funds and customer interface; considering India being the world’s largest • Development of a platform namely recipient of remittances (Paragraph ‘Regulatory Application Management VI.45); System’ (RAMS) by the Department • Launching full scale public tech platform to undertake an end-to-end digital [renamed as Unified Lending Interface transformation of its internal processing (ULI)] with more financial institutions/data of regulatory applications to ensure a life- service providers and product offerings cycle approach to regulation of any RE; (Paragraph VI.46); and • Putting in place the framework for SRO(s) • Consolidation of existing guidelines on for the FinTech sector (Paragraph VI.47); regulatory matters into thematic Master • Setting up a repository for capturing Directions. essential information about FinTechs FinTech Department and repository for tech-related activities VI.42 The FinTech Department is entrusted with by REs in order to effectively discern the developments in its ecosystem the responsibility of fostering innovation in the (Paragraph VI.48); FinTech ecosystem, while remaining vigilant and addressing the associated risks. The Department • Conduct of next global hackathon undertook several measures in pursuance of ‘HaRBInger 2024’ (Paragraph VI.49); and this mandate to fulfil the objectives set out for • Testing innovative products/services 2024-25. and technology under sixth cohort of Agenda for 2024-25 the regulatory sandbox (RS) [Paragraph VI.50]. VI.43 The Department had set out the following goals for 2024-25: Implementation Status • Expanding the scope of CBDC pilots VI.44 The CBDC-R (e₹-R) pilot started with to cover new use cases such as offline the initial use cases of person-to-person (P2P) functionality, programmability, cross- and person-to-merchant (P2M) transactions. border transactions and tokenisation The Reserve Bank has since rolled out multiple 132REGULATION, SUPERVISION AND FINANCIAL STABILITY pilots exploring offline and programmability assessments and decision-making by enabling features as well. The programmability use cases access to a diverse array of data. As on March include direct benefit transfers to farmers against 31, 2025 the Platform has recorded 44 lenders generation of carbon credits and loans to tenant including banks and NBFCs, using over 60 data farmers under kisan credit card (KCC) in select services for 12 loan journeys including KCC locations. Employee allowances for fuel/meal loans, digital cattle loans, MSME loans, etc. purposes are being implemented by banks. Based on the learnings and the positive response Under Subhadra Yojana of the state government from stakeholders, the scope and coverage of of Odisha, e₹ has been used as a payment the platform are being expanded to include more channel for around 88,000 beneficiaries so far. products, data providers and lenders. Discussions are underway with multiple central VI.47 The Reserve Bank released a ‘Draft government Ministries and state governments for Framework for Recognising Self-Regulatory leveraging programmability feature of CBDC to Organisation(s) for FinTech Sector’ on January transfer funds to beneficiaries with a defined end 15, 2024, inviting comments and feedback from use. the stakeholders. Based on the inputs received VI.45 Bilateral cross-border CBDC pilots with and examination thereof, the ‘Framework for select countries are being actively explored Recognising SRO(s) for FinTech Sector’ (SRO- and progress has been made in finalisation of FT framework) was finalised and released on May roadmap, technical aspects and use cases. 30, 2024, which laid down the characteristics of a The Reserve Bank’s participation in multilateral FinTech SRO, and includes, inter alia, functions CBDC initiatives, particularly under the Bank for and governance standards. Accordingly, International Settlements (BIS) Innovation Hub, applications were invited and FinTech Association are also being considered. for Consumer Empowerment (FACE) was recognised as SRO-FT vide press release dated VI.46 The development of ULI, previously August 28, 2024. called as Public Tech Platform for Frictionless Credit (PTPFC) and rechristened to ULI on VI.48 With a view to gather information on the August 26, 2024, was announced as part of the FinTech sector including the use of emerging Reserve Bank’s Statement on Developmental technologies by traditional financial institutions, and Regulatory Policies on August 10, 2023. a ‘FinTech Repository’ was launched on May The ULI pilot commenced on August 17, 2023. 28, 2024, to capture essential information about ULI is an enterprise-grade, open architecture FinTech entities, their activities and technology platform which connects lenders and data stack. Simultaneously, a related repository service providers through a standardised, for REs called ‘EmTech Repository’ was also open application programming interface (API) launched to capture information on their adoption framework operating on a plug-and-play model. of emerging technologies such as artificial By eliminating the need for multiple bilateral intelligence (AI), machine learning (ML), cloud integrations by banks, ULI streamlines credit computing, distributed ledger technology (DLT), 133ANNUAL REPORT 2024-25 etc. The FinTech and EmTech Repositories Major Initiatives are secure web-based applications and are Framework for Responsible and Ethical managed by the Reserve Bank Innovation Hub Enablement of AI (FREE-AI) (RBIH). VI.51 Driven by rapid advances in computing VI.49 The Reserve Bank launched the third power and the vast availability of digital data, AI edition of its annual Global Hackathon – and ML technologies have seen growing interest ‘HaRBInger 2024 – Innovation for Transformation’ and significant progress in recent years, with – on June 7, 2024, focusing on two themes ‘Zero financial institutions globally and domestically Financial Frauds’ and ‘Being Divyang Friendly’. increasingly adopting these technologies. The The Hackathon received 534 proposals, of which Reserve Bank is exploring and implementing 39 were received from teams outside India. An AI/ML-driven solutions in its own functions. independent jury evaluated and selected the The Reserve Bank has constituted an external winners based on several parameters, including committee in December 2024 comprising experts comprehensiveness, innovation, feasibility, with a mandate to recommend a Framework for scalability and compliance. Responsible and Ethical Enablement of AI in the financial sector. VI.50 The Reserve Bank has been operating the RS framework since 2019, under which four Global Conference on Digital Public Infrastructure thematic cohorts9 have been announced and (DPI) and Emerging Technologies completed till date (Table VI.1). Under the fourth VI.52 As part of the celebrations of the 90th year cohort, three entities were found viable. The of its establishment, the Reserve Bank organised a fifth cohort which is theme neutral is currently global conference on ‘Digital Public Infrastructure underway. The On-Tap10 application facility under and Emerging Technologies’ during August 26- the RS is open for the closed themes. 27, 2024 at Bengaluru. The Conference was Table VI.1: Regulatory Sandbox - Experience So Far (Number) Cohort Theme Applications Received Shortlisted for Testing Successfully Exited 1 2 3 4 5 1 Retail Payments 32 6 6 2 Cross-border Payments 27 8 4 3 MSME Lending 22 8 5 4 Prevention and Mitigation of Financial Frauds 9 6 3 5 Theme Neutral 22 5 Testing is going on On Tap Closed Cohort Themes 11 3 2 9 ‘Retail Payments’, ‘Cross Border Payments’, ‘MSME Lending’ and ‘Prevention and Mitigation of Financial Frauds’. 10 The Reserve Bank vide press release dated April 9, 2025 allowed ‘Theme Neutral’ applications as part of the ‘On-Tap’ facility under the RS. 134REGULATION, SUPERVISION AND FINANCIAL STABILITY attended by around 700 participants, including model leverages advanced AI/ML techniques 81 distinguished delegates from 28 central banks to learn patterns of mule account activity from and multilateral institutions such as World Bank, data, achieving higher accuracy as compared to IMF, BIS Innovation Hub and European Central the traditional systems. This solution is currently Bank (ECB). being tested and deployed in a few large public sector banks. VI.53 FinTech Department engages with Agenda for 2025-26 FinTech ecosystem regularly through both structured and one to one basis, with a view VI.55 In 2025-26, the Department will focus on to convey the policy initiatives, understand the the following goals: new products/services, gather information on • Expand the scope and coverage of new innovations and identify areas which need CBDC and introducing new use cases solutions. This helps to chart out areas for policy and features; support. During 2024-25, 486 interactions were • Introducing business-to-customer (B2C) conducted which included 22 structured group functionality in ULI; interactions. ‘Finquiry’ is an initiative that provides • Scaling up ‘MuleHunter.aiTM’; and an opportunity for FinTechs to visit the FinTech • Prepare a framework for responsible and Department at Mumbai for open enquiries and ethical adoption of AI in financial sector. policy clarifications, while ‘Finteract’ is conducted 4. SUPERVISION OF FINANCIAL across various cities on rotation, both at monthly intervals. Since April 2024, the Reserve Bank INTERMEDIARIES convened 12 structured interactions under Department of Supervision (DoS) ‘FinTeract’ covering over 965 representatives VI.56 The DoS is entrusted with the from FinTechs, and 10 open interactions were responsibility of supervising all SCBs (excluding convened through ‘Finquiry’ (since June 2024) RRBs), LABs, payments banks (PBs), SFBs, with over 300 participants. The Reserve Bank CICs, AIFIs, UCBs, NBFCs (excluding HFCs) also launched an initiative named ‘FinKonnect’ and ARCs. in June 2024 aimed at providing a platform to Commercial Banks connect successful entities from the RS and HaRBInger with the potential users of such VI.57 The Department took several measures solutions such as banks, NBFCs and separately to further strengthen both onsite and off-site with investors. supervision of the SCBs, LABs, PBs, SFBs, CICs and AIFIs during the year. RBIH Initiative: AI/ML- based Solution to Identify Agenda for 2024-25 Mule Bank Accounts (MuleHunter.ai™) VI.58 The Department had set the following VI.54 In order to enable timely detection of mule goals for 2024-25: accounts, RBIH has developed ‘MuleHunter. ai™’, a supervised ML model designed for near- • Setting up of cyber range to augment real-time identification of mule accounts. The cyber incident response capability of 135ANNUAL REPORT 2024-25 SCBs (Utkarsh 2.0) [Paragraph VI.59]; number of frauds, public sector banks continued and to contribute maximum to the fraud amount • To augment supervisory capabilities (Table VI.2). Frauds have occurred predominantly in the category of digital payments (card/internet) by a suite of SupTech data tools on in terms of number and primarily in the loan micro-data analytics and other similar portfolio (advances) in terms of value (Table VI.3). use cases using artificial intelligence While card/internet frauds contributed maximum and machine learning (Utkarsh 2.0) to the number of frauds reported by private sector [Paragraph VI.60]. banks, frauds in public sector banks were mainly Implementation Status in loan portfolio. The increase in the amount involved in the total frauds reported during 2024- VI.59 The approach to implementation of cyber 25 over 2023-24 was mainly due to removal of range was re-strategised as per the requirement fraud classification in 122 cases amounting to of the Reserve Bank’s Department of Information ₹18,674 crore reported during previous financial and Technology (DIT). The project is now set to years and reporting afresh during the current be executed by Institute for Development and financial year after re-examination and ensuring Research in Banking Technology (IDRBT) in compliance with the judgement of the Hon’ble coordination with DIT and DoS with the objective Supreme Court dated March 27, 2023. of enhancing synergies among the existing Agenda for 2025-26 cyber drills conducted by IDRBT and other stakeholders. It is in advanced stage of finalising VI.62 The Department has set out the following the implementation modalities. goals for 2025-26: • Strengthening of liquidity stress tests of VI.60 DoS has set up an Advanced Supervisory SCBs by developing a cash flow analysis Analytics Group (ASAG) for increasing the use to ensure banks remain resilient during of techniques like AI/ML which has developed episodes of stress. The process would several advanced analytics models (microdata evaluate the potential impact of extreme analytics, governance assessment model, social but plausible scenarios on a bank’s media monitoring model, fraud vulnerability liquidity position, ensuring it can meet index, borrowers’ vulnerability model and asset obligations even during crises. It would quality prediction model). The Department is in provide forward-looking perspective and the process of developing more such models. assess the stability of banks’ liquidity Other Initiative positions under adverse conditions. By identifying vulnerabilities and ensuring Fraud Analysis adequate liquidity buffers, stress testing VI.61 An assessment of bank group-wise fraud would aid in ensuring resilience of banks, cases over the last three years indicates that protect depositor interest and prevent while private sector banks reported maximum systemic risks; 136REGULATION, SUPERVISION AND FINANCIAL STABILITY Table VI.2: Fraud Cases - Bank Group-wise (Amount in ₹ crore) Bank Group/Institution 2022-23 2023-24 2024-25 Number of Amount Number of Amount Number of Amount Frauds Involved Frauds Involved Frauds Involved 1 2 3 4 5 6 7 Public Sector Banks 3,331 12,557 7,460 9,254 6,935 25,667 (24.7) (66.2) (20.7) (75.6) (29.0) (71.3) Private Sector Banks 8,971 5,206 24,207 2,722 14,233 10,088 (66.4) (27.4) (67.2) (22.3) (59.4) (28.0) Foreign Banks 804 292 2,899 154 1,448 181 (6.0) (1.5) (8.0) (1.3) (6.0) (0.5) Financial Institutions 9 888 1 1 2 13 (0.1) (4.7) - - - - Small Finance Banks 311 31 1,019 64 1,217 58 (2.3) (0.2) (2.8) (0.5) (5.1) (0.2) Payments Banks 68 7 472 35 113 6 (0.5) - (1.3) (0.3) (0.5) - Local Area Banks 0 0 2 0 5 1 - - - - - - Total 13,494 18,981 36,060 12,230 23,953 36,014 (100.0) (100.0) (100.0) (100.0) (100.0) (100.0) -: Nil/Negligible. Note: 1. Figures in parentheses represent the percentage share of the total. 2. Data are in respect of frauds of ₹1 lakh and above reported during the period. 3. The figures reported by banks and FIs are subject to changes based on revisions filed by them. 4. Frauds reported in a year could have occurred several years prior to year of reporting. 5. Amounts involved reported do not reflect the amount of loss incurred. Depending on recoveries, the loss incurred gets reduced. Further, the entire amount involved is not necessarily diverted. 6. As on March 31, 2025, 783 frauds amounting to ₹1,12,911 crore were withdrawn by banks due to non-compliance with the principles of natural justice as per the judgment of the Hon’ble Supreme Court dated March 27, 2023. 7. Data pertaining to 2024-25 includes fraud classification in 122 cases amounting to ₹18,674 crore, pertaining to previous financial years, reported afresh during the current financial year after re-examination and ensuring compliance with the judgement of the Hon’ble Supreme Court, dated March 27, 2023. Source: RBI Supervisory Returns. • Further strengthening the supervisory • To provide a near-real-time view and framework for PBs and SFBs; analytics on the uptime of select digital • Digital services are important channels services for the benefit of customers for servicing customers and ensuring of banks, a dynamic online dashboard resilience of the channels is of paramount would be developed and the banks would importance. A framework will be devised be onboarded in a phased manner. with specific parameters for operational resilience of digital channels in REs; Urban Cooperative Banks (UCBs) • Issuance of guidelines on digital forensic VI.63 The Department continued with its readiness; and objective to monitor the performance of UCBs 137ANNUAL REPORT 2024-25 Table VI.3: Frauds Cases - Area of Operations (Amount in ₹ crore) Area of Operation 2022-23 2023-24 2024-25 Number of Amount Number of Amount Number of Amount Frauds Involved Frauds Involved Frauds Involved 1 2 3 4 5 6 7 Advances 4,021 17,542 4,118 10,072 7,950 33,148 (29.8) (92.4) (11.4) (82.4) (33.2) (92.1) Off-balance Sheet 13 280 11 256 8 270 (0.1) (1.5) - (2.1) - (0.7) Forex Transactions 13 12 19 38 23 16 (0.1) (0.1) (0.1) (0.3) (0.1) - Card/Internet 6,699 278 29,082 1,457 13,516 520 (49.7) (1.5) (80.6) (11.9) (56.5) (1.4) Deposits 652 259 2,002 240 1,208 527 (4.8) (1.4) (5.6) (2.0) (5.0) (1.5) Inter-Branch Accounts 3 0 29 10 14 26 - - (0.1) (0.1) (0.1) (0.1) Cash 1,485 159 484 78 306 39 (11.0) (0.8) (1.3) (0.6) (1.3) (0.1) Cheques/DDs, etc. 118 25 127 42 122 74 (0.9) (0.1) (0.4) (0.3) (0.5) (0.2) Clearing Accounts 18 3 17 2 6 2 (0.1) - - - - - Others 472 423 171 35 800 1,392 (3.5) (2.2) (0.5) (0.3) (3.3) (3.9) Total 13,494 18,981 36,060 12,230 23,953 36,014 (100.0) (100.0) (100.0) (100.0) (100.0) (100.0) -: Nil/Negligible. Note: 1. Figures in parentheses represent the percentage share of the total. 2. Refer to footnotes 2-7 of Table VI.2. Source: RBI Supervisory Returns. during the year and undertook measures for Implementation Status a safe and well-managed urban cooperative VI.65 A set of Level II UCBs11 offering digital banking sector. payment services have been advised to carry out Agenda for 2024-25 gap assessment through Computer Emergency Response Team-India (CERT-In) empanelled VI.64 The Department had set out the following auditors. UCBs have been utilising the services goal for supervision of UCBs in 2024-25: of third-party IT service providers (ITSPs) for • Strengthening the cyber/IT risks various services such as for hosting servers in assessment (Paragraph VI.65). data centres, automated teller machine (ATM) 11 Please refer to the Reserve Bank’s circular on ‘Comprehensive Cyber Security Framework for Primary (Urban) Cooperative Banks (UCBs) – A Graded Approach’ dated December 31, 2019 for definition of Level II UCBs. 138REGULATION, SUPERVISION AND FINANCIAL STABILITY switch, core banking solution (CBS), card for monitoring in the revised PCA framework. management and mobile banking. To evaluate The framework has been suitably harmonised the cyber risk, pooled audit of three such common with similar frameworks applicable for SCBs and ITSPs was conducted by select UCBs through NBFCs, with suitable modifications keeping in CERT-In empanelled auditor. Cyber security mind the underlying principle of proportionality. related instructions issued to UCBs have been It is largely principle-based, with a fewer number consolidated and an updated framework is being of parameters as compared to the SAF, but finalised. ensuring sustenance of the supervisory rigour. Other Initiatives Agenda for 2025-26 Risk-based Approach (RBA) for KYC/AML VI.68 The Department has identified the following Supervision of UCBs goals for supervision of UCBs in 2025-26: VI.66 The coverage of UCBs under RBA was • Review of risk-based approach (RBA) aligned with the four-tiered regulatory framework for KYC/AML supervision of select UCBs and expanded to include Tier 3 and Tier 4 UCBs (Utkarsh 2.0); constituting around 60 per cent of the total deposit • Examining the migration of UCBs to risk- size of the sector. based supervision (RBS); and Prompt Corrective Action (PCA) Framework for UCBs • Issuance of updated guidelines on cyber security framework. VI.67 The Reserve Bank issued the guidelines on PCA framework for UCBs on July 26, 2024, Non-Banking Financial Companies (NBFCs) superseding earlier instructions issued on VI.69 The Department continued to closely supervisory action framework (SAF). The revised monitor the NBFCs (excluding HFCs) and ARCs framework seeks to provide flexibility to design registered with the Reserve Bank. entity specific supervisory action plans based on the assessment of risks on a case-by-case basis. Other Initiative The provisions of the PCA framework will be Risk-based Approach (RBA) for KYC/AML effective from April 1, 2025. The PCA framework Supervision of NBFCs has been made applicable to all UCBs in Tier 2, VI.70 Under RBA, the criterion to include Tier 3 and Tier 4, except UCBs under all-inclusive Directions12. Tier 1 UCBs have been excluded from NBFCs was reviewed and aligned with that the PCA framework as of now; however, they will of scale-based regulations. Accordingly, all continue to be subjected to enhanced monitoring upper layer NBFCs and those with an asset size under the extant supervisory framework. Capital, above ₹5,000 crore in the middle layer are now asset quality and profitability are the key areas covered. 12 All-inclusive Directions are restrictions imposed by the Reserve Bank on banks in the public interest. These directions are issued under Section 35A of the Banking Regulation Act, 1949. 139ANNUAL REPORT 2024-25 Agenda for 2025-26 Implementation Status VI.71 The Department has identified the VI.74 An IS audit sub-group under Standing following goals for supervision of NBFCs in Committee on cyber security was formulated with representation from industry, academia 2025-26: and experts from IS audit profession. The • Review of RBA for KYC/AML supervision report of the sub-group has been finalised and of select NBFCs (Utkarsh 2.0); the recommendations are being examined for • As a thematic assessment, assessing appropriate action. adherence by REs to pricing guidelines VI.75 Data governance aspects, including prescribed vide extant regulations to localisation and data privacy, are being examined ensure that the customers of such loans by an internal inter-departmental group on data are not being charged exorbitant interest governance. While ‘The Digital Personal Data rates; and Protection Act’ was enacted in August, 2023, the rules related to the Act have not been framed, • Examining the migration of NBFCs to and the same will be examined before finalising risk-based supervision (RBS). the report of the sub-group. Supervisory Measures for All Supervised VI.76 Supervisory DQI (sDQI) was developed Entities (SEs) to identify and address deficiencies in risk data aggregation capabilities and risk reporting VI.72 A unified DoS has been operationalised practices across SEs. This sDQI model is used in which the supervision of banks, UCBs and for assessing the quality of data submitted by NBFCs is being undertaken in a holistic manner SEs to DoS through various returns. The model under one umbrella Department. generates SE-wise and aggregate sDQI scores Agenda for 2024-25 each quarter. The movement in sDQI score is being monitored to identify improvement/decline VI.73 The Department had set out the following in the quality of reporting by various SEs. supervisory goals for 2024-25: VI.77 A mechanism in the form of a feedback • Examining information systems (IS) audit loop among various groups of the department is framework in REs (Paragraph VI.74); in place along with a structured framework for • Examining data governance framework supervisory action. for REs (Paragraph VI.75); Other Initiatives • Developing data quality index (DQI) for Strategy to Strengthen KYC/AML Supervision of offsite returns (Paragraph VI.76); and SEs • Deeper integration of offsite analytics with VI.78 The specialised KYC/AML risk onsite supervision (Paragraph VI.77). assessment of SEs, implemented through the 140REGULATION, SUPERVISION AND FINANCIAL STABILITY ‘Supervisory Assessment for KYC/AML Risks Fraud Monitoring Returns and Return on Theft, (SAKAR)’ framework in 2020, was further Burglary, Dacoity and Robbery strengthened with increase in the coverage VI.79 Commercial banks (excluding RRBs); of the SEs under offsite risk assessment; NBFCs (excluding HFCs) in the upper layer, inspection of SEs which were not previously middle layer and base layer (with asset size of subjected to onsite examination for KYC/AML/ ₹500 crore and above); and UCBs are required Terrorist Financing (TF) risks; and carrying out to report incidents through returns on frauds and thematic assessments on areas of emerging theft, burglary, dacoity and robbery on CIMS from risks. The supervisory strategy has also been reoriented to identify the major deficiencies and November 18, 2024. areas of non-compliance, particularly in critical Cross-border Supervisory Cooperation processes such as customer due diligence and VI.80 During the year, the Reserve Bank transaction monitoring at the system level and to proactively strengthened international mitigate the KYC/AML/TF risks in a more focused supervisory cooperation by establishing and manner through targeted assessments and close deepening formal relationships with authorities engagement with the SEs. Further, to utilise the supervisory resources in a more efficient manner, in key global jurisdictions. These efforts aim desktop assessments of smaller SEs have also to enhance the stability of the financial system been introduced. (Box VI.2). Box VI.2 Exploring Supervisory Dimensions Through Cross-border Cooperation Consolidated supervision of international banking groups supervision, which are critical for safeguarding financial by home and host country authorities is essential in a systems worldwide. highly globalised and interconnected financial system. The Supervisors across the globe are increasingly engaging increasing scale and complexity of cross-border banking in cross-border cooperation through formal agreements, operations across multiple jurisdictions pose significant bilateral exchanges and multilateral forums. Recognising risks to global financial stability. While banks leverage the importance of international supervisory collaboration, offshore centres to expand their business and attract the Reserve Bank has established formal arrangements, investments, responsible supervision ensures that local including 47 memoranda of understanding (MoUs) with operations meet the standards of domestic jurisdictions, overseas authorities, covering major jurisdictions with preventing risk accumulation and contagion. significant Indian bank operations. These arrangements facilitate onsite inspections, exchange of supervisory The Basel Committee on Banking Supervision (BCBS) has information, technical collaboration and coordinated crisis highlighted the importance of international cooperation responses. in its core principles for effective banking supervision, particularly principle 3 (cooperation and collaboration) and To enhance the supervision of cross-border banking principle 11 (home-host relationships). These principles groups, supervisory colleges were formalised as a establish minimum standards for prudential regulation and platform for collaboration, coordination and information (Contd.) 141ANNUAL REPORT 2024-25 sharing. The Reserve Bank established its first supervisory In addition to multilateral engagements, the Reserve Bank college in 2012 for State Bank of India and ICICI Bank, has initiated High-Level Bilateral Supervisory Exchanges later extending it to Axis Bank, Bank of Baroda, Bank of with authorities such as the UK’s Financial Conduct Authority India, and Punjab National Bank. These colleges convene and Prudential Regulation Authority, the Monetary Authority biennially in India, enabling home and host supervisors to of Singapore, and the Malta Financial Services Authority. address key supervisory concerns and risks. Similarly, the These exchanges facilitate comprehensive knowledge Reserve Bank actively participates in supervisory colleges sharing on emerging risks, including climate risk, SupTech, third-party outsourcing and operational resilience. for foreign banks with Indian operations, hosted by their respective home supervisors. Additionally, to enhance preparedness against IT-based risks and digital fraud, the Reserve Bank is actively Furthering its commitment to global collaboration, the engaging with overseas supervisors to adopt global best Reserve Bank is an active member of the Federal Reserve practices in operational resilience and cyber security. Bank of New York’s Supervisors Roundtable, comprising 24 agencies from 18 jurisdictions. Source: RBI. Gold Loans the portfolio and ensure that adequate controls are in place over outsourced activities and third- VI.81 In the backdrop of significant growth in party service providers. gold loans in recent years, the Department of Supervision and Regulation jointly conducted a Cyber Security Related Measures for REs review of the adherence to prudential guidelines, VI.82 Cyber security continued to be assessed as well as practices being followed by select as a major operational risk. Cyber incident SEs with regard to loans against pledge of gold monitoring framework was updated and detailed ornaments and jewellery. The review and the guidance was provided to REs on reporting of findings of onsite inspection indicated several cyber incidents. Thematic studies were carried irregular practices such as: (i) shortcomings in out including on IT governance, third party IT the use of third parties for sourcing and appraisal service providers, comparative study on IT/ of loans; (ii) valuation of gold without the information system (IS) regulations to assess presence of the customer; (iii) inadequate due the relative areas and improve upon the existing diligence and lack of end use monitoring; (iv) lack risk mitigation measures. Advanced supervisory of transparency during auction of gold ornaments tools have been used to assess the SEs’ cyber and jewellery on default by the customer; resilience capabilities such as conduct of (v) limitations in monitoring of loan-to-value (LTV); phishing simulation exercise. Frameworks on IS and (vi) incorrect application of risk-weights. audit, forensic readiness and revised guidelines The SEs have been advised vide circular dated for cyber security for UCBs are being worked September 30, 2024 to comprehensively review upon based on the updated risk environment. their policies, processes and practices on gold Fraud Risk Management in REs loans to identify gaps and initiate appropriate remedial measures in a timebound manner. The VI.83 The Reserve Bank issued the revised SEs have also been advised to closely monitor Master Directions on fraud risk management for 142REGULATION, SUPERVISION AND FINANCIAL STABILITY REs on July 15, 2024. The revised Directions sectoral and market-wide cyber crisis are principle-based and strengthen the role of simulation exercises in a phased manner; the Board in overall governance and oversight and of fraud risk management. Framework on early • Enhance the existing framework for warning signals (EWS) and red flagging of supervision of NBFCs in Base Layer. accounts (RFA) has been further strengthened for early detection and prevention of frauds Enforcement Department (EFD) in the REs along with timely reporting to law VI.85 The Enforcement Department was set enforcement agencies and supervisors. The up with a view to separate enforcement action Master Directions now explicitly require REs from supervisory process and to put in place a to ensure compliance with the principles of structured, rule-based approach to identify and natural justice in a time-bound manner before process violations by the REs of the applicable classifying persons/entities as fraud, duly statutes and the directions issued thereunder, taking into account the Hon’ble Supreme and to enforce the same consistently across the Court judgment dated March 27, 2023. These Directions have also been made applicable to Reserve Bank. The objective of enforcement is RRBs, rural cooperative banks and HFCs. to ensure compliance by the REs with the rules and regulations, within the overarching principles Agenda for 2025-26 of financial stability, public interest and consumer VI.84 The Department has identified the protection. following goals for supervision of all SEs in Agenda for 2024-25 2025-26: • Review and issue of updated/harmonised VI.86 The Department had set out the following goal for 2024-25: regulatory instructions on statutory audit and concurrent audit in REs; • Based on a feasibility study, a Scale- • Conducting detailed thematic reviews on based Framework for Enforcement would select areas of cyber risks; be put in place (Paragraph VI.87). • Enhancing cyber resilience and Implementation Status capabilities of SEs through implementing VI.87 The Scale-based Framework for recommendations of the inter-regulatory Enforcement is being reviewed on the basis of working group on uniformity in baseline the feasibility study and the feedback received. cyber security guidelines of financial entities; Major Developments • Enhancing cyber mapping of financial VI.88 During 2024-25, the Department systems and conduct of cross- undertook enforcement action against REs and 143ANNUAL REPORT 2024-25 imposed 353 penalties aggregating to ₹54.78 Agenda for 2025-26 crore for contraventions/non-compliance13 with VI.90 During 2025-26, the Department proposes provisions of statutes and certain directions to achieve the following goal: issued by the Reserve Bank from time to time • Review the standard operating procedure (Table VI.4). (SOP) for enforcement action based on VI.89 With the objective of rationalising and the experience gained (Utkarsh 2.0). consolidating enforcement action by the 5. CONSUMER EDUCATION AND Reserve Bank, the enforcement related work PROTECTION (i.e., imposition of monetary penalty and compounding) under the Payment and Settlement Consumer Education and Protection Systems (PSS) Act, 2007 was transferred to the Department (CEPD) Department and the circular on framework for VI.91 The CEPD frames policy guidelines enforcement action under the PSS Act, 2007 has for effective grievance redress mechanism at been issued on January 30, 2025. the level of the REs; monitors the functioning of internal grievance redress mechanism of Table VI.4 Enforcement Actions REs; administers ‘the Reserve Bank-Integrated (April 2024 - March 2025) Ombudsman Scheme, 2021’ (RB-IOS) through Regulated Entity Number of Total Penalty Penalties (₹ crore) ombudsman offices; oversees the performance 1 2 3 of the consumer education and protection cells Public Sector Banks 8 11.11 at the regional offices; and creates public Private Sector Banks 15 14.80 awareness on safe banking practices, extant Foreign Banks 6 3.52 regulations on customer service14 and protection, Payments Banks 1 0.27 as also on the avenues for redress of customer Small Finance Banks 2 0.72 complaints. Regional Rural Banks 6 0.59 Agenda for 2024-25 Cooperative Banks 264 15.63 Non-banking Financial Companies/ 37 7.29 VI.92 The Department had proposed the Asset Reconstruction Companies following goals for 2024-25: Credit Information Companies 1 0.02 Housing Finance Companies 13 0.83 • Improvement in the complaint Total 353 54.78 management system to enhance support Source: RBI. in lodging complaints and ensure greater 13 Illustratively, some of them include contravention of/violation related to Section 26A of Banking Regulation Act, 1949; Cyber Security Framework in banks; Exposure Norms and IRAC Norms; Reserve Bank of India [Know Your Customer (KYC)] Directions, 2016; Reserve Bank of India (Frauds Classification and Reporting by Commercial Banks and Select FIs) Directions, 2016; Reporting Information on CRILC; Submission of Credit Information to Credit Information Companies (CICs); Customer Protection-Limiting Liability of Customers in Unauthorised Electronic Banking Transactions; Director Related Loans; the Housing Finance Companies (NHB) Directions, 2010; and the Non-Banking Financial Company - Peer to Peer Lending Platform (Reserve Bank) Directions, 2017. 14 Annex III of this Report provides a list of customer centric measures undertaken during April 2022 to March 2025. 144REGULATION, SUPERVISION AND FINANCIAL STABILITY consistency in decisions and outcomes Redress Mechanism in Banks’ in January 2021. (Utkarsh 2.0) [Paragraph VI.93]; The framework, inter alia, includes recovery of • Development of consumer protection cost of redress of complaint from outlier banks to incentivise banks to strengthen their internal assessment matrix for REs (Utkarsh 2.0) grievance redressal systems and to bring [Paragraph VI.94]; improvements in the quality of customer service. • Strengthen internal grievance redress Based on the experience gained and feedback framework to encourage banks to take obtained, the framework is being reviewed proactive measures to improve customer to fine-tune the parameters, strengthen the service (Paragraph VI.95); mechanism and further nudge the concerned • Conduct of survey to assess the reasons REs towards improving their internal grievance for the low level of complaints in the rural/ redress mechanisms. semi-urban areas (Paragraph VI.96); and VI.96 A survey has been undertaken to • Review and rollout of reoriented understand the reasons for the low level of nationwide intensive awareness complaints from the rural/semi-urban areas and programme (NIAP) based on feedback assess the level of awareness in these areas, as received from REs and Offices of RBI also to provide inputs for geography/population Ombudsman (ORBIOs) [Paragraph specific awareness programmes. The findings of VI.97]. the survey are currently being analysed. Implementation Status VI.97 The Reserve Bank had launched a month- VI.93 The Reserve Bank is collaborating closely long NIAP in November 2022, in collaboration with Reserve Bank Information Technology Pvt. with the REs, with focus on creating awareness in Ltd. (ReBIT) to integrate artificial intelligence the hitherto unreached and isolated segments of (AI) into the complaint management system in a the populations. Based on the feedback from all phased manner. While phase I will introduce a the stakeholders, the need was felt for sustaining conversational AI chatbot for the complainants, consumer awareness efforts with a targeted phase II will have more advanced features for approach on an ongoing basis. Accordingly, a processing the complaints. systematic approach for augmenting awareness VI.94 The Reserve Bank is developing throughout the year has been initiated in January a consumer protection assessment matrix 2025. (CoPAM) to assess the quality of customer Major Developments protection provided by the REs. The pilot test of the model with respect to select banks is Receipt of Complaints at ORBIOs currently underway. VI.98 During 2024-25, 2.96 lakh complaints VI.95 The Reserve Bank had issued were received at ORBIOs, compared to 2.93 lakh ‘Framework for Strengthening the Grievance complaints during 2023-24, showing a marginal 145ANNUAL REPORT 2024-25 increase. Complaints were mainly received • Improve the complaint management against banks, followed by NBFCs, non-bank system to better support the lodging system participants and CICs. Majority of these of complaints and ensure greater complaints pertain to loans/advances and digital consistency in decisions and outcomes banking products. (Utkarsh 2.0). Awareness Initiatives Deposit Insurance and Credit Guarantee Corporation (DICGC) VI.99 The Reserve Bank of India Ombudsmen conducted 47 townhall meetings and 239 VI.101 The DICGC, a wholly owned subsidiary of awareness programmes in 2024-25, with the Reserve Bank established under the DICGC focus on specific groups such as students, Act, 1961, administers the deposit insurance senior citizen and women. Moreover, thematic scheme in India, the objective of which is to multimedia campaigns on safe banking practices protect depositors of banks and preserve public for Aadhaar enabled payment system (AePS), confidence in the banking system thereby complaint lodging procedure and ‘Digital Arrest’ contributing to financial stability. The deposit were conducted. Awareness booklets relating to insurance scheme is mandatory for all banks safe banking practices were distributed in rural (commercial and co-operative) that are licensed self-employment training institutes (RSETIs). by the Reserve Bank. The number of registered The Reserve Bank is in the process of releasing insured banks stood at 1,982 as on March animated short films depicting modus operandi of 31, 2025, comprising 139 commercial banks various frauds and safeguards to be exercised. (including 11 SFBs, 6 PBs, 43 RRBs and 2 LABs) and 1,843 co-operative banks (1,457 UCBs, 34 Agenda for 2025-26 StCBs and 352 DCCBs). VI.100 During 2025-26, the Department has VI.102 The current coverage limit of deposit identified the following goals to focus: insurance is ₹5 lakh per depositor of a bank for • Review of ‘Reserve Bank-Integrated deposit accounts held ‘in the same capacity and Ombudsman Scheme, 2021’, including in the same right’15. As on September 30, 2024, consumer education and protection the number of fully insured deposit accounts cells, centralised receipt and processing under the coverage limit was 286.9 crore (281.8 centre, and contact centre (Utkarsh 2.0); crore a year ago) which constituted 97.7 per cent • Issuance of Master Direction on grievance (97.9 per cent a year ago) of the total number redressal framework in REs; and of accounts. In terms of value, the total insured 15 Deposit accounts are called so when the depositor has one or more types of deposit accounts and in one or more branches of a bank in his/her personal name. This also includes deposit held in the name of the proprietary concern where the depositor is the sole proprietor. If the depositor has deposit accounts in his/her capacity as a partner of a firm/guardian of a minor/director of a company/trustee of a trust/joint account, in one or more branches of the bank then such accounts are considered as held in different capacity and different right. In the case of joint accounts, if individuals open more than one joint accounts in which their names are not in the same order or group of persons are different, then the deposits held in these joint accounts are considered as held in the different capacity and different right. 146REGULATION, SUPERVISION AND FINANCIAL STABILITY deposits were ₹96,74,623 crore (₹90,32,340 25, the total claims settled by the Corporation crore in the previous year) which was 42.6 per amounted to ₹476 crore, all of which were cent (44.2 per cent in the previous year) of towards 43 UCBs liquidated/placed under all- assessable deposits16. The reserve ratio (i.e., inclusive Directions. The size of the DIF stood at Deposit Insurance Fund/Insured Deposits) as on ₹2,28,933 crore as on March 31, 2025 recording September 30, 2024 stood at 2.21 per cent (2.02 a y-o-y growth of 15.2 per cent over ₹1,98,753 per cent in the previous year). Currently, the crore as on March 31, 2024. coverage limit is 2.5 times the GDP per capita in 6. CONCLUSION 2024-25. VI.105 The Reserve Bank undertook several VI.103 The DICGC levies banks a flat rate measures to safeguard the financial system premium of 0.12 per cent per annum on the by further strengthening the regulatory and total assessable deposits for providing deposit supervisory framework of banking and non- insurance. During 2024-25, deposit insurance banking sectors in line with global best practices. premium received was ₹26,764 crore, recording Going forward, concerted efforts would be a y-o-y growth of 12.1 per cent. made, inter alia, towards rationalisation and VI.104 The DICGC maintains a Deposit harmonisation of regulations across regulated Insurance Fund (DIF) for the settlement of claims entities; issuance of prudential guidelines on of depositors of banks taken into liquidation/ climate risk for banks; preparing a framework for amalgamation or put under all-inclusive responsible and ethical adoption of AI in financial Directions. The Fund has been built up through sector; strengthening of liquidity stress tests transfer of the Corporation’s surplus, i.e., excess of SCBs; and also examining the migration of of income (mainly comprising premium received UCBs/NBFCs to risk-based supervision, besides from insured banks, interest income from strengthening cyber security and fraud detection investments and cash recovery out of liquidation mechanism. Further, fine-tuning the existing of assets of failed banks) over expenditure complaint management and grievance redress (payment of claims of depositors and related mechanism, including exploring the use of AI, expenses) each year, net of taxes. During 2024- would remain in focus. 16 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. 147ANNUAL REPORT 2024-25 VII PUBLIC DEBT MANAGEMENT As the debt manager to the central and state governments, the Reserve Bank manages their market borrowing programme adhering to the broad objectives of cost optimisation, risk mitigation and market development. During 2024-25, the government securities (G-secs) yields and the weighted average coupon on the entire outstanding debt stock decreased. The weighted average maturity (WAM) of primary issuances increased as compared to the previous year. Issuances of sovereign green bonds (SGrBs) and ultra-long securities continued during the year. VII.1 The Internal Debt Management VII.3 The remainder of the chapter is arranged Department (IDMD) of the Reserve Bank is under three sections. Section 2 presents the entrusted with the responsibility of managing the implementation status in respect of the agenda for domestic debt of the central government by statute 2024-25 along with major developments during vide Sections 20 and 21 of the Reserve Bank of the year in the area of debt management for India (RBI) Act, 1934, and of 28 state governments both the central and state governments. Section and two union territories (UTs) in accordance with 3 covers major initiatives to be undertaken in the respective bilateral agreements as provided 2025-26, followed by a summary in the last in Section 21A of the RBI Act. In terms of Section section. 17(5) of the RBI Act, 1934, short-term credit up to three months is provided to both the central 2. Agenda for 2024-25 and state governments to bridge temporary VII.4 The Department had set out the following mismatches in their cash flows. goals for 2024-25: VII.2 Market borrowings by the central ● Consolidation of debt through calendar government moderated in 2024-25 on the back of driven, auction-based switch operations its lower gross fiscal deficit (GFD). The Reserve along with re-issuance of securities to Bank ensured the completion of the market augment liquidity in the G-secs market borrowing programme for both the central and (Paragraph VII.5-VII.6); state governments in a non-disruptive manner, keeping in mind the three broad objectives of ● Development of an application cost optimisation, risk mitigation and market programming interface (API) to facilitate development. The weighted average yield (WAY) value free transfer (VFT) of G-secs by of market borrowings for the central government the depositories in a seamless manner softened by 28 basis points (bps) during the (Paragraph VII.7); year. The maturity profile of outstanding dated securities was elongated to contain the rollover ● Review of operational guidelines for risk. The Reserve Bank, in consultation with the floating rate savings bonds (FRSB) and central government, also issued SGrBs during sovereign gold bond (SGB) scheme 2024-25. (Paragraph VII.8); and 148PUBLIC DEBT MANAGEMENT ● Further improving the user interface of the process simpler and to remove manual the RBI ‘Retail Direct’ portal by providing intervention, API has been developed connecting additional payment options (Paragraph the systems between the Reserve Bank and the VII.9). depositories, which now facilitates seamless transfer of G-secs between the depositories for Implementation Status settlement of inter-depository trades executed VII.5 The Reserve Bank successfully completed between demat account holders of different the combined gross market borrowings of the depositories. central and state governments to the tune of VII.8 The Floating Rate Savings Bonds, ₹24.7 lakh crore, which was 3.0 per cent lower 2020 (Taxable) [FRSB, 2020 (T)] - operational than the previous year. During 2024-25, there guidelines specified the roles and responsibilities were 101 re-issuances out of 118 issuances of of the receiving offices with respect to issue G-secs (85.6 per cent) as compared with 135 and servicing of these bonds. A comprehensive re-issuances out of 149 issuances (90.6 per review of the operational guidelines for the FRSB cent) in the previous year. With an aim to ensure has been carried out and the revised guidelines active debt consolidation, switches amounting to will be issued shortly. ₹1.47 lakh crore were completed during 2024-25 as against the budgeted amount of ₹1.50 lakh VII.9 The RBI ‘Retail Direct’ mobile application crore. Further, buyback of short-term securities was launched on May 28, 2024 to improve ease amounting to ₹1.18 lakh crore was completed of access and convenience of investing in G-secs through reverse auctions. for retail investors. The mobile application offers a single sign-on facility for seamless navigation VII.6 During 2024-25, securities ranging from between primary market and secondary market 3-year to 50-year tenor (original maturity) were modules of the app. To further expand the modes issued as part of the government’s market of payment available in the ‘Retail Direct’ portal/ borrowing programme with the objective of catering mobile application, UPI single-block-and-single- to the requirements of various investors with debit facility has been introduced. This facility appetite for securities in different maturity buckets. allows investors to pre-authorise transactions Based on market feedback and in line with global and block funds in their accounts for debits to be market practice, issuance of benchmark security initiated as per the scheduled timeline in respect in 15-year tenor was introduced during the year in of bids placed in primary auctions of G-secs, place of the 14-year benchmark security. SGrBs state government securities (SGS) and treasury were issued for the total amount of ₹21,697 crore bills (T-Bills). (₹11,697 crore in the 10-year tenor and ₹10,000 Major Developments crore in the 30-year tenor) during the year. VII.7 To facilitate the settlement of inter- Debt Management of the Central Government depository trades executed in stock exchanges VII.10 During 2024-25, both gross and net between demat account holders of different market borrowings of the Government of India depositories, the Reserve Bank had earlier (GoI) through dated G-secs were lower by 9.2 per rolled out an advanced VFT module. To make cent and 1.5 per cent, respectively, as compared 149ANNUAL REPORT 2024-25 Table VII.1: Market Borrowings of the Central Government (₹ crore) Item 2021-22 2022-23 2023-24 2024-25 1 2 3 4 5 Gross Market Borrowings through Dated Securities 11,27,382 14,21,000 15,43,000 14,00,697 (4.8) (5.3) (5.3) (4.2) Net Market Borrowings (i to iv)# 9,29,351 11,74,375 12,28,805 10,81,598 (3.9) (4.4) (4.2) (3.3) i) Dated Securities@ 8,63,103 11,08,261 11,80,456 11,62,879 ii) 91-day T-Bills 45,439 -23,798 20,164 72,713 iii) 182-day T-Bills 71,252 52,426 15,982 -55,896 iv) 364-day T-Bills -50,444 37,487 12,203 -98,098 #: After adjusting for switches/buyback, net market borrowings during 2024-25 stood at ₹9,93,233 crore, ₹12,26,101 crore in 2023-24, ₹11,71,951 crore in 2022-23 and ₹9,29,060 crore in 2021-22. @: Without adjusting for buyback/switches. Note: Figures in parentheses are per cent of GDP. Source: RBI, Union Budget and MoSPI. to the previous year. Net market borrowings maturity of primary issuances and outstanding through dated securities and T-Bills taken together debt increased as compared to the previous year were lower by 12.0 per cent as compared to the (Table VII.2). previous year (Table VII.1). VII.12 There were two instances of devolvement Debt Management Operations on Primary Dealers (PDs) during 2024-25 as VII.11 The weighted average yield of G-secs against no such instance in the previous year. issued during the year decreased by 28 bps as There was one instance each of rejection of all compared to the previous year, while the weighted bids for a notified amount of ₹6,000 crore, and average coupon on the entire outstanding debt partial acceptance of bids for ₹1,695 crore as stock decreased by 4 bps. The weighted average against the notified amount of ₹6,000 crore. Table VII.2: Market Loans of Central Government - A Profile* (Yield in Per cent/Maturity in Years) Years Range of Cut Off Yield in Primary Issues Issued during the Year^ Outstanding Stock# Under 5 Years 5-10 Years Over 10 Years Weighted Range of Weighted Weighted Weighted Average Maturities@ Average Average Average Yield Maturity Maturity Coupon 1 2 3 4 5 6 7 8 9 2018-19 6.56-8.12 6.84-8.28 7.26-8.41 7.77 1-37 14.73 10.40 7.81 2019-20 5.56-7.38 6.18-7.44 5.96-7.77 6.85 1-40 16.15 10.72 7.71 2020-21 3.79-5.87 5.15-6.53 4.46-7.19 5.79 1-40 14.49 11.31 7.27 2021-22 4.07-5.10 4.04-6.78 4.44-7.44 6.28 1-40 16.99 11.71 7.11 2022-23 5.43-7.45 5.21-7.52 5.65-7.90 7.32 1-40 16.05 11.94 7.26 2023-24 6.89-7.39 6.98-7.40 7.07-7.57 7.24 3-50 18.09 12.54 7.29 2024-25 6.61-7.25 6.69-7.19 6.78-7.34 6.96 3-50 20.66 13.24 7.25 @: Residual maturity of issuance and figures are rounded off. *: Excluding special securities. ^: Excluding switch auction. #: Including switch auction. Source: RBI. 150PUBLIC DEBT MANAGEMENT VII.13 G-secs yields softened during the year driven by various factors, viz., decline in inflation, expectation of monetary policy easing, continuation of fiscal consolidation, the Reserve Bank’s liquidity injection measures, increased FPI investments aided by inclusion of G-secs in global bond indices, fall in crude oil prices and start of monetary easing by major central banks (see Section 5 of Chapter II). Overall, the 10-year yield softened by 45 bps in 2024-25 (Chart VII.1). VII.14 During 2024-25, about 55.3 per cent of the market borrowing was through issuance of Source: FBIL. dated securities, with a residual maturity of 10 years and above as compared with 52.1 per cent Ownership of Securities in the previous year (Table VII.3). VII.16 Commercial banks remained the largest holders of G-secs (including T-Bills and Treasury Bills (T-Bills) SGS) accounting for 36.4 per cent as at end-March VII.15 Short-term cash requirements of 2025, followed by insurance companies (24.3 the central government are met through issuance per cent), provident funds (10.6 per cent) and of auction treasury bills (ATBs). During 2024-25, the Reserve Bank (8.1 per cent). The share of the net short-term issuance of ATBs (91,182 and foreign portfolio investors was 1.9 per cent. The other holders of G-secs (including T-Bills and 364 days) declined to ₹(-)81,281 crore as against SGS) include mutual funds, state governments, ₹48,349 crore in the previous year. financial institutions, corporates and others. Table VII.3: Issuance of Government of India Dated Securities – Maturity Pattern (Amount in ₹ lakh crore) Residual Maturity 2022-23 2023-24 2024-25 Amount Raised Percentage Amount Raised Percentage Amount Raised Percentage to Total to Total to Total 1 2 3 4 5 6 7 Less than 5 Years 2.7 19.0 2.5 16.5 1.9 13.4 5 - 9.99 Years 4.6 32.1 4.8 31.4 4.4 31.3 10 -14.99 Years 2.9 20.1 2.8 17.8 2.1 15.5 15 Years & Above 4.1 28.8 5.3 34.3 5.6 39.8 Total 14.2 100.0 15.4 100.0 14.0 100.0 Note: Figures in the columns might not add up to the total due to rounding off of numbers. Source: RBI. 151 tnec reP Chart VII.1: FBIL Semi Annualised Par Yield Curve 7.55 7.35 7.15 6.95 6.75 6.55 6.35 Maturity (Years) March 31, 2023 March 28, 2024 March 28, 2025 2 4 6 8 01 21 41 61 81 02 22 42 62 82 03 23 43 63 83 04 24 44 64 84 05ANNUAL REPORT 2024-25 Primary Dealers (PDs) VII.17 The number of PDs stood at 21 [14 bank- PDs and 7 standalone PDs (SPDs)]. The PDs have the mandate to underwrite primary auctions of dated G-secs, while they have a target of achieving bidding commitment and success ratio in respect of primary auctions of T-Bills/cash management bills (CMBs). PDs achieved an average success ratio of 66.7 per cent in H1:2024-25 and 64.2 per cent in H2:2024-25. The share of amount allotted to PDs in auctions of T-Bills was 74.8 per cent during 2024-25 as compared with 69.4 per cent in the previous year. The commission paid to PDs, including GST, for underwriting primary auctions of dated G-secs Source: RBI. during 2024-25 was ₹15.8 crore as compared with secondary G-sec market. Total volume transacted ₹48.5 crore during 2023-24. on behalf of these institutions stood at ₹730 crore Floating Rate Savings Bond, 2020 (Taxable) (face value) during 2024-25 as compared to ₹920 [FRSB, 2020 (T)] Scheme crore (face value) in the previous year. VII.18 During the year, ₹5,503 crore was raised Debt Management of State Governments through issuance of the FRSB, 2020 (T), of which, ₹346 crore was raised through the Reserve VII.21 Following the recommendations of the Bank’s ‘Retail Direct’. 14th Finance Commission to exclude most of the states from the National Small Savings Fund Cash Management of the Central Government (NSSF) financing facility, market borrowings of VII.19 The ways and means advances (WMA) states have increased over the last few years. limit of the central government was fixed at ₹1.5 The share of market borrowings in financing the lakh crore and ₹0.5 lakh crore for H1 and H2 of gross fiscal deficit of states rose to 79 per cent in 2024-25, respectively. The cash balance of the 2024-25 (BE) from 75.5 per cent in 2023-24 (RE). central government remained in surplus during most part of the year. The central government VII.22 The gross market borrowings of states resorted to WMA for 8 days during 2024-25 as in 2024-25 stood at 81.9 per cent of the amount compared with 24 days in the previous year indicated in the quarterly indicative calendar. (Chart VII.2). There were 835 issuances in 2024-25, of which, 100 were re-issuances (782 issuances Investments under Foreign Central Bank (FCB) in 2023-24, of which, 49 were re-issuances) Scheme [Table VII.4]. VII.20 Under the FCB scheme, the Reserve Bank invests in Indian G-secs on behalf of select FCBs VII.23 The weighted average cut-off yield of SGS and multilateral development institutions in the issuances during 2024-25 fell to 7.20 per cent from 152 erorc hkal ₹ Chart VII.2: GoI Cash Balance Position 6 5 4 3 2 1 0 -1 -2 rpA-1 rpA-12 yaM-11 yaM-13 nuJ-02 luJ-01 luJ-03 guA-91 peS-8 peS-82 tcO-81 voN-7 voN-72 ceD-71 naJ-6 naJ-62 beF-51 raM-7 raM-72 2022-23 2023-24 2024-25PUBLIC DEBT MANAGEMENT Table VII.4: Market Borrowings of States through SGS (Amount in ₹ crore) Item 2021-22 2022-23 2023-24 2024-25 1 2 3 4 5 Gross Sanctions under Article 293(3) 8,95,166 8,80,779 11,29,295 11,73,714 Gross Amount Raised during the Year 7,01,626 7,58,392 10,07,058 10,73,310 Redemptions during the Year 2,09,143 2,39,562 2,89,918 3,19,965 Net Amount Raised during the Year 4,92,483 5,18,830 7,17,140 7,53,345 Amount Raised during the Year to Gross Sanctions (per cent) 78.4 86.1 89.2 91.4 Outstanding (at the end of period)# 44,10,254 49,29,083 56,46,222 63,99,567 #: Including Ujjwal DISCOM Assurance Yojana (UDAY) bonds and other special securities. Source: RBI. 7.52 per cent in the previous year. The weighted UTs resorted to WMA and 9 states/UTs availed average spread (WAS) of SGS issuances over OD. comparable maturity of the central government VII.25 The limits for financial accommodation securities was 30 bps in 2024-25 as compared to provided by the Reserve Bank to state 31 bps in the previous year. In 2024-25, 25 states governments/UTs through SDF and WMA were and two UTs issued dated securities of tenors reviewed based on the recommendations of the other than 10 years, ranging from 2 to 35 years. Working Group on Consolidated Sinking Fund The average inter-state spread on securities of (CSF) and Guarantee Redemption Fund (GRF); 10-year tenor (fresh issuances) was 4 bps in and the Group on Review of Ways and Means 2024-25, as compared to 3 bps in 2023-24. Advances to the State Governments, respectively VII.24 During 2024-25, 16 states/UTs (Box VII.1). The revised SDF/WMA limits were availed special drawing facility (SDF), 13 states/ made effective from July 1, 2024. Box VII.1 Review of Financial Accommodation Facilities for the State Governments In terms of Section 17(5) of the Reserve Bank of India WMA and OD. SDF is a collateralised facility available to Act, 1934, the Reserve Bank provides short-term financial the states at concessional rates1 against their investment in accommodation facilities, not exceeding three months from CSF/GRF/auction treasury bills (ATBs). WMA and OD are the date of making of the advance, to the states to tide over uncollateralised facilities available at rates higher2 than that applicable for SDF. The financial accommodation facilities temporary mismatches in their cash flows. available to the state governments can be availed in order Presently, financial accommodation facilities to the states of first SDF followed by WMA and OD. from the Reserve Bank are available in the form of SDF, (Contd.) 1 SDF against investment in CSF/ GRF is available at repo rate minus 200 bps, while SDF against investment in ATBs is available at repo rate minus 100 bps. 2 WMA up to its pre-fixed limits but outstanding up to 3 months from date of making advance is available at the prevailing repo rate, while WMA outstanding beyond 3 months from date of making advance is available at repo rate plus 100 bps. The OD beyond the WMA limits is available at the prevailing repo rate plus 200 bps and at the prevailing repo rate plus 500 bps if OD exceeds 100 per cent of WMA limits. 153ANNUAL REPORT 2024-25 During the 33rd Conference of the State Finance Secretaries GRF, the methodology to determine the SDF limits of the held on July 6, 2023, members requested for a revision in the state governments against their investment in CSF/GRF/ WMA limits on account of rise in expenditure post pandemic. ATBs has also been revised. The revised maximum limit Accordingly, the Reserve Bank constituted a Group of select of SDF that can be availed by the states/UTs against the State Finance Secretaries to review the WMA limits of the investments held under CSF/GRF shall be 50 per cent of states based on the latest expenditure data. The Group the lower of (i) outstanding balance of the funds as on the analysed the expenditure data for the three-year period from last date of the second preceding quarter, and (ii) the current 2019-20 to 2021-22 and based on the methodology adopted balance held in CSF/GRF. For investments held in ATBs, the by the Sudhir Shrivastava Committee3, recommended maximum limit of SDF shall be 50 per cent of the lower of an increase in aggregate WMA limit for states to ₹60,118 (i) outstanding balance in ATBs (91/182/364 days) as on the crore from the extant limit of ₹47,010 crore. Accepting last date of the second preceding quarter, and (ii) the current the recommendations of the Group, the Reserve Bank ATB balance. revised the WMA limits of the states/UTs. Further, based on the recommendation of the Working Group4 on CSF and Source: RBI. VII.26 The day end surplus cash balance above also conducted at the Reserve Bank’s College the minimum required to be maintained by of Agricultural Banking, Pune, in January 2025 any state/UTs gets auto-invested in 14 days which was attended by officials from 14 states. intermediate treasury bills (ITBs). States/UTs Investments in Consolidated Sinking Fund (CSF)/ are also permitted to invest in ATBs through Guarantee Redemption Fund (GRF) and Budget primary auctions under the non-competitive Stabilisation Fund (BSF) bidding facility. The outstanding investments in ITBs moderated during the year 2024-25 VII.28 The Reserve Bank manages two reserve (Table VII.5). fund schemes on behalf of states – the CSF and VII.27 Capacity building programmes (CBPs) the GRF. Currently, 25 states and two UTs have set on cash and debt management were conducted up CSF, while 21 states and one UT have set up for five states. In addition, a two-day CBP was GRF. Besides CSF/GRF, the Reserve Bank also Table VII.5: Investments in ITBs and ATBs by State Governments/UTs (₹ crore) Item Outstanding as on March 31 2021 2022 2023 2024 2025 1 2 3 4 5 6 14-Day (ITBs) 2,05,230 2,16,272 2,12,758 2,66,805 1,88,072 ATBs 41,293 87,400 58,913 51,258 88,781 Total 2,46,523 3,03,672 2,71,671 3,18,063 2,76,853 Source: RBI. 3 Advisory Committee (Chairman: Shri Sudhir Shrivastava) on Ways and Means Advances to State Governments submitted the Report to the Reserve Bank on March 24, 2021. 4 The Working Group to review the CSF/GRF was constituted during the 32nd Conference of State Finance Secretaries held on July 7, 2022. 154PUBLIC DEBT MANAGEMENT maintains BSF for the state government of Odisha. ● Extending API facility for seamless transfer Outstanding investments by member states in the of G-secs between demat accounts and CSF and GRF as at end-March 2025 stood at Retail Direct Gilt (RDG) accounts. ₹2,40,348 crore and ₹16,019 crore, respectively, 4. Conclusion as against ₹2,06,441 crore and ₹12,259 crore, VII.30 During the year, the market borrowings respectively, as at end-March, 2024. of the central and state governments were 3. Agenda for 2025-26 completed successfully amidst global financial volatility and geopolitical tensions. The market VII.29 During 2025-26, the market borrowing borrowing programme for 2025-26 will be programme is proposed to be conducted with managed in an orderly manner taking into account the following strategic milestones to achieve the the government’s fiscal deficit goals and evolving overall goals of debt management: market conditions. The Reserve Bank would ● Expanding the bidding and payment continue to ensure smooth conduct of the market options available to retail investors under borrowing programme based on the guiding the RBI ‘Retail Direct’ portal/application; principles of cost optimisation, risk mitigation and and market development. 155ANNUAL REPORT 2024-25 VIII CURRENCY MANAGEMENT During 2024-25, initiatives were undertaken towards modernisation of the currency management architecture. Maintaining adequate supply of clean banknotes in circulation, sustaining the self-sufficiency in banknote production, strengthening the integrity of banknotes through research, and improving methodologies for assessing the future demand for banknotes remained key priorities. VIII.1 The Reserve Bank remained committed 2. Agenda for 2024-25 during the year to ensure sufficient supply VIII.3 The Department had set out the following of clean banknotes and coins to meet the goals for 2024-25: demand for cash from the public. Withdrawal ● Carrying forward the project on of ₹2000 denomination banknotes initiated modernisation of the currency in 2023-24 continued during the year. The management infrastructure (Paragraph plan to modernise the currency management VIII.4); infrastructure in the country was taken forward ● Exploring more sustainable and eco- during the year. An exercise to standardise the friendly disposal of currency note Note Sorting Machines (NSMs) being used briquettes (Paragraph VIII.5); across the currency ecosystem was undertaken in collaboration with the Bureau of Indian Standards ● Finetuning policies and initiating (BIS). A research project commissioned by the measures for improving delivery of Department of Currency Management (DCM) banknotes/coins to members of the public on sustainable use of banknote shreds yielded (Paragraph VIII.6); and positive results and the process is being actively ● Implementation of technical standards taken forward. issued by BIS for NSMs used by banks across the country (Paragraph VIII.2 Against this backdrop, the rest of the VIII.7). chapter is organised into five sections. Section 2 covers the implementation status of the agenda Implementation Status for 2024-25, followed by important developments VIII.4 The Reserve Bank has embarked in currency in circulation along with other upon the project ‘Sa-Mudra’ (“With Currency”), initiatives in section 3. The developments with involving multiple stakeholders for redesigning regard to Bharatiya Reserve Bank Note Mudran and modernising the currency management Pvt. Ltd. (BRBNMPL), a wholly owned subsidiary architecture in the country using network of the Reserve Bank, are given in section 4. The optimisation, technological solutions, automation Department’s agenda for 2025-26 is provided in and business process re-engineering. The section 5 with concluding observations towards underlying objective is to attain better process end of the chapter. efficiency, clean note policy enforcement, better 156CURRENCY MANAGEMENT security, and green shift in currency management alternate usage of the banknote shreds. Following operations. A task force has been set up to research and field level trials, it has been established that the banknote shreds can be used implement this project. In view of the enormity to supplement the raw material for manufacturing and complexities involved, it has been decided to of particle boards. Accordingly, a process has implement the project in a phased manner. been initiated for empanelment of particle board VIII.5 With a view to move up the sustainability manufacturers who will procure briquettes for value chain for disposal of soiled banknotes, the end use as raw material in partial replacement of Department undertook a project for identifying wood particles in their boards (Box VIII.1). Box VIII.1 Sustainable Use of Banknote Shreds/Briquettes In consideration of the environmental impact of the Chart 1: Various Uses of Banknote Shreds ingredients embedded in banknote paper substrate such as security threads and fibres, security inks and other chemicals used in banknote printing; the Reserve Bank has been exploring sustainable and eco-friendly solutions for disposal of the banknote briquettes. Over the past few years, the quantum of banknote briquettes produced in India annually has hovered around 15,000 tonnes. Current Global Practices in Banknote Shred Disposal Globally, central banks as well as other authorities responsible for managing currency operations deploy different methods for disposal of banknote shreds, with a vast majority disposing them in landfills or through incineration (Chart 1). However, these methods are not environment friendly, may affect soil and/or generally degrade the environment owing to the chemical and elemental properties of banknotes. Source: M/s Royal Dutch Kusters Engineering, ‘Waste Recovery Pyramid In comparison to the primitive disposal methods such as (Value Chain of Disposal) of Banknote Shred/Briquettes’, Netherlands. dumping the banknote shreds in landfill and incinerating them as fuel substitutes, re-usage of the soiled banknote shreds with currency briquette particles would conform to the for fabricating certain long-lasting materials (such as board technical requirements of particle board. panels, materials for interior design, particle board furniture Based on the findings of the study, the Reserve Bank and acoustic applications) is found to be more sustainable. has initiated a process for empanelment of particle board Study Project with Institute of Wood Science and manufacturers who will procure briquettes for end use as Technology (IWST) partial replacement of wood particles in their boards. Going The Department commissioned a study by IWST1 forward, the Department would continue to actively pursue its initiatives towards finding more environment-friendly for ‘Evaluation of Suitability of Banknote Briquettes ways for disposal of banknote shred/briquettes. Replacement with Wood Particles to Manufacture Particle Boards’. The study established that particle boards created Source: RBI. 1 Institute of Wood Science and Technology is an autonomous body under the Ministry of Environment, Forest and Climate Change, Government of India. 157ANNUAL REPORT 2024-25 VIII.6 The Reserve Bank undertook various deploy only such NSM models that conform to initiatives to improve the circulation of coins these standards and are duly certified by BIS such as their distribution and exchange of lower beginning November 1, 2025. denomination notes through Mobile Coin Vans 3. Developments in Currency in Circulation (MCVs), coin melas and packaging of coins in VIII.8 Currency in circulation includes value-based small pouches. banknotes, central bank digital currency (CBDC) VIII.7 In pursuance of the clean note policy, the and coins. Presently, banknotes in circulation Reserve Bank has issued instructions on ‘Note comprise denominations of ₹2, ₹5, ₹10, ₹20, ₹50, Authentication and Fitness Sorting Parameters’ ₹100, ₹200, ₹500 and ₹2000. The Reserve Bank for NSMs installed in the banks. However, lack of is no longer printing banknotes of denominations uniformity in sorting of banknotes was observed of ₹2, ₹5 and ₹2000. Coins in circulation comprise due to non-standardisation of NSMs in use by the denominations of 50 paise and ₹1, ₹2, ₹5, ₹10 banks. To address this issue, BIS, at the Reserve and ₹20. Bank’s initiative, framed and issued IS 18663:2024 Banknotes titled ‘Note Sorting Machines - Specifications’ in March 2024. The laboratory facility of BIS is VIII.9 The value and volume of banknotes in being leveraged for certification of NSMs that circulation increased by 6.0 per cent and 5.6 per duly meet the standards and performance testing cent, respectively, during 2024-25 (Table VIII.1). parameters. Banks have also been advised to During 2024-25, the share of ₹500 banknotes at Table VIII.1: Banknotes in Circulation (end-March) Denomination (₹) Volume (pieces in lakh) Value (₹ crore) 2023 2024 2025 2023 2024 2025 1 2 3 4 5 6 7 2 and 5 1,10,843 1,10,547 1,10,352 4,263 4,249 4,239 (8.1) (7.5) (7.1) (0.1) (0.1) (0.1) 10 2,62,123 2,49,506 2,53,590 26,212 24,951 25,359 (19.2) (17.0) (16.4) (0.8) (0.7) (0.7) 20 1,25,802 1,33,973 1,38,398 25,160 26,795 27,680 (9.2) (9.1) (8.9) (0.8) (0.8) (0.8) 50 85,716 89,783 98,959 42,858 44,892 49,480 (6.3) (6.1) (6.4) (1.3) (1.3) (1.3) 100 1,80,584 2,05,656 2,27,891 1,80,584 2,05,656 2,27,891 (13.3) (14.0) (14.7) (5.4) (5.9) (6.2) 200 62,620 77,108 86,754 1,25,241 1,54,215 1,73,509 (4.6) (5.2) (5.6) (3.7) (4.4) (4.7) 500 5,16,338 6,01,770 6,34,458 25,81,690 30,08,847 31,72,287 (37.9) (41.0) (40.9) (77.1) (86.5) (86.0) 2000 18,111 410 318 3,62,220 8,202 6,366 (1.3) (0.03) (0.02) (10.8) (0.2) (0.2) Total 13,62,137 14,68,754 15,50,720 33,48,228 34,77,805 36,86,811 Note: 1. Figures in parentheses represent the percentage share in total volume/value. 2. Figures may not add up to total due to rounding off of numbers. Source: RBI. 158CURRENCY MANAGEMENT 86 per cent, declined marginally in value terms. Coins In volume terms, ₹500 denomination at 40.9 VIII.11 The value and volume of coins in per cent, constituted the highest share of the circulation increased by 9.6 per cent and 3.6 per total banknotes in circulation, followed by ₹10 cent, respectively, during 2024-25 (Table VIII.2). denomination banknotes at 16.4 per cent. The As on March 31, 2025, coins of ₹1, ₹2, and ₹5 lower denomination banknotes (₹10, ₹20 and together constituted 81.6 per cent of the total ₹50) together constituted 31.7 per cent of total volume of coins in circulation, while in value banknotes in circulation by volume. terms, these denominations accounted for 64.2 per cent. Withdrawal of ₹2000 Denomination Banknotes from Circulation e₹ in Circulation VIII.12 The value of e₹ in circulation increased VIII.10 The withdrawal of ₹2000 banknotes from by 334 per cent during 2024-25 (Table VIII.3). circulation, initiated in terms of press release dated May 19, 2023, continued during the year Currency Management Infrastructure and 98.2 per cent of ₹3.56 lakh crore in circulation VIII.13 The functions relating to issuance of at the time of announcement have returned to the currency (i.e., banknotes and coins) and their banking system up to March 31, 2025. The facility management are performed by the Reserve for exchange and deposit of the ₹2000 banknotes Bank through its 19 issue offices, 2,689 currency is presently available at 19 issue offices2 of the chests and 2,299 small coin depots across the Reserve Bank. The ₹2000 banknotes can also country. As on March 31, 2025, State Bank of be sent through India Post to any of the 19 issue India accounted for the highest share of currency offices for credit to bank accounts in India. chests (Table VIII.4). Table VIII.2: Coins in Circulation (end-March) Denomination (₹) Volume (pieces in lakh) Value (₹ crore) 2023 2024 2025 2023 2024 2025 1 2 3 4 5 6 7 Small coins 1,47,880 1,47,880 1,47,880 700 700 700 (11.6) (11.2) (10.8) (2.3) (2.1) (1.9) 1 5,21,618 5,29,934 5,38,720 5,216 5,299 5,387 (40.8) (40.0) (39.3) (17.2) (15.9) (14.7) 2 3,47,277 3,55,929 3,64,605 6,946 7,119 7,292 (27.1) (26.9) (26.6) (23.0) (21.3) (19.9) 5 1,94,155 2,05,471 2,16,198 9,708 10,274 10,810 (15.2) (15.5) (15.8) (32.1) (30.8) (29.5) 10 59,764 68,637 83,636 5,976 6,864 8,364 (4.7) (5.2) (6.1) (19.8) (20.6) (22.9) 20 8,483 15,667 20,180 1,697 3,133 4,036 (0.7) (1.2) (1.5) (5.6) (9.4) (11.0) Total 12,79,178 13,23,518 13,71,218 30,242 33,389 36,589 Note: 1. Figures in parentheses represent the percentage share in total volume/value. 2. Figures may not add up to total due to rounding off of numbers. Source: RBI. 2 Ahmedabad, Belapur, Bengaluru, Bhopal, Bhubaneswar, Chandigarh, Chennai, Guwahati, Hyderabad, Jaipur, Jammu, Kanpur, Kolkata, Lucknow, Mumbai, Nagpur, New Delhi, Patna and Thiruvananthapuram. 159ANNUAL REPORT 2024-25 Table VIII.3: e₹ in Circulation (end-March) Table VIII.4: Currency Chests and Small Coin Depots (end-March 2025) e₹ Denomintion Volume Value (₹) (pieces in lakh) (₹ crore) Category Number of Number of Currency Small Coin 2023 2024 2025 2023 2024 2025 Chests Depots 1 2 3 4 5 6 7 8 1 2 3 e₹-R 0.5 2.7 18.4 23.0 0.01 0.09 0.11 State Bank of India 1,372 1,221 (16.1) (7.7) (4.7) (0.2) (0.04) (0.01) Nationalised Banks 1,072 869 1 3.8 37.3 45.7 0.04 0.37 0.46 Private Sector Banks 227 193 (22.2) (15.7) (9.3) (0.7) (0.2) (0.05) 2 2.8 27.1 38.8 0.06 0.54 0.78 Cooperative Banks 5 5 (16.2) (11.4) (7.8) (1.0) (0.2) (0.08) Foreign Banks 5 3 5 2.4 27.3 35.4 0.12 1.37 1.77 Regional Rural Banks 7 7 (13.9) (11.5) (7.2) (2.1) (0.6) (0.2) Reserve Bank of India 1 1 10 1.5 21.4 30.6 0.15 2.14 3.06 Total 2,689 2,299 (8.8) (9.0) (6.2) (2.6) (0.9) (0.3) Source: RBI. 20 1.2 19.7 32.0 0.23 3.94 6.39 (6.8) (8.3) (6.5) (4.1) (1.7) (0.6) Counterfeit Notes 50 0.8 17.0 33.3 0.39 8.49 16.64 (4.6) (7.1) (6.7) (6.9) (3.6) (1.6) VIII.16 During 2024-25, out of the total Fake 100 0.8 20.7 38.2 0.83 20.73 38.23 (4.8) (8.7) (7.7) (14.5) (8.9) (3.8) Indian Currency Notes (FICNs) detected in the 200 0.6 16.0 45.7 1.16 32.01 91.33 banking sector, 4.7 per cent were detected at the (3.4) (6.7) (9.2) (20.4) (13.7) (9.0) Reserve Bank (Table VIII.8). 500 0.5 32.9 171.5 2.71164.36 857.68 (3.2) (13.8) (34.7) (47.5) (70.2) (84.4) VIII.17 The counterfeit notes detected in the 2000 - - - - - - denominations of ₹10, ₹20, ₹50, ₹100 and ₹2000 Total e₹-R 17.1 237.8 494.1 5.7 234.01,016.5 declined during 2024-25, while those in ₹200 Total e₹-W … … … 10.7 0.08 - Total e₹ 17.1 237.8 494.1 16.4 234.11,016.5 -: Nil. e₹-R: e₹-Retail. e₹-W: e₹-Wholesale. …: Not applicable. Table VIII.5: Indent and Supply of Banknotes Note: 1. Figures in parentheses represent the percentage share by BRBNMPL and SPMCIL (April-March) in total volume/value. 2. Figures may not add up to total due to rounding off of (Pieces in lakh) numbers. Denom- 2022-23 2023-24 2024-25 Source: RBI. ination Indent Supply Indent Supply Indent Supply (₹) Indent and Supply of Currency 1 2 3 4 5 6 7 5 - - - - - - VIII.14 The volume of indent of banknotes and 10 6,000 6,000 8,000 8,000 18,000 18,000 coins for 2024-25 was higher than 2023-24 20 20,000 19,999 20,000 20,000 15,000 15,000 50 20,000 20,000 25,000 25,000 30,000 30,000 (Tables VIII.5 and VIII.6). The printing presses 100 60,000 60,000 70,000 70,000 80,000 80,000 supplied banknotes as per indent placed with 200 20,000 20,000 30,000 30,000 40,000 40,000 500 1,00,000 1,00,004 90,000 90,000 1,20,0001,20,000 them. 2000 - - - - - - Total 2,26,000 2,26,002 2,43,000 2,43,000 3,03,0003,03,000 Disposal of Soiled Banknotes -: Nil BRBNMPL: Bharatiya Reserve Bank Note Mudran Pvt. Ltd. VIII.15 The disposal of soiled banknotes SPMCIL: Security Printing and Minting Corporation of India Ltd. Note: Figures may not add up to total due to rounding off of increased by 12.3 per cent during 2024-25 as numbers. compared with the previous year (Table VIII.7). Source: RBI. 160CURRENCY MANAGEMENT Table VIII.6: Indent and Supply of Coins by Mints (April-March) (Pieces in lakh) Denomination (₹) 2022-23 2023-24 2024-25 Indent Supply Indent Supply Indent Supply 1 2 3 4 5 7 8 1 1,000 1,000 3,000 3,058 1,000 1,000 2 3,000 3,000 3,000 3,000 1,000 1,000 5 3,000 3,000 3,000 3,000 8,000 8,000 10 1,000 1,002 1,000 1,000 1,000 1,000 20 2,000 2,000 2,000 1,999 4,000 4,000 Total 10,000 10,002 12,000 12,056 15,000 15,000 Note: Figures may not add up to total due to rounding off of numbers. Source: RBI. and ₹500 denominations increased by 13.9 and Other Initiatives 37.3 per cent, respectively, as compared with the Awareness Campaign on Coins, Mobile Aided previous year (Table VIII.9). Note Identifier (MANI) and Exchange Facility for Expenditure on Security Printing Soiled Banknotes VIII.18 The expenditure incurred on security VIII.19 During the year, the Reserve Bank printing during 2024-25 was ₹6,372.8 crore as conducted awareness campaigns through against ₹5,101.4 crore during the previous year digital media, social media and All India Radio mainly due to increase in indent for printing of (AIR) to increase awareness about coins among banknotes. members of the public. The Reserve Bank also conducted awareness campaign for the Table VIII.7: Disposal of Soiled Banknotes visually impaired through AIR about MANI App (April-March) which facilitates identification of denomination (Pieces in lakh) of Indian banknotes. Further, print, digital and Denomination (₹) 2022-23 2023-24 2024-25 1 2 3 4 Table VIII.8: Number of Counterfeit Notes 2000 4,824 18,458 2,211 Detected (April-March) 1000 - 4 - (Number of pieces) 500 51,092 63,320 89,855 2022-23 2023-24 2024-25 200 13,062 13,594 24,756 1 2 3 4 100 58,282 60,217 58,334 Detection at the 10,465 17,613 10,255 50 34,219 19,095 25,720 Reserve Bank (4.6) (7.9) (4.7) 20 21,393 13,971 16,503 Detection at Other 2,15,304 2,05,026 2,07,141 10 45,077 23,461 20,799 Banks (95.4) (92.1) (95.3) Up to 5 1,315 370 384 Total 2,25,769 2,22,639 2,17,396 Total 2,29,264 2,12,493 2,38,563 Note: 1. Figures in parentheses represent the percentage share -: Nil. in total. Note: Figures may not add up to total due to rounding off of 2. Does not include counterfeit notes seized by the police numbers. and other enforcement agencies. Source: RBI. Source: RBI. 161ANNUAL REPORT 2024-25 Table VIII.9: Denomination-wise Counterfeit 4. Bharatiya Reserve Bank Note Mudran Pvt. Notes Detected in the Banking System Ltd. (BRBNMPL) (April-March) VIII.22 The BRBNMPL has been playing a (Number of pieces) critical role in designing, printing and supply of Denomination (₹) 2022-23 2023-24 2024-25 banknotes. BRBNMPL, a subsidiary of the 1 2 3 4 Reserve Bank, has been a partner in the 2 and 5 3 1 3 implementation of the Reserve Bank’s strategic 10 313 235 159 goal of indigenisation of banknote production. 20 337 297 253 It has also been consistently focusing on 50 17,755 15,366 12,015 enhancing logistics efficiency and bringing cost 100 78,699 66,310 51,069 effectiveness by increasing direct remittances 200 27,258 28,672 32,660 500 (Specified Banknotes) 6 11 5 to various currency chests. BRBNMPL has 500 91,110 85,711 1,17,722 established learning and development centre at 1000 (Specified Banknotes) 482 1 2 its Mysuru campus, which is primarily focused 2000 9,806 26,035 3,508 on imparting and sharing banknote printing and Total 2,25,769 2,22,639 2,17,396 allied knowledge to the domestic as well as global Source: RBI. stakeholders. VIII.23 For conducting advanced testing of social media campaigns were organised for security features of Indian banknotes, counterfeit creating awareness on exchange facility for deterrence tests, forensic/scientific analysis soiled notes. of forged notes, ethical counterfeiting of notes Procurement of New Security Features for Indian through the use of latest available tools and Banknotes technologies and for the development of security/ design features for Indian banknotes, a Currency VIII.20 The Reserve Bank is actively taking Research and Development Centre (CRDC) has forward the process of introduction of been set up under the administrative control of new/upgraded security features for banknotes. BRBNMPL. Indigenisation of Inputs for Banknote Production 5. Agenda for 2025-26 VIII.21 To reduce dependencies on foreign VIII.24 During the year, the Department will sources, the Reserve Bank has actively pursued focus on the following: indigenisation of banknote production over the years. With persistent efforts, all the primary raw ● Carrying forward the project on materials used for the production of banknotes, modernisation of the currency i.e., banknote paper, all types of inks (offset, management infrastructure; numbering, intaglio and colour-shifting intaglio ● Strengthening the integrity of Indian ink) and all other security features are now being banknotes through introduction of new/ procured from domestic sources. upgraded security features; 162CURRENCY MANAGEMENT ● Installation and commencement of awareness about security features of banknotes operation of new SBS machines; and acceptance of coins, and ensure adequate supply of clean currency notes for the public. ● Capacity augmentation for processing of Action towards modernisation and automation of banknotes; and currency management infrastructure also gained ● Understanding the payment behaviour of momentum. Going forward, sustaining self- the public through survey. sufficiency in banknote production, analytical and developmental currency research towards further 6. Conclusion strengthening the life and integrity of banknotes VIII.25 During 2024-25, the Reserve Bank and understanding the trends in public preference continued its efforts to improve the efficiency for cash vis-à-vis other modes of payment shall of banknote and coin distribution, raise public continue to remain key focus areas. 163ANNUAL REPORT 2024-25 PAYMENT AND SETTLEMENT SYSTEMS IX AND INFORMATION TECHNOLOGY The Reserve Bank continued with its initiatives during 2024-25 to enhance the efficiency, security, and accessibility of payment systems, fostering a more inclusive and resilient digital payments ecosystem. Efforts towards accelerating global outreach of India’s domestic payment systems, particularly Unified Payments Interface (UPI) and RuPay cards, were sustained. The Reserve Bank seeks to leverage the latest technology to provide the best-in- class information and communication technology (ICT) infrastructure. IX.1 Building on the foundations of the IX.3 Against this backdrop, section 2 covers Payments Vision documents1, the Reserve developments in the area of payment and Bank focused on expanding digital payment settlement systems during 2024-25 and an adoption across all segments of society by assessment of the implementation status of the promoting innovation and a supportive regulatory agenda for the year. Section 3 provides various measures undertaken by the DIT vis-à-vis the framework. The year witnessed greater emphasis agenda set for 2024-25. The chapter has been on cyber resilience and payment security controls summarised in section 4. of payment system operators (PSOs), fraud prevention and consumer awareness to ensure a 2. DEPARTMENT OF PAYMENT AND safe and seamless experience for users. On the SETTLEMENT SYSTEMS (DPSS) global front, the Reserve Bank explored various IX.4 During the year, DPSS launched avenues for expanding the global outreach of UPI many initiatives in line with Payments and RuPay cards. Vision 2025, across the pillars of integrity, inclusion, innovation, institutionalisation and IX.2 The Department of Information Technology internationalisation. (DIT) made significant advancements during the year in leveraging technology to enhance its Payment Systems operations, including the launch of PRAVAAH2 IX.5 India’s payment and settlement systems3 - a centralised web-based portal for submission recorded a robust growth of 34.8 per cent in terms of applications to the Reserve Bank for seeking of transaction volume during 2024-25 on top of authorisation, licenses or regulatory approvals. the expansion of 44 per cent in the previous year Several initiatives were taken in the areas of (Table IX.1). In value terms, the growth was 17.3 expanding cloud infrastructure for the financial per cent in 2024-25 as compared with 15.8 per sector and strengthening cyber security. cent in the previous year, mainly due to growth in 1 Payments Vision documents were released by the Reserve Bank in 2005, 2009, 2010, 2012, 2016, 2019 and 2022 to provide strategic direction along with implementation roadmap to drive structured development of the payments ecosystem. 2 Platform for Regulatory Application, Validation And AutHorisation. 3 Total payments, including digital payments and paper-based instruments. 164PAYMENT AND SETTLEMENT SYSTEMS AND INFORMATION TECHNOLOGY Table IX.1: Payment System Indicators - Annual Turnover (April-March) Item Volume (lakh) Value (₹ lakh crore) 2022-23 2023-24 2024-25 2022-23 2023-24 2024-25 1 2 3 4 5 6 7 A. Settlement Systems CCIL Operated Systems 41 43 47 2,588.0 2,592.1 2,962.2 B. Payment Systems 1. Large Value Credit Transfers - RTGS 2,426 2,700 3,025 1,499.5 1,708.9 2,013.9 Retail Segment (2 to 6) 2. Credit Transfers 9,83,621 14,86,107 20,61,015 550.1 675.4 797.8 2.1 AePS (Fund Transfers) 6 4 4 0.004 0.003 0.002 2.2 APBS 17,834 25,888 32,964 2.5 3.9 5.5 2.3 ECS Cr - - - - - - 2.4 IMPS 56,533 60,053 56,250 55.9 65.0 71.4 2.5 NACH Cr 19,257 16,227 16,939 15.4 15.3 16.7 2.6 NEFT 52,847 72,640 96,198 337.2 391.4 443.6 2.7 UPI 8,37,144 13,11,295 18,58,660 139.1 200.0 260.6 3. Debit Transfers and Direct Debits 15,343 18,250 21,660 12.9 16.9 22.1 3.1 BHIM Aadhaar Pay 214 194 230 0.1 0.1 0.1 3.2 ECS Dr - - - - - - 3.3 NACH Dr 13,503 16,426 19,762 12.8 16.8 22.0 3.4 NETC (Linked to Bank Account) 1,626 1,629 1,668 0.03 0.03 0.02 4. Card Payments 63,325 58,470 63,861 21.5 24.2 26.1 4.1 Credit Cards 29,145 35,610 47,741 14.3 18.3 21.1 4.2 Debit Cards 34,179 22,860 16,120 7.2 5.9 5.0 5. Prepaid Payment Instruments 74,667 78,775 70,254 2.9 2.8 2.2 6. Paper-based Instruments 7,109 6,632 6,095 71.7 72.1 71.1 Total Retail Payments (2+3+4+5+6) 11,44,065 16,48,234 22,22,885 659.1 791.5 919.3 Total Payments (1+2+3+4+5+6) 11,46,491 16,50,934 22,25,910 2,158.6 2,500.4 2,933.1 Total Digital Payments (1+2+3+4+5) 11,39,382 16,44,302 22,19,815 2,086.8 2,428.2 2,862.0 CCIL : Clearing Corporation of India Ltd. AePS : Aadhaar Enabled Payment System. Cr : Credit. APBS : Aadhaar Payment Bridge System. ECS : Electronic Clearing Service. Dr : Debit. IMPS : Immediate Payment Service. NACH : National Automated Clearing House. - : Nil/Negligible. NEFT : National Electronic Funds Transfer. BHIM : Bharat Interface for Money. NETC : National Electronic Toll Collection. RTGS : Real Time Gross Settlement. Note: 1. RTGS system includes customer and inter-bank transactions only. 2. Settlements of government securities and forex transactions are through CCIL. Government securities include outright trades and both legs of repo transactions and triparty repo transactions. 3. The figures for cards are for payment transactions at Point of Sale (PoS) terminals and online. 4. Figures in the columns might not add up to the total due to rounding off of numbers. Source: RBI. the large value payment system, viz., Real Time Digital Payments Gross Settlement (RTGS). The share of digital IX.6 During 2024-25, RTGS transactions transactions in the total volume of non-cash retail increased by 12 per cent in volume terms and 17.8 payments was 99.9 per cent during 2024-25 (99.8 per cent in value terms. The volume and value per cent a year ago). of retail transactions increased by 34.9 per cent 165ANNUAL REPORT 2024-25 and 16.1 per cent, respectively (Table IX.1). As authorisation to a few other online PAs, PPIs and on March 31, 2025, RTGS services were WLA operators. Moreover, the Reserve Bank also available through 1,73,688 IFSCs4 of 250 granted approval to four banks for PPI issuance member banks, while NEFT services were during the year (Table IX.2). available through 1,74,762 IFSCs of 236 Table IX.2: Authorisation of Payment System member banks. Operators (PSOs) [end-March] IX.7 The retail payment system recorded (Number) robust growth in transaction volume as well as Entities 2024 2025 value in 2024-25 (Table IX.1). Amongst the retail 1 2 3 payment system, UPI transactions increased by A. Non-Banks – Authorised 41.7 per cent in terms of volume and 30.3 per PPI Issuers^ 38 48 Payment Aggregators- Online$ 22 46 cent in terms of value, while NEFT transactions Payment Aggregators – Cross Border - 5 rose by 32.4 per cent in terms of volume and WLA Operators 4 5 13.4 per cent in terms of value. In terms of Instant Money Transfer Service 1 1 Providers volume, UPI transactions had the highest share BBPCU [NPCI Bharat BillPay Ltd.(NBBL)] 1 1 (84 per cent) in total retail payments during BBPOUs 10 10 2024-25. TReDS Platform Operators 4 5 MTSS Operators# 8 7 IX.8 Payments Infrastructure Development Card Networks 5 5 Fund (PIDF) aided the growth in digital payments ATM Networks 2 2 during the year by subsidising the availability of Financial Market Infrastructure 1 1 acceptance infrastructure, especially in Tier III Central Counterparties 1 1 Retail Payments Organisation 1 1 to Tier VI centres. During 2024-25, the number B. Banks – Approved of point of sale (PoS) terminals increased by PPI Issuers 59 63 24.7 per cent to 1.1 crore. UPI Quick Response BBPOUs 46 46 (QR) codes increased by 91.5 per cent to 65.8 ATM Networks 3 3 crore as on March 31, 2025. $: Two entities surrendered their certificate of authorisation during the period. #: Certificate of authorisation of one entity was revoked during the Authorisation of Payment Systems period. ^: Certificate of authorisation of one entity was cancelled as per IX.9 During the year, the Reserve Bank regulatory requirement. accorded authorisation/approval to 26 online -: Nil. Note: PSOs comprise PPI issuers, online Payment Aggregators Payment Aggregators (PAs), five Payment (PAs-Online), Payment Aggregators - Cross Border (PA-CB), Aggregators - Cross Border (PA-CB), 11 non- cross-border money transfer (in-bound only) service schemes (MTSS), WLA operators, TReDS platforms, ATM networks, instant bank Prepaid Payment Instrument (PPI) issuers, money transfer service providers, card networks, Bharat Bill one Trade Receivables and Discounting System Payment Central Unit (BBPCU), Bharat Bill Payment Operating Units (BBPOUs) and central counterparty (CCP), besides the CCIL (TReDS) entity and one white label ATM and the National Payments Corporation of India (NPCI). (WLA) operator, besides granting in-principle Source: RBI. 4 Indian Financial System Codes. 166PAYMENT AND SETTLEMENT SYSTEMS AND INFORMATION TECHNOLOGY Agenda for 2024-25 innovative solutions now available to address the fraud and friction in payments, IX.10 The Department had set out the following an alternate risk-based authentication goals for 2024-25: mechanism leveraging behavioural ● The Central Payments Fraud Information biometrics, location/historical payments, Registry (CPFIR) reporting to be digital tokens, and in-app notifications will extended to local area banks, state be explored (Paragraph IX.14); and cooperative banks, district cooperative ● The prevailing centralised payment banks, regional rural banks (RRBs) and systems (RTGS and NEFT) relied only non-scheduled urban cooperative banks on account number and IFSC for transfer (UCBs) for payment fraud reporting of funds. With an aim to curb frauds and (Utkarsh 2.0) [Paragraph IX.11]; enhance the payment experience further, ● Cheque truncation system (CTS) had two the introduction of real-time payee name settlements, one for presentation session validation before the actual fund transfer and other for return session. Under on- will be explored in compliance with newly realisation model, a single settlement enacted ‘The Digital Personal Data would be arrived at after closure of return Protection Act, 2023’ (Paragraph IX.15). session for net position of each bank to Implementation Status improve liquidity efficiency of the CTS (Paragraph IX.12); IX.11 CPFIR, a web-based payment related ● In light of goals for Viksit Bharat 2047, fraud reporting solution, has been implemented the Reserve Bank, along with NPCI from March 31, 2020. CPFIR reporting was International Payments Ltd. (NIPL) made available to all scheduled commercial will work towards taking UPI to 20 banks (SCBs) [including small finance banks countries with initiation timeline of 2024- (SFBs) and payments banks (PBs)], non-bank 25 and completion timeline of 2028-29. PPI issuers and non-bank credit card issuers. Moreover, Fast Payment System (FPS) The reporting has now been extended to 49 collaboration with group of countries scheduled UCBs, all local area banks, 43 RRBs, like European Union and South Asian 71 district central co-operative banks (DCCBs) Association for Regional Cooperation and 234 non-scheduled UCBs. The remaining (SAARC) as well as multilateral linkages banks are being on-boarded to CPFIR reporting will be explored (Paragraph IX.13); in a gradual manner. ● The prevailing payments ecosystem IX.12 To improve the efficiency of cheque (card networks/banks/PPI entities) clearing, reduce settlement risk for participants has largely adopted SMS-based one- and enhance customer experience, continuous time password (OTP) as additional clearing of cheques under CTS was announced factor of authentication (AFA). With the in the statement on developmental and advancement in technology, various regulatory policies of the Reserve Bank (August 167ANNUAL REPORT 2024-25 8, 2024). The approach paper and technical the Reserve Bank issued a draft framework specification document on continuous clearing on ‘Alternative Authentication Mechanisms and on-realisation settlement under CTS were for Digital Payment Transactions’ on July 31, released to the CTS member banks by NPCI in 2024. August 2024. NPCI and banks are in the process IX.15 A circular on introduction of beneficiary of updating their systems, post which go-live will bank account name look-up facility for RTGS be scheduled. Once implemented, the cheque and NEFT systems was issued on December 30, clearing cycle will reduce from the present T+1 2024. The facility shall enable the remitters using day to a few hours. RTGS and NEFT systems to verify the name IX.13 The Reserve Bank is committed towards of the bank account to which money is being the goal of taking UPI to 20 countries with a transferred before initiating the fund transfer completion timeline of 2028-29 and has been and thereby avoid mistakes and prevent frauds. facilitating the global outreach of expanding the Based on the account number and IFSC of the footprint of UPI as well as the RuPay cards. The beneficiary entered by the remitter, the facility Reserve Bank has joined Project Nexus and is will fetch the beneficiary’s account name from actively collaborating with other countries on the bank’s Core Banking Solution (CBS). All interlinking of FPS (Box IX.1). banks who are direct members or sub members IX.14 To enable the payments ecosystem of RTGS and NEFT were advised to offer this and leverage the technological advancements, facility no later than April 1, 2025. Box IX.1 Project Nexus: A Multilateral Approach for Inter-linking Fast Payment Systems (FPS) The Reserve Bank has been collaborating with various better scalability. Driven by these factors and to provide countries bilaterally to link India’s FPS, i.e., UPI, with their further impetus to the Reserve Bank’s efforts in expanding respective FPS for effecting payments in person-to-person the international connectivity of its payment systems, India (P2P) and person-to-merchant (P2M) modes. As of now, joined Project Nexus in June 2024. Project Nexus is a there are seven5 countries which accept UPI for merchant multilateral international initiative, conceptualised by the Bank for International Settlements Innovation Hub (BISIH) payments while the linkage of UPI with PayNow, the FPS of to enable instant cross-border retail payments by inter- Singapore, is live for personal remittances. linking domestic FPS. Malaysia, Philippines, Singapore and Bilateral linking of FPS comes with advantages like: (a) Thailand, along with India, have joined Project Nexus as faster negotiation and implementation; (b) tailored solutions founding member countries, while Indonesia and European to address specific needs; and (c) refining the approach on Central Bank (ECB) are the special observers. Once live, an ongoing basis. Project Nexus is expected to support the goals outlined in the G20 cross-border payments roadmap on enhancing Another approach towards inter-linking FPS is the speed, transparency and accessibility, while reducing costs. multilateral platform which has advantages in terms of resource optimisation, standardisation of procedures, and Source: RBI. 5 Bhutan, France, Mauritius, Nepal, Singapore, Sri Lanka and the United Arab Emirates (UAE). 168PAYMENT AND SETTLEMENT SYSTEMS AND INFORMATION TECHNOLOGY Major Developments the revised ‘Directions for CCPs’ on October 28, 2024 to strengthen corporate governance Integrity in CCPs. Some of the major changes in the Domestic Money Transfer (DMT) – Review of Directions include increased representation of Framework independent directors in Board meetings as well IX.16 The framework for DMT was introduced in as in important committees such as Nomination 2011 for opening up the formal banking channel and Remuneration Committee, Risk Management to facilitate domestic fund transfers of small Committee and Audit Committee. value, and users now have multiple digital options Oversight of CPS for funds transfer. Based on a review, the extant DMT framework was revised to enhance the IX.19 An onsite inspection of CPS was carried safety of cash-based remittances by mandating out in April 2024 by a team of internal experts due diligence process like: (a) registration of sourced from different departments of the remitter with verified mobile number and officially Reserve Bank. RTGS, being a financial market valid document (OVD) as provided in ‘Master infrastructure (FMI) and a systemically important Direction – Know Your Customer Directions, payment system, was assessed against the 2016’; (b) validation of each transaction with principles for financial market infrastructure additional factor of authentication (AFA); and (PFMIs)6 as outlined in the Reserve Bank’s (c) use of identifiers to classify the transactions as oversight framework for FMIs and retail cash-based remittances. payment systems (RPS). The NEFT system, Updation of RTGS System Regulations and NEFT though not an FMI, was also assessed against Procedural Guidelines the PFMIs. IX.17 The Reserve Bank revised the RTGS Cyber Resilience and Payment Security Controls regulations and the NEFT procedural guidelines of PSOs on October 25, 2024, which include instructions IX.20 Based on the feedback received from the on access criteria for membership to centralised stakeholders on the draft Master Direction, the payment systems (CPS), periodic review of final ‘Master Directions on Cyber Resilience and membership, adherence to cyber security Digital Payment Security Controls for Non-bank guidelines by CPS members on an ongoing basis PSOs’ were issued by the Reserve Bank on July and instructions from extant circulars concerning 30, 2024. The Directions cover robust governance RTGS and NEFT. mechanisms for identification, analysis, Revision of Central Counterparties (CCPs) monitoring and management of cyber security Directions, 2024 risks and vulnerabilities by providing a framework IX.18 The Reserve Bank repealed ‘Directions for overall information security preparedness, for CCPs’ dated June 12, 2019 and issued with an emphasis on cyber resilience. 6 PFMIs are international standards for financial market infrastructures issued by the Committee on Payments and Market Infrastructures (CPMI) and the International Organisation of Securities Commissions (IOSCO) in April 2012. 169ANNUAL REPORT 2024-25 Enabling Additional Factor of Authentication (AFA) user to have a separate bank account linked to in Cross-border Card Not Present Transactions UPI. This payment solution, introduced in August 2024, will further deepen the reach and usage of IX.21 Introduction of AFA for digital payments digital payments. has enhanced the safety of transactions which, in turn, provided confidence to customers to adopt UPI Access for PPIs Through Third-party digital payments. This requirement, however, Applications is mandatory for domestic transactions only. In IX.24 The Reserve Bank permitted linking of order to provide a similar level of safety for online PPIs through third-party UPI applications. This international transactions using cards issued will enable PPI holders to make/receive UPI in India, the Reserve Bank has proposed to payments through third-party UPI applications. enable AFA for non-recurring cross-border card not present transactions where request for an Payment Aggregators (PAs)-Offline - Draft authentication is raised by an overseas merchant Guidelines or overseas acquirer. IX.25 PAs play an important role in the payments Financial Inclusion ecosystem and, hence, were brought under regulations in March 2020 and designated as Facilitating Accessibility to Digital Payment PSOs. However, the current regulations are not Systems for Persons with Disabilities applicable to offline PAs which handle proximity/ IX.22 The Reserve Bank issued guidelines face-to-face transactions and play a significant to promote effective access to digital payment role in the spread of digital payments. New systems wherein payment system participants draft Directions applicable to offline PAs as well (PSPs) [i.e., banks and authorised non-bank were placed on the Reserve Bank’s website for payment system providers] were advised to feedback/comments. review their payment systems/devices in terms Business-to-Business (B2B) Payments in Bharat of accessibility to persons with disabilities. Based Bill Payment System (BBPS) on the review, PSPs may carry out necessary modifications so that all their payment systems IX.26 Businesses today are serviced through and devices such as PoS machines can be enterprise resource planning (ERP) systems, easily accessed and used by persons with B2B service providers, FinTechs and banks. disabilities. These solutions are currently not interoperable which makes payments and reconciliation of Introduction of Delegated Payments Through UPI invoices across these platforms difficult. Hence, IX.23 ‘Delegated Payments’/’UPI Circle’ the Reserve Bank decided to include B2B as enable individuals (primary user) to allow a category in BBPS operated by NPCI Bharat another individual (secondary user) to make UPI BillPay Ltd. (NBBL). Through BBPS, the systems transactions up to a limit from the primary user’s will be able to interact with each other thereby bank account, without the need for the secondary reducing manual overheads. 170PAYMENT AND SETTLEMENT SYSTEMS AND INFORMATION TECHNOLOGY UPI - Enhancement of Limits Innovation IX.27 In order to encourage wider adoption Auto-replenishment of FASTag, National Common of UPI, limits were enhanced for the following Mobility Card (NCMC) and UPI Lite products of UPI: IX.30 The e-mandate framework for processing ● UPI123Pay: In consultation with the recurring transactions was issued by the Reserve stakeholders, the per-transaction limit Bank on January 10, 2020, enabling recurring was increased to ₹10,000 from ₹5,000. payments with defined periodicity. Recurring ● UPI Lite: UPI Lite wallet limit of ₹500 per payments such as replenishment of balances transaction and overall per wallet limit in FASTag and NCMC, which do not have any of ₹2,000 were increased to ₹1,000 and fixed periodicity, and/or are not time/amount ₹5,000, respectively. specific, were permitted to be auto-replenished using e-mandate, and were exempted from the ● Enhancing Transaction Limits for Tax requirement of pre-debit notification on processing Payments through UPI: Considering of e-mandates for recurring transactions. The that direct and indirect tax payments are regular, common and high Reserve Bank also brought UPI Lite facility value, the limit for tax payments within the ambit of the e-mandate framework through UPI was enhanced from by introducing an auto-replenishment facility for ₹1 lakh to ₹5 lakh per transaction. loading the UPI Lite wallet if the balance goes below a threshold amount set by the customer. Pre-sanctioned Credit Lines Through UPI - Since the funds remain with the customer (funds Extending the Scope to SFBs move from the customer’s account to the wallet), IX.28 Credit lines on UPI has the the requirement of additional authentication or potential to make available low-ticket, pre-debit notification has also been dispensed low-tenor products to ‘new-to-credit’ customers. with. SFBs leverage on a high-tech, low-cost model to reach the last mile customer and can play an UPI for Cash Deposit enabling role in expanding the reach of credit IX.31 Cash deposit machines (CDMs) deployed on UPI. The Reserve Bank, therefore, permitted by banks enhance customer convenience while SFBs to extend pre-sanctioned credit lines reducing cash-handling load on bank branches. through UPI. Given the popularity and acceptance of UPI, Enhancing Public Awareness Through Various interoperable cash deposit facility through use of Channels UPI has been enabled since June 2024. IX.29 During the year, 419 electronic banking Internationalisation awareness and training (e-BAAT) programmes Global Outreach of Payment Systems were conducted by the regional offices of the Reserve Bank, in which safe usage of electronic IX.32 The Payments Vision 2025 Document payment systems, their benefits and grievance envisaged expanding the global outreach of UPI redressal mechanisms were explained to the and RuPay cards as one of the key objectives participants. under the internationalisation pillar. The Reserve 171ANNUAL REPORT 2024-25 Bank has been facilitating the linkage of UPI Digital Payments Index (DPI) with FPS of other countries on a bilateral basis, IX.34 The Reserve Bank had constructed a enabling both inward and outward remittance composite DPI in 2021 to capture the extent payments. Acceptance of India’s UPI apps via QR of digitisation of payments across the country. code has been operationalised in Bhutan, France, The RBI-DPI index, computed semi-annually, Mauritius, Nepal, Singapore, Sri Lanka, and the demonstrates significant growth representing the UAE, which enables Indian tourists, students, rapid adoption and deepening of digital payments and business travellers in other countries to across the country in recent years (Chart IX.1). make payments to merchants using their Indian Inspection of PSOs UPI apps. RuPay cards acceptance is presently IX.35 Under Section 16 of the Payment live in Nepal, Bhutan, Mauritius, Singapore, the and Settlement Systems Act, 2007, onsite UAE and Maldives. Furthermore, the issuance of inspections of 84 entities, viz., one financial RuPay cards is live in Bhutan and Mauritius, and market infrastructure (CCIL), one retail payment RuPay cards issued in Bhutan and Mauritius are organisation [NPCI which includes NPCI Bharat acceptable in India as well. The Reserve Bank BillPay Ltd. (NBBL), RuPay Cards, NPCI BHIM has given approval to NIPL for deployment of UPI Services Ltd. (NBSL), and NPCI International like infrastructure in Namibia, Peru, Trinidad and Payments Ltd. (NIPL)], 31 non-bank PPI issuers, Tobago, and Jamaica. 10 BBPOUs, two TReDS platform providers, one ATM network provider, 34 online PAs, one PA- Other Initiatives CB, two WLAOs and one entity facilitating instant Review of ATM Interchange Fee and Customer money transfer (IMT) were carried out by the Charges Reserve Bank. During 2024-25, the Department undertook enforcement action against three IX.33 The Reserve Bank had, from time to time, issued various instructions on the number of free ATM transactions and maximum charges that can be levied on a customer beyond the mandatory number of free transactions. Instructions were also issued on interchange fee structure for ATM transactions. Based on a review, it has been prescribed, vide the updated (as on March 28, 2025) circular on ‘Usage of Automated Teller Machines/Cash Recycler Machines – Review of Interchange Fee and Customer Charge’, that the ATM interchange fee will be as decided by the ATM networks. Further, with effect from May 1, 2025, banks may charge customers a maximum fee of ₹23 per ATM transaction, beyond the Source: RBI. mandatory number of free transactions. 172 )001 = 8102 hcraM( xednI Chart IX.1: Digital Payments Index 500 465.3 445.5 450 418.8 395.6 400 377.5 349.3 350 304.1 300 270.6 250 217.7 207.8 200 150 100 02-raM 02-peS 12-raM 12-peS 22-raM 22-peS 32-raM 32-peS 42-raM 42-peSPAYMENT AND SETTLEMENT SYSTEMS AND INFORMATION TECHNOLOGY PSOs for contraventions/non-compliance of the towards framing of ‘Payments Vision directions issued by the Reserve Bank. Document 2028’ has started with inputs being sought from various stakeholders. First Onsite Inspection of AMC Repo Clearing Ltd. The document would aim to build on the IX.36 An onsite inspection of AMC Repo growth of payment systems in the last Clearing Ltd., a CCP authorised by the Reserve decade and provide further impetus to Bank to act as a triparty agent and for settling repo entities in the payments ecosystem for in corporate bond securities traded in recognised them to develop and deploy solutions in stock exchanges, was carried out in June 2024. this space; and Being a CCP, the entity was assessed against the PFMIs. ● The G20 Roadmap for enhancing cross-border payments has set targets Agenda for 2025-26 for achieving cheaper, faster, more IX.37 In 2025-26, the Department will focus on transparent and more accessible cross- the following goals: border payments. The ‘Annual Progress ● To assess the evolving trends, adoption Report on Meeting the Targets for Cross- patterns and user preferences in India’s border Payments: 2024 Report on Key digital payments ecosystem, the Reserve Performance Indicators’ published by Bank proposes to conduct a ‘Survey on Financial Stability Board (FSB) indicates Usage of Digital Payments’. The findings that the primary challenge with speed of are expected to provide key insights into payments is experienced at the beneficiary the transaction behaviour and challenges leg (i.e., the time from the beneficiary bank faced by users, thereby facilitating receiving the payment until the funds are evidence-based decision making towards credited to the end-customer’s account). enhancing financial inclusion and making The Reserve Bank shall work towards payment systems more effective; identifying the frictions in processing of beneficiary leg of cross-border payments ● To protect customers from digital payment and framing suitable regulatory policy/ frauds, the Reserve Bank constituted a action in consultation with the relevant committee to examine various aspects of stakeholders in India. setting up a Digital Payments Intelligence Platform (DPIP) to harness advanced 3. DEPARTMENT OF INFORMATION technologies for the purpose. Reserve TECHNOLOGY (DIT) Bank Innovation Hub (RBIH) has been IX.38 DIT continued its endeavour to ensure assigned for building a prototype of DPIP the smooth functioning of all the IT systems and in consultation with five to ten banks applications of the Reserve Bank and leverage based on the contours of the report of the the latest technology to provide the best-in-class committee; ICT infrastructure. PRAVAAH, the secure and ● The Reserve Bank had issued ‘Payments centralised web-based portal, was made live Vision 2025’ in June 2022 detailing the during the year. The Reserve Bank has been roadmap it wishes to embark on for the selected for the Digital Transformation Award period up to December 2025. The work 2025 by Central Banking, London, UK for 173ANNUAL REPORT 2024-25 PRAVAAH and Sarthi, for transformation in the This cloud facility is intended to be rolled internal and external processes, reducing reliance out in a calibrated fashion in the medium- on paper-based workflows and increasing term (Paragraph IX.41); transparency and efficiency in the Reserve Bank. ● The Indian Financial Network (INFINET) Further, in order to reduce the risks associated is the communication backbone for the with dependence on external vendors, and to Indian banking and financial sector. It is support the ‘AatmaNirbhar Bharat’ initiative, the a Closed User Group (CUG) network Department prioritised the in-house development for exclusive use of member banks and of projects like e-Kuber 3.0 (i.e., core banking financial institutions. Critical payment system of the Reserve Bank), alternate messaging system applications such as RTGS, NEFT system and alternate mechanism for digital and e-Kuber run on the INFINET network payment systems. To ensure the security of the backbone. INFINET 3.0 which seeks to Reserve Bank’s IT infrastructure, best practices refresh the existing INFINET 2.0 with in cyber security and cyber hygiene were followed better technology, bandwidth, and overall during the year. To maintain the heightened services is proposed to be built with the state of cyber security awareness and resilience latest software-defined wide area network across the organisation, the second series of the (SD-WAN) technology. The features six-month long Cybersecurity Awareness Drive proposed under SD-WAN include effective (CAD 2.0) was launched with the theme of ‘Cyber load balancing of the links, voice and Surakshit Bharat (#SatarkNagrik)’. video traffic optimisation and application Agenda for 2024-25 aware routing. SD-WAN also provides for centralised management of the network IX.39 The Department had set out the following and zero touch provisioning (Paragraph goals for 2024-25: IX.42); ● The Reserve Bank initiated the project to ● The Reserve Bank, in its bid to take the construct a new state-of-the-art greenfield Indian Rupee (INR) on global platform next generation data centre to address at greater pace, has conceptualised the capacity expansion constraints, meet a solution wherein India’s domestic ever-increasing IT landscape needs and Structured Financial Messaging System avoid region specific risks. The data (SFMS) would be extended through a centre, which is envisaged to cater to the Global SFMS Hub to other countries. internal needs of the Reserve Bank and its Interested countries can connect their subsidiary organisations, shall commence local messaging system to Global SFMS its operations in 2024-25 (Utkarsh 2.0) Hub for cross-border payment messaging [Paragraph IX.40]; in their local currencies. This may help India ● To enhance the security, integrity, in promoting self-reliance in technology and privacy of Indian financial sector infrastructure (Paragraph IX.43); and data, a cloud facility will be set up and initially operated by the Indian Financial ● To align with the ‘AatmaNirbhar Bharat’ Technology and Allied Services (IFTAS). initiative of the country, the Department 174PAYMENT AND SETTLEMENT SYSTEMS AND INFORMATION TECHNOLOGY plans to develop the following applications Implementation Status in-house to reduce external dependencies IX.40 Construction activity of the second (including vendors), besides providing greenfield data centre is progressing well. increased flexibility in terms of carrying The facility has been designed and built to out changes in the system: ensure a high level of redundancy, resilience o Development of e-Kuber 3.0 and system availability, incorporating application by Reserve Bank in-built fault tolerance. It has achieved Tier Information Technology Pvt. Ltd. IV certification for its design, underscoring its (ReBIT), the Reserve Bank’s wholly compliance with the highest standards of reliability owned subsidiary. The development and performance. of the core accounting platform along with Government Payment Module IX.41 IFTAS was entrusted with building the (GPx) is in progress. Indian Financial Sector (IFS) cloud with the objective of providing secure and cost-effective o Developing an alternate messaging cloud-based services and ease the challenges system framework to support domestic of adopting modern technology, governance as well as cross-border financial and and data localisation. The work on Phase I of non-financial message communication. the IFS cloud services was initiated during the It would be based on globally year. Simultaneously, work on beta phase of accepted ISO 20022 messaging standards with functionalities like the IFS cloud, involving a few banks/financial cross-border solution, and Letter intermediaries having Minimum Viable Product of Credit/Bank Guarantee (LC/BG) (MVP) services, has commenced to obtain message. customer feedback, understand the challenges, and help improve the cloud services offering. o Develop an alternate mechanism for digital payment systems, which would IX.42 The Reserve Bank had initiated offer all the functionalities currently INFINET 3.0 project through IFTAS with the being offered by existing Centralised objective of refreshing the existing INFINET Payment Systems (CPS) along with 2.0 with transformative changes in technology, other advanced functionalities. The framework, automation, improved bandwidth, and system would support retail and overall services. The latest SD-WAN technology high value payment services, bulk has been adopted in the INFINET 3.0 solution message support and low value fast design which allows for better traffic engineering, payment services. It would provide application visibility and enhanced security. options like thick client and open Presently, the project is at an advanced stage of API solution to connect to CPS. It is implementation. also proposed to offer this in-house developed comprehensive system to IX.43 To enable cross-border payments in local other countries as well (Paragraph currencies, the Reserve Bank has completed the IX.44). development of Global SFMS Hub during the 175ANNUAL REPORT 2024-25 year. Using the services of this Hub, interested receive their inputs in PRAVAAH itself. Further, countries through their central bank or designated the Reserve Bank plans to build a unified bank may directly send/receive financial technology platform to enhance integration, messages to/from the designated bank in India. security and interoperability across the departments. Technical discussions with countries that have expressed interest in connecting with the Hub are ChiRAG: A Generative Conversational AI Tool presently underway. IX.46 The potential of emerging technologies, IX.44 The e-Kuber 3.0 application is being particularly generative AI which can generate developed with many business and functional context-aware, human-like responses and modules along with an enterprise application analyse vast amounts of data, is rapidly gaining traction in the central banking landscape, technical platform. The development of offering transformative opportunities to enhance e-Payments and e-Receipts as part of GPx operations and decision-making processes. To was completed during the year, and the this effect, the Reserve Bank has also developed implementation of the core accounting platform its generative AI platform, Chat interface with is underway. Retrieval Augmented Generation (ChiRAG). Major Initiatives Initially designed as a tool for information extraction and synthesis, ChiRAG has potential PRAVAAH - A Secure and Centralised Web- to evolve into a sophisticated orchestration layer, based Portal which will seamlessly coordinate with diverse IX.45 As a part of the Reserve Bank’s types of information and data associated with the commitment to leveraging technology for Reserve Bank’s wide array of functions. enhanced governance, PRAVAAH was Sarthi 2.0 successfully launched on May 28, 2024. This IX.47 During the year, the Reserve Bank secure, centralised web-based portal has digitised undertook revamping of its Electronic the submission and processing of applications, Document Management System (Sarthi 2.0). requests and references from regulated entities Sarthi 2.0 is being implemented with a host of and individuals ensuring seamless and faster features such as improved User Interface (UI)/ delivery of services in a transparent manner. User eXperience (UX), innovative workflow PRAVAAH was also integrated with Sarthi, the processes, mobile responsiveness, knowledge internal workflow application of the Reserve repository functionality, and integration with Bank, thereby, ensuring end-to-end digitisation of Microsoft Office. the entire processing lifecycle of the applications Making NEFT Compliant with ISO 20022 and facilitating ease of doing business for the Messaging Standards Regulated Entities (REs). Going forward, planned enhancements in PRAVAAH would include: (a) IX.48 The NEFT system at the Reserve Bank Aadhaar based e-Sign services to authenticate has been compliant with ISO 20022 messaging uploaded documents; and (b) dedicated access standards since 2023. Over 230 member banks to other regulators and government agencies to of the NEFT system were migrated to ISO 176PAYMENT AND SETTLEMENT SYSTEMS AND INFORMATION TECHNOLOGY standards using a converter solution facilitating Agenda for 2025-26 conversion between INFINET Format Number IX.50 The Department’s goals for 2025-26 are (IFN) and ISO messages by August 2024. The set out below: member banks are now in the process of making ● Cloud Facility for the Financial their respective Core Banking Solutions (CBS) Sector : Phase I of the IFS cloud with compliant with ISO 20022, thus, enabling direct, basic services such as Infrastructure- end-to-end transmission of ISO messages. The as-a-Service, Platform-as-a-Service, adoption of ISO 20022 will provide structured and Software-as-a-Service, Container-as-a- granular data, end-to-end automation, effective Service, Storage-as-a-Service, and Public compliance, and interoperability across domestic Internet Protocol-as-a Service would be and foreign payment solutions. initiated. Subsequently, work on Phase II of the cloud with advance services like API Continuous Upgradation of Information management, application performance Technology (IT) and Cyber Security management, availability zone, and IX.49 Upgradation of IT and cyber security forms Development, Security and Operations a part of the Reserve Bank’s ongoing efforts to (DevSecOps) will be initiated; navigate the ever-evolving landscape of digital ● e-Kuber 3.0: Development of future threats. As part of the CAD, ‘Red Teaming’ cyber modules relating to functionalities such as security exercise was conducted for officials primary auction, public debt management, managing critical IT infrastructure. To develop Central Accounts Section and Centre new approaches and technical solutions to for Financial Literacy (CFL) have been address problems/challenges encountered while planned; carrying out day-to-day operations in the Reserve ● Alternate Mechanism for Digital Payment Bank, an all-India competition ‘Cyber Codefest - System: The Reserve Bank will continue Let’s Develop Together’ was conducted. While further innovation and development the construction of the Enterprise Computing of alternate payment and messaging and Cybersecurity Training Institute (ECCTI) systems. The vision will be to develop at Bhubaneswar, which aims at fostering a payment and messaging solutions based safe and responsible cyber culture within on modern standards with advanced the Reserve Bank, is in progress, advanced capabilities; training programmes for officers of the Reserve ● AI Governance Policy: Framework Bank have already commenced. A high-level for AI Policy for the Reserve Bank for conference on IT, ‘Tech Connect’, organised responsible and ethical use of AI/machine during July 25-27, 2024, served as a forum learning (ML) technologies by employees, for exploring current technological trends and vendors, and third-party partners will be gaining a comprehensive understanding of the initiated. By providing clear guidelines best practices that play a key role for benefit of on data handling, consent and security, the stakeholders. the policy seeks to maintain the integrity 177ANNUAL REPORT 2024-25 of the Reserve Bank’s operations while 4. CONCLUSION using the opportunities that AI offers; and IX.51 During 2024-25, the Reserve Bank ● Enhancing Trust in the Financial Sector continued with its endeavour towards enhancing Through ‘bank.in’ and ‘fin.in’ Domains: the efficiency, security and accessibility of the To combat increased instances of fraud payment systems, while further expanding the in digital payments, the Reserve Bank global outreach, promoting digital payments had announced introducing the ‘bank. adoption and strengthening cyber resilience. The in’ exclusive internet domain for Indian banks. This initiative aims to reduce cyber efforts towards fostering innovation, reducing security threats and malicious activities operational risks and ensuring robust ICT like phishing; and streamline secure infrastructure for the smooth functioning of its IT financial services, thereby enhancing systems and applications were sustained. The trust in digital banking and payment work relating to cloud facility for the financial services. The Institute for Development sector, next generation core banking (i.e., e-Kuber and Research in Banking Technology 3.0), registration of banks for ‘bank.in’ domain (IDRBT) will act as the exclusive registrar. The registration process for the banks will and AI governance policy framework would be be initiated. initiated in 2025-26. 178COMMUNICATION, INTERNATIONAL RELATIONS, RESEARCH AND STATISTICS COMMUNICATION, INTERNATIONAL X RELATIONS, RESEARCH AND STATISTICS During the year, the Reserve Bank continued to widen its communication reach through social media and public awareness campaigns. Economic and financial relations were deepened with international organisations and multilateral bodies, besides successful completion of India’s Financial Sector Assessment Programme (FSAP). Efforts were made for effective cash management on behalf of the government and sound management of foreign exchange reserves. Economic policy analysis and research were sharpened, and information management systems were further strengthened. X.1 The Reserve Bank’s communication further strengthened with the adoption of latest policy, based on the broad principles of technology. The Reserve Bank also initiated work transparency, clarity and timeliness, has facilitated towards harmonisation of its statutory regulations. in effectively managing public perceptions about X.2 Against this backdrop, the rest of the its various policies and actions. The Reserve Bank chapter is divided into eight sections. Section 2 strengthened its communication channels further presents major initiatives of the Reserve Bank with by adding podcasts in its toolkit during the year. regard to its communication policy and processes. Economic and financial relations were deepened Section 3 discusses the Reserve Bank’s with international organisations and multilateral international relations, including interactions bodies. Several measures were undertaken with international organisations and multilateral to enhance the efficiency in government cash bodies. Section 4 deals with the activities of management through onboarding stakeholders the Reserve Bank as a banker to governments progressively to the integrated platform (viz., e-Kuber1, SNA-SPARSH2 and TIN3 2.0). Risk and banks. Section 5 analyses the conduct of foreign exchange reserves management. management practices for foreign exchange Section 6 focuses on activities of the Department reserves were strengthened amidst heightened of Economic and Policy Research (DEPR) on market uncertainty. Research studies were conducted on a variety of contemporary economic research, including statutory reports macroeconomic and financial issues towards and frontline research publications. Section providing analytical inputs for policy formulation 7 outlines the activities of the Department of along with timely release of flagship publications. Statistics and Information Management (DSIM), Forecasting and statistical methods were refined whereas Section 8 presents the activities of the using innovative techniques and models, while Legal Department. Concluding observations are the information management system was provided in the last section. 1 The core banking solution of the Reserve Bank. 2 Single Nodal Agency - Samayochit Pranali Akikrut Sheeghra Hastantaran (SNA-SPARSH) is a real time system of integrated quick transfers. 3 Tax Information Network. 179ANNUAL REPORT 2024-25 2. COMMUNICATION PROCESSES ● Continue 360-degree awareness campaigns on various themes X.3 Clear and timely central bank (Paragraph X.8); communication enhances the effectiveness of central bank’s policies and pre-empt spread of ● Comprehensively review the Reserve misinformation in the age of social media through Bank’s communication policy proactive two-way communication channel. Thus, (Paragraph X.9); effective communication by central banks can ● Commence RBI Sunta Hai (RBI Listens) strengthen the efficacy of their policy measures programme (Paragraph X.10); and foster price and financial stability. ● Effectively use social media platforms for X.4 During the year, the Reserve Bank’s spreading financial awareness and public communication strategy facilitated in instilling awareness messages (Paragraph X.11); confidence among the public, investors and and other stakeholders. When warranted, timely interventions in the supervisory and financial ● Develop ‘The RBI Museum’ microsite markets space through verbal communication (Paragraph X.12). were undertaken. Instances of fake news and Implementation Status deepfake videos about the Reserve Bank on X.7 The Reserve Bank’s structured social media platforms were promptly clarified communication in written form through the website through press releases along with undertaking and social media platforms was supplemented public awareness campaigns (PACs) through through speeches and interviews by the top multiple channels to ensure systemic stability and management and post monetary policy press public trust. conferences. Further, to meet the knowledge X.5 During the year, concerted efforts were needs of regional media with respect to central made to demystify the actions and thinking of the banking policies, informal media interactions and Reserve Bank through speeches and interviews workshops on important policy initiatives were of the top management and social media held at Kolkata and Hyderabad during the year. interactions, which helped build public trust and confidence in its ability to achieve multiple X.8 The Reserve Bank, in its role as a objectives. To take its messages to younger full-service central bank, continued to conduct population, the Reserve Bank announced 360-degree PACs under the ‘RBI Kehta Hai ’ and the introduction of podcasts as an additional ‘RBI Says’ banner. The focus of these campaigns communication tool. is to create awareness on the Reserve Bank’s initiatives, alert people against fraudulent Agenda for 2024-25 players or schemes and improve financial X.6 The Department had set out the following literacy. During 2024-25, the Reserve Bank goals for 2024-25: discontinued the practice of celebrity endorsed ● Conduct workshops for media personnel messages, while giving more prominence on a periodic basis (Paragraph X.7); to mascots - Money Kumar and Ms. Money. 180COMMUNICATION, INTERNATIONAL RELATIONS, RESEARCH AND STATISTICS Compared to the previous year, when the regional languages apart from Hindi and English Reserve Bank launched 30 campaigns on (Table X.1). various themes, 43 campaigns covering 23 Table X.1: Customised Campaigns (2024-25) themes were conducted during the year (up to Campaign Theme Period March 31, 2025). 1 2 X.9 A revised version (version 3.0, January 1. MANI App April 2024 October 2024 2025) of the communication policy is placed on 2. First Resort Complaint (RB-IOS) May 2024 the website to account for changes in usage of October 2024 social media, podcasts, fact checking and to align 3. Aadhaar Enabled Payment System June 2024 4. CEPD SMS Campaign April 2024 it with the revised Utkarsh plan. May 2024 June 2024 (2 Campaigns) X.10 The ‘RBI Sunta Hai ’ project is currently July 2024 August 2024 being developed to enhance the Reserve Bank’s December 2024 ability to capture cues from the media channels, March 2025 which can act as early warning signal or provide 5. Account Aggregator July 2024 October 2024 input for issuing clarifications, if necessary. The 6. Misinformation of Coins July 2024 project, currently in progress, will also enable the 7. Fraud Impersonation August 2024 November 2024 tracking and removal of fake news, paving the 8. Retail Direct Mobile App August 2024 way for selective two-way communication. 9. Money Mules September 2024 X.11 As part of the new initiative, the Reserve 10. Sachet Portal November 2024 11. Forex Trading Platform November-December 2024 Bank’s PACs were released through social media 12. UDGAM Portal November-December 2024 platforms using Google display ads and YouTube, 13. Public Notice on Deepfake December 2024 which resulted in better targeting of audience, and Videos enabled niche and focused campaigns in some 14. Multi Thematic Half Page Print December 2024 Campaign regions. The Reserve Bank has further expanded 15. Inoperative Account December 2024 its outreach by adding WhatsApp as an additional 16. Children Awareness Programme January 2025 means to deliver PACs. – Beware of unknown pop-ups 17. Children Awareness Programme January 2025 X.12 ‘The RBI Museum’ microsite was – Exchange of soiled notes developed during the year to provide interactive 18. Nomination Facility January-February 2025 19. Digital Arrest January-February 2025 content, educational resources and information 20. Children Awareness Programme January-February 2025 about the Reserve Bank’s policies and initiatives, – Do not click on unknown links while showcasing snippets from its history. 21. Retail Direct Mobile App February 2025 22. Nomination Facility February-March 2025 Major Developments 23. Financial Literacy Week 2025 February-March 2025 X.13 During 2024-25, the Department 24. Nomination Facility March 2025 25. IPL 2025 March-May 2025 disseminated customised communication using MANI: Mobile Aided Note Identifier. various media, viz., television (TV), print, radio, RB-IOS: Reserve Bank - Integrated Ombudsman Scheme. digital, out-of-home (OOH), Google ads, YouTube, CEPD: Consumer Education and Protection Department. UDGAM: Unclaimed Deposits Gateway to Access inforMation. and short-messaging-service (SMS) in 12 major Source: RBI. 181ANNUAL REPORT 2024-25 X.14 Apart from these thematic customised Other Initiatives campaigns, the Reserve Bank participated Awareness Campaign for Children in high impact events/programmes like the X.16 As part of the ‘Catch Them Young’ Indian Premier League (IPL), Paris Olympics initiative, simplified public awareness messages 2024, Kaun Banega Crorepati (KBC), Drama with the tagline ‘RBI Kehta Hai... Smart Bano, Juniors (Marathi), Pro Kabaddi League 2024 Cool Raho’ were released, aimed at creating and child focused awareness programme with awareness among children. New mascots - ‘Junior Nickelodeon. For greater reach in Tier-3 and Money’ and ‘Mini Money’ - were introduced for Tier-4 cities, campaigns were also launched child-focused messaging to find resonance with through national broadcasters, viz., Akashvani and Doordarshan. children. RBI Website Social Media Command Centre X.15 During 2024-25, the Department X.17 The Reserve Bank’s presence on various released 2,517 press releases, 161 notifications, social media platforms is well evidenced by the 16 Master Circulars, 16 Master Directions, and increasing number of followers, engagement and uploaded 14 interviews and 60 speeches of the information dissemination (Table X.2). top management, five RBI reports, seven working Post Monetary Policy Press Conferences papers, 2,351 tenders and 53 recruitment related advertisements. The newly developed RBI X.18 On the date of announcement of the website and mobile application was released on bi-monthly monetary policy, the Governor and April 5, 2024. Both old and new RBI websites Deputy Governors interact with the media would run parallelly till the new website gets fully persons. Six such press conferences were stabilised. conducted during 2024-25. Table X.2: Social Media Presence* Platform Name of Social Media Launch Date Number of Followers/ Handle/Page Subscribers (Lakh) 1 2 3 4 1. X (formerly Twitter) i. @RBI January 2012 23.00 ii. @RBISays August 2019 2.30 2. YouTube Reserve Bank of India August 2013 4.85 3. Facebook i. @RBIsays August 2019 0.17 ii. @therbimuseum February 2020 0.03 4. Instagram @reservebankofindia January 2022 3.70 5. Public App @RBIsays January 2023 0.67 6. LinkedIn @Reserve Bank of India December 2023 2.04 *: As on March 31, 2025. Source: RBI. 182COMMUNICATION, INTERNATIONAL RELATIONS, RESEARCH AND STATISTICS Informal Media Interactions ● Commencement of RBI Sunta Hai - Social Media Listening Project; X.19 The Reserve Bank conducted 13 media interactions in an informal, Chatham House4 set ● Media room with facility of podcast; up in Mumbai and Delhi during 2024-25. ● Impact assessment of PACs; and Podcasts ● Greater collaboration with regulated X.20 Podcasts, with accompanying video entities (REs) for awareness campaigns. (commonly called ‘vodcasts’) are used for explainers, select interviews of the Reserve Bank 3. INTERNATIONAL RELATIONS personnel and discussing other important areas under its ambit. The podcasts are intended to X.22 During 2024-25, the Reserve Bank through create visibility and awareness in focused areas its International Department (ID) strengthened of the Reserve Bank which do not attract enough economic and financial relations with international attention in traditional media (Box X.1). organisations (IOs) and multilateral bodies. Agenda for 2025-26 India’s perspectives were articulated at various international fora such as the International X.21 During 2025-26, the Reserve Bank’s communication channels would be further Monetary Fund (IMF), the G20, the Bank for strengthened with: International Settlements (BIS), the Financial Box X.1 Podcasts by Central Banks - A Distinct Digital Communication Tool Podcasts are used to provide niche and targeted content adaptation to changing media consumption habits. The on specific topics by media platforms, independent media podcasts will attempt to break down technical subjects into and standalone podcast producers. Major central banks and simple, conversational explainer formats, making Reserve global financial institutions such as the US Federal Reserve Bank’s messages more relatable and engaging for the public. Unlike traditional announcements, podcasts offer (US Fed), the European Central Bank (ECB), the Bank for potential for feedback and engagement from listeners. This International Settlements (BIS), the International Monetary communication tool is expected to counter misinformation Fund (IMF), and the World Bank have embraced podcasts by dealing with topics like inflation, digital payments, cyber to take their messages and ideas to a wider audience. Like frauds, and monetary policy in an engaging manner. these institutions, the Reserve Bank plans to use podcasts References: as an additional tool for its communication purpose, along 1. Dhiman, B. (2023), ‘The Power of Podcasts: with the existing structured communication. The podcasts Revolutionising News and Information’, July 20, can be accessed anytime from anywhere and makes policy Available at SSRN. communication more accessible, engaging and relatable, 2. Mehendale, S. (2022), ‘Why India Pods: Studying especially for the younger, tech-savvy and regional- the Motivations of Indian Independent Podcasters’, language-speaking population. This innovation aligns International Journal of Early Childhood Special with the Reserve Bank’s digital-first strategy, reflecting its Education,14 (4): 2612-2618. 4 The Royal Institute of International Affairs, commonly known as Chatham House, is a British think-tank based in London, England. The Chatham House rule evolved to facilitate frank and candid discussions on any issue by speakers who may not have other appropriate forum to speak freely. 183ANNUAL REPORT 2024-25 5 Stability Board (FSB), SAARCFINANCE and Assessment Programme (FSAP) for India BRICS6. The Reserve Bank completed its 2024 (Utkarsh 2.0) [Paragraph X.25]; and tenure of chairmanship of the South East Asian ● As chair of the SEACEN Centre for the Central Banks (SEACEN) Research and Training year 2024, the Reserve Bank would host Centre and subsequently, Bank of Korea (BoK) the 17th SEACEN high-level seminar and has assumed the chairmanship. The revised the 23rd meeting of the SEACEN Executive Framework of SAARC currency swap for 2024-27 Committee (EXCO) [Paragraph X.26]. was also finalised during the year, to meet the Implementation Status short-term liquidity needs of SAARC countries. X.24 The Reserve Bank, with the approval of Agenda for 2024-25 the Government of India, has revised the X.23 The Department had set out the following framework on currency swap arrangement for goals for 2024-25: SAARC countries for the period 2024-27 (Box X.2). ● SAARC currency swap framework for X.25 The Department facilitated discussions 2024-27 (Utkarsh 2.0) [Paragraph X.24]; under the Financial Sector Assessment ● IMF-World Bank (WB) Joint Quinquennial Programme (FSAP) 2024 exercise, for a Surveillance - Financial Sector comprehensive assessment of the country’s Box X.2 Framework on Currency Swap Arrangement for SAARC Countries, 2024-27 Central bank currency swaps, especially the bilateral swaps international transactions. The Reserve Bank will continue and regional financing arrangements, are an integral part to offer swap support in USD and Euro under the extant of the global financial safety net. India, in consultation with USD/Euro swap window with an overall corpus of US$ 2 other SAARC countries, put in place the bilateral currency billion. The framework also has a provision for simultaneous swap arrangement for SAARC countries in 2012. The access to both these windows in exceptional cases, with SAARC currency swap facility is a bilateral arrangement that total aggregate disbursal under the swap facility at any point provides liquidity to SAARC countries to meet balance of in time not exceeding US$ 3 billion or its equivalent. payments pressures or short-term foreign exchange liquidity The Reserve Bank signed bilateral swap agreements with requirements and is revised from time to time. the Royal Monetary Authority of Bhutan on August 1, 2024, With the approval of the Government of India, the Reserve and the Maldives Monetary Authority on October 7, 2024, Bank put in place the new SAARC currency swap framework under the new framework. The swap support extended by 2024-27 for three years from June 19, 2024 to June 18, 2027. the Reserve Bank under the new framework is USD 400 Under this framework, an Indian Rupee (INR) swap window million under the USD/Euro window and ₹15 billion under with various concessions for swap support in INR has been the INR window. introduced with a total corpus of ₹250 billion, with a view to focus on INR swaps and for encouraging the use of INR in Source: RBI. 5 Network of Central Bank Governors and Finance Secretaries of the South Asian Association for Regional Cooperation (SAARC) countries (viz., Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka). 6 Brazil, Russia, India, China and South Africa. Egypt, Ethiopia, Iran and United Arab Emirates were admitted as new members during the 2023 BRICS Summit in South Africa. Indonesia joined the bloc as a full member in January 2025. 184COMMUNICATION, INTERNATIONAL RELATIONS, RESEARCH AND STATISTICS financial sector conducted jointly by the IMF and budget for 2025, and other administrative the World Bank. The assessment is based on the issues. financial system’s adherence to global standards Other Initiatives such as the Basel Core Principles (BCP) for Banking Supervision and the CPMI-IOSCO7 core BIS Activities principles. Financial stability assessment under X.27 The Department provided analytical FSAP is mandatory for 32 systemically important support for various meetings of the BIS, including jurisdictions every five years and for another the Governors’ bi-monthly meetings, the 15 jurisdictions every ten years. India was one Committee on the Global Financial System of the first countries to volunteer for the FSAP (CGFS)8, the BIS annual meeting of Emerging assessment after the exercise began in 1999 and Market Deputy Governors and the BIS annual has been undergoing the FSAP since 2010. The conference. In addition, the Department majority of meetings under 2024 FSAP exercise participated in the BIS Preparatory Asian for India started in December 2023 and concluded Consultative Council (ACC) meetings. on October 4, 2024. The FSAP exercise has FSB Initiatives on Global Financial Regulation been completed with the release of the Financial System Stability Assessment (FSSA) by the X.28 The Department actively participated in IMF on February 28, 2025. The Financial Sector discussions across various standing committees Assessment (FSA) report by the World Bank is of the FSB, articulating the Reserve Bank’s also expected to be released in due course. The perspectives on a wide range of topics. These overall assessment of the FSAP indicates that included global cooperation on financial stability, the Indian financial system is resilient and has the resilience of non-banking financial institutions become more diversified and inclusive, driven by (NBFIs), the March 2023 banking turmoil, cross- economic growth, digitalisation and supportive border payments, cyber and operational resilience, economic policies. digital innovation [including artificial intelligence X.26 The 23rd meeting of the SEACEN (AI) and tokenisation], and nature-related Executive Committee (EXCO) - a Committee financial risks. Additionally, the Department also of Deputy Governors of member central banks contributed inputs to key FSB reports and various - was held virtually on August 30, 2024 under surveys conducted by the FSB. the chairmanship of Dr. Michael Debabrata IMF Patra, Deputy Governor, Reserve Bank with the representatives of 19-member central banks. X.29 The Department provided support for The meeting discussed the implementation of the the Reserve Bank participation at the bi-annual SEACEN Centre’s Work Plan in 2024, activities, Fund-Bank meetings of the International 7 Committee on Payments and Market Infrastructures (CPMI) - International Organisation of Securities Commissions (IOSCO). 8 The CGFS assesses potential sources of stress in global financial markets and promotes improvements in their functioning and stability. 185ANNUAL REPORT 2024-25 Monetary and Financial Committee (IMFC) held under the financial sector issues, financial in April and October 2024 on the early warning inclusion, international financial architecture, exercise; global policy agenda; the IMF quota macroeconomic policy framework and sustainable and governance reforms; and India’s stance on finance. exchange rate management under the integrated X.32 With the overarching theme of ‘Solidarity, policy framework. The Department shared the Equality, and Sustainability’, South Africa became Reserve Bank’s stance on various policy issues the first African country to take the helm of G20 including IMF resource raising through its Bilateral on December 1, 2024, marking the continuity Borrowing Arrangements (BBAs), with the Ministry of the Global South’s leadership in the forum’s of Finance (MoF), Government of India (GoI). discussion. It also facilitated the completion of the IMF’s SAARCFINANCE Article IV consultations held during December 2024. The IMF Article IV report, which was X.33 The Reserve Bank took the lead to put released on February 27, 2025, made a favourable in place the SAARCFINANCE roadmap for assessment noting that India’s economic growth regional cooperation for the period 2025-2030 remained robust, inflation broadly declined to enumerating three focus areas of cooperation target band, financial system remained resilient amongst the SAARC central banks, viz., banking and fiscal consolidation continued. regulation and supervision; financing for climate and sustainable development; and emerging G20 digital technologies in central banking operations. X.30 Brazil’s G20 Presidency centred around BRICS the theme of ‘Building a Just World and a X.34 Under BRICS Finance Track in 2024, Sustainable Planet’. It carried forward the work discussions focused on BRICS economic on several legacy priorities, including the work initiated under India’s G20 Presidency9 such outlook and policy cooperation, global economic and financial governance reforms, promoting as enhancing multilateral development banks settlements in national currencies, amendments capacity to deal with shared global challenges, to the Contingent Reserve Arrangement (CRA) managing debt vulnerabilities, strengthening the to make it more dynamic by onboarding of new global financial safety net, ensuring sustainable members and including alternative eligible capital flows, enhancing cross-border payments, currencies. promoting cyber resilience, among others. Capacity Building X.31 As part of the troika10, India extended its support to the Brazilian Presidency in terms X.35 The Reserve Bank continued to engage of its proposals, inputs, and comments. Under in capacity building initiatives by organising the Finance Track, the Reserve Bank worked exposure visits, technical assistance, workshops in coordination with the MoF, GoI, on priorities and experience sharing sessions for the 9 India successfully completed its G20 Presidency, which culminated in the endorsement of the New Delhi Leaders’ Declaration. Consequently, India handed over the G20 Presidency to Brazil on December 1, 2023. 10 The G20 troika is a group of three countries that includes the current, previous, and future G20 Presidencies. 186COMMUNICATION, INTERNATIONAL RELATIONS, RESEARCH AND STATISTICS SAARCFINANCE members and the central e-Kuber with government system for the bankers from the Southeast Asian, European and notified states (Paragraph X.39). African nations. Implementation Status Agenda for 2025-26 X.39 During the year, the CSS payment X.36 During the year, the Department will focus arrangements were implemented in 20 more on the following aspects of the Reserve Bank’s states. With this, central government and 27 state international engagements: governments are live under this arrangement. This ● Intensifying engagements with BRICS has enabled just-in-time payments under CSS central banks by finalising amendments using tripartite integration between e-Kuber and to BRICS CRA treaty and facilitating financial systems of both Centre and respective discussions on onboarding of new BRICS state governments. members to the CRA; Major Developments ● Continuing operational readiness for swap support under the framework on currency Enhancing Efficiency in Government Payment swap arrangement for SAARC Countries Systems 2024-27; X.40 The state governments of Meghalaya, ● Strengthening cooperation with Arunachal Pradesh and Nagaland have been SAARCFINANCE and other central integrated for e-payments in e-Kuber. To enhance banks through capacity building, technical the efficiency of banking services provided to assistance, and research activities; and governments, the Reserve Bank has implemented ● Finalising the memorandum of several initiatives, including the introduction of a understanding (MoUs) under negotiation dashboard facility for governments and Aadhaar- with other central banks, especially with based direct benefit transfer (DBT) payments the Banque de France and the European (Box X.3). Central Bank. Integration of State Governments with e-Kuber 4. GOVERNMENT AND BANK ACCOUNTS X.41 During the year, the process of manual X.37 The Department of Government and Bank reporting of receipts by agency banks to the Accounts (DGBA) manages the functions of the Reserve Bank for various state governments that Reserve Bank as the banker to banks and banker are already integrated with e-Kuber system was to governments, besides maintaining internal discontinued for faster and efficient processing accounts and formulating accounting policies of along with online reconciliation of the government the Reserve Bank. transactions. Seven state governments were Agenda for 2024-25 also integrated with the Reserve Bank’s X.38 The Department had set out the following e-Kuber system for e-receipts agency bank goal for 2024-25: reporting and one state government was ● Implementation of centrally sponsored integrated with e-Kuber system for NEFT/RTGS schemes (CSS) through integration of based receipt. 187ANNUAL REPORT 2024-25 Box X.3 Initiatives for Ushering in Efficiency in Government Transactions With the increasing integration of governments’ systems ● Transaction data can be filtered and customised using with the Reserve Bank’s e-Kuber system for processing different parameters of transactions as per the need. e-payments and e-receipts, the volume of transactions Aadhaar-based Direct Benefit Transfer (DBT) Payments processed through the Reserve Bank has increased As per the GoI guidelines, the DBT payments under manifold. Some of the initiatives taken by the Reserve CSS need to be processed through National Payments Bank during 2024-25 for improving the banking services to Corporation of India’s (NPCI) Aadhaar Payment Bridge governments, which will be also continued in the ensuing System (APBS). The APBS functionality has been financial year, are as under: developed to enable governments to make payments to Dashboard Facility to Governments beneficiaries based on Aadhaar numbers instead of bank account number and IFSC11. The government plans to route With the objective to enable state government account these payments through the Reserve Bank, leveraging on holders to view/download the details and status of the Reserve Bank’s state of the art information technology transactions processed through the Reserve Bank, a web- (IT) infrastructure and the integration between the systems based interactive dashboard facility has been developed of central government public financial management system and made live in April 2024. The salient features of the (PFMS), state government, e-Kuber system and NPCI dashboard facility are as under: system to enable the processing of DBT payments. ● Government users can view the transaction cycle Under this arrangement, the state governments will status of the e-receipts and e-payment transactions send Aadhaar-based payment files directly to NPCI for processed through e-Kuber integration; processing, while the Reserve Bank will do the gross fund ● Enables creation of multiple government users to view settlement (debit/credit) accounting. The pilot run of the dashboard as per the requirements of government; project was conducted on November 25, 2024 with the ● Government users can download/export the transaction state government of Rajasthan, PFMS and NPCI. level data for reconciliation; and Source: RBI. Stabilisation of Extant Government Initiatives X.44 Tax Information Network (TIN 2.0) which replaced the erstwhile Online Tax Accounting X.42 As part of the endeavour by the Reserve System (OLTAS) in 2023 has stabilised. New Bank to continuously upgrade and enhance the modes of payment like unified payments interface process of government banking, the Indo-Nepal (UPI) have been added on both goods and remittance facility was made live in e-payments service tax (GST) and TIN platforms to expand for processing defence pension payments by the available payment modes and enhance Controller General of Defence Accounts to tax payer experience. The integration of state pensioners domiciled in Nepal. governments and union territories (UTs) with the X.43 Under the SNA-SPARSH model, an Reserve Bank’s system for processing of online alternative fund flow mechanism for just-in-time Memorandum of Error (MoE) cases related to release of CSS funds, 20 more state governments GST was taken forward with onboarding of state were onboarded. of West Bengal and initiation of user acceptance 11 Indian Financial System Code. 188COMMUNICATION, INTERNATIONAL RELATIONS, RESEARCH AND STATISTICS test (UAT) with the governments of Mizoram, Agenda for 2025-26 Meghalaya, Nagaland and union territory of X.47 The Department proposes the following Lakshadweep. agenda for 2025-26: Formation of Committee to Review Agency ● Implementation of CSS payments Commission Rates through Aadhaar as notified by central X.45 The Reserve Bank pays agency government using NPCI’s Aadhaar commission to agency banks for conducting Payment Bridge System (APBS) platform government banking business. Agency through integration of e-Kuber with NPCI, commission rates are reviewed periodically. The central and state government systems for current rates were implemented, w.e.f. July 1, the notified states. 2019. The Reserve Bank constituted a committee under the Chairpersonship of Chief Financial 5. MANAGING FOREIGN EXCHANGE Officer (CFO), Reserve Bank with representations RESERVES from CAG, controller general of accounts X.48 In sync with the broader principles (CGA), MoF, GoI, Indian Banks’ Association of reserve management, the Department of (IBA), Department of Statistics and Information External Investments and Operations (DEIO) Management (DSIM) and DGBA to review the continued with the management of foreign costs of government banking and the agency exchange reserves (FER). The FER increased commission rates. The Committee submitted its by 3.4 per cent during 2024-25 (11.7 per cent report on March 10, 2025. a year ago). The Department also sustained Digitisation of Special Deposit Scheme,1975 its endeavour to ensure diversification of forex reserves by exploring new asset X.46 In line with its endeavour of leveraging classes/jurisdictions for deployment of foreign technology for enhanced productivity, the currency assets (FCA) as per its defined policy Reserve Bank is in the process of developing objectives. digital solutions for maintenance of accounts under the legacy Special Deposit Scheme,1975, X.49 The reserve management function as part of e-Kuber 3.0. These accounts shall be continued to be challenging with heightened brought into a digital platform with functionality of market uncertainty driven by geopolitical risks processing interest payments and withdrawals. and financial market volatility (Box X.4). Box X.4 Reserve Management in an Era of Uncertainty Foreign exchange reserves are expected to cushion rising frequency of geopolitical conflicts has highlighted the volatility in the exchange rate and build resilience to issue of weaponisation of reserves, with sanctions affecting external sector shocks which are increasing with recurrent the accessibility and usability of foreign assets. The rapid geopolitical and economic shocks. The recent central bank advancement of technology such as ongoing work by various survey ‘Trends in Reserve Management 2024’ conducted by central banks on digital currencies (CBDCs), cryptocurrency Central Banking revealed that geopolitical escalation is the markets and AI is reshaping the global financial landscape most significant risk perceived by reserve managers. The and provides opportunities as well as challenges. (Contd.) 189ANNUAL REPORT 2024-25 In response to these challenges, central banks are adopting enables countries to respond swiftly to financial shocks diverse strategies to manage reserves effectively while caused by major geopolitical developments. Thus, bulk of simultaneously pursuing the three traditional objectives of the global reserves are invested in the USD denominated safety, liquidity and return. In this regard, diversification is assets (Chart 2). seen as one of the most critical approaches. By spreading Moreover, reserve managers are increasingly prioritising reserves across various currencies, asset classes, and sustainable investing, integrating environmental, social, jurisdictions; countries can mitigate risks associated with over-dependence on specific assets or geopolitical factors. and governance (ESG) criteria into their strategies to align Reserve managers across the globe earmark their assets with global sustainability goals and mitigate climate risks. into multiple tranches such as liquidity tranche to address These elements are vital for future proofing of reserves. liquidity needs and investment tranche to pursue higher The era of uncertainty demands a dynamic and forward- returns. Moreover, gold’s property of being a safe-haven looking approach to reserve management across nations. asset has led to significant gold purchases by central banks By adopting robust diversification, embracing innovation (Chart 1). and embedding sustainability into their strategies, Liquidity management is another key focus in uncertain central banks can strengthen their economies’ resilience times. Keeping a portion of reserves in highly liquid assets against shocks. Chart 1: Gold Purchases by Central Banks - Recent Trends Reference: Central Banking (2024), ‘Trends in Reserve Management: 2024’, Survey Results. Agenda for 2024-25 ● To formulate an operational mechanism for trade settlement using INR X.50 The Department had set out the following under the Asian Clearing Union goals for 2024-25: (ACU) mechanism (Utkarsh 2.0) ● To adopt global processes and investment [Paragraph X.53]. frameworks to provide a leadership role to central bank peers in reserve management Implementation Status (Paragraph X.51); X.51 The Department organised international ● To encourage internationalisation of INR symposium on reserve management on the theme in its pursuit for bringing efficiency in ‘Challenges in Reserve Management - Need for trade settlements through local currency Diversification’. The symposium was attended by (Paragraph X.52); and five central banks. 190 ennoT sevreser latot fo tnec reP Chart 2: World - Allocated Reserves by Currency: Q4: 2024 (in billion USD) 250 20 18 200 16 14 150 12 100 10 2,275 8 6,631 50 6 4 0 2 -50 0 Claims in Euro Claims in Swiss Francs 2019 2020 2021 2022 2023 2024 Claims in Pounds Sterling Claims in Chinese Renminbi Claims in U.S. Dollars Claims in Australian Dollars China Russia India Claims in Japanese Yen Claims in Other Currencies Poland Türkiye Global Trend (RHS) Claims in Canadian Dollars Source: IMF, RBI and World Gold Council. Source: IMF.COMMUNICATION, INTERNATIONAL RELATIONS, RESEARCH AND STATISTICS X.52 To encourage internationalisation of INR system infrastructure of UPI quick response (QR) for bringing efficiency in the trade settlements codes and RuPay cards, which is now integrated through local currency, the Reserve Bank with several countries. coordinated with partner countries to enter into X.53 An international workshop on ‘Reimagining local currency settlement (LCS)12 arrangements Settlements Amongst the ACU Nations’ was (Box X.5). MoUs for LCS were signed with conducted to explain and arrive at a consensus the Central Bank of UAE (June 2023), Bank among the member central banks on potential Indonesia (March 2024), Maldives Monetary use of domestic currencies. Subsequently, the Authority (November 2024) and Bank of Mauritius (March 2025) to facilitate trade invoicing and ACU Board has given in-principle approval for the settlement in local currencies. Pursuant to the inclusion of domestic currencies of the members MoUs, some traction has been observed in the as settlement currencies under ACU mechanism. trade settlement in INR with trade partners. The operational mechanism for use of domestic Further, trade in local currencies has been currencies in the ACU mechanism is being encouraged and promoted through payment deliberated. Box X.5 Local Currency Settlement in the Changing Global Financial Order The recent surge in geopolitical tensions along with rising economic engagement between partner countries, leading geoeconomic fragmentation have added to the existing to increased cross-border investment and deeper financial vulnerabilities in global trade and external sector of integration. The advent of LCS holds promise to EMEs to emerging market economies (EMEs). Accordingly, central economise on foreign currency and usher efficiency and banks in emerging economies are exploring ways to adapt independence in settling both trade and capital account to the emerging global economic and financial landscape. transactions. Trade settlement mechanism using domestic currencies In a more geoeconomically fragmented world, alternative of bilateral trade partners provides a feasible alternative currencies could play a greater role. Local currency under such scenario. settlement of bilateral trade with strategic partners and With the objective of de-risking its trade from global neighbouring nations can help de-risk a country’s trade headwinds, the Reserve Bank is exploring trade settlement trade and help navigate the evolving global order. Like in local currencies with some of its trade partners, aiming regional financial arrangements, LCS can complement a at providing an alternative settlement mechanism. MoUs on establishing a LCS framework for bilateral trade robust global payment and settlement system improving transactions have been signed with the Central Bank of the overall global trade across nations. UAE (CBUAE), Bank Indonesia (BI), Maldives Monetary References: Authority (MMA) and Bank of Mauritius (BOM). The LCS 1. Koosakul, J., Zhang, L., and Zia, M. (2024), ‘Geopolitical arrangement allows traders to invoice and pay for trade Proximity and the Use of Global Currencies’, Working proceeds in their domestic currency, thereby minimising Paper, International Monetary Fund, September. exposure to exchange rate risks. This, in turn, reduces transaction costs, facilitates developing a market in 2. International Monetary Fund, (2024), ‘Policy Pivot, domestic currency exchange rate and reduces settlement Rising Threat’, World Economic Outlook, International time. Over the long-term, it can also strengthen the Monetary Fund, October. 12 Local currency settlement refers to the usage of domestic currencies of partner countries for settlement of bilateral trade and investment. LCS reduces dependency on third party currencies for settling cross-border trade transactions and payment obligations. 191ANNUAL REPORT 2024-25 Agenda for 2025-26 ● Preparation of a study on New Digital Economy and Productivity Paradox X.54 The Department has set the following goals for 2025-26: (Utkarsh 2.0) [Paragraph X.58]; ● To leverage the Reserve Bank’s leadership ● Publication of a joint Report with ICRIER13 role in: (i) promoting collaborative on ‘Food Inflation Projection Framework’ approach towards reserve management (Utkarsh 2.0) [Paragraph X.58]; and through multilateral platforms, and (ii) ● To strengthen inputs for policymaking, with emerging as a ‘centre of excellence’, studies on the ‘Balance Sheet Channel providing training/handholding to other of Monetary Policy Transmission’, central banks, if required; and ‘Dynamics of Inflation Surges in India’, ● To undertake a comprehensive review of ‘Global Value Chain (GVC) Participation credit risk policy and enhance the use of by India and its Impact on Productivity’ technology in credit risk management. and ‘Financial Inclusion and its Impact on 6. ECONOMIC AND POLICY RESEARCH Monetary Policy Effectiveness in India’ X.55 The Department of Economic and Policy (Paragraph X.58). Research (DEPR) serves as the hub of research Implementation Status activities in the Reserve Bank by supporting policy X.57 In line with the objectives set for 2024- formulation through timely and topical analytical inputs. In addition to preparing various statutory 25, the Department published 100 research and non-statutory reports of the Reserve Bank, papers/articles during 2024-25. These include the Department collects, compiles, and six research articles in the RBI Occasional disseminates primary and secondary data on Paper Series, seven RBI Working Papers, one various aspects relating to the Indian economy, DRG Study, one Programme Funding Scheme and publishes topical research papers and Study, 61 RBI Bulletin articles and 24 papers articles authored by the Reserve Bank’s research in domestic and international peer-reviewed staff. It also engages in collaborative research journals. Key contemporary issues relevant for between the Reserve Bank’s staff and external policy making were covered as part of these researchers. papers/articles, viz., (a) Estimation of the Natural Agenda for 2024-25 Rate of Interest for India; (b) Determinants of X.56 During 2024-25, the Department had set Household Saving Portfolio; (c) Analysis of Core the following goals: Inflation; (d) Agriculture Supply Chain Dynamics; (e) Estimation of State-level Fiscal Multipliers; ● Publication of a minimum of 100 research papers while maintaining and enhancing (f) Mobile Banking Adoption for Rural Financial quality of analysis and coverage Inclusion; and (g) Valuation of Unpaid Household (Utkarsh 2.0) [Paragraph X.57]; Activities. 13 Indian Council for Research on International Economic Relations. 192COMMUNICATION, INTERNATIONAL RELATIONS, RESEARCH AND STATISTICS X.58 The studies on ‘New Digital Economy index of supply chain pressures for India (ISPI) to and Productivity Paradox’; ‘Price Dynamics and monitor supply chain health and its implications Supply Chains in Vegetables, Pulses, Fruits, for economic growth and price stability was Livestock, and Poultry’; ‘Balance Sheet Channel of compiled and published in the RBI Bulletin. Monetary Policy Transmission’ and ‘Dynamics of Knowledge and Research Dissemination Inflation Surges in India’ were also completed and X.61 During the year, the DEPR Study Circle, released during the year. The studies ‘Financial an in-house discussion forum, organised 17 Inclusion and Its Impact on Monetary Policy online seminars/presentations of research papers Effectiveness in India’ and ‘GVC Participation by on diverse topics to facilitate in-depth discussion India and Its Impact on Productivity’ are under and improve the overall quality of research. The preparation. Department organised several notable events Other Initiatives during the year to foster knowledge exchange. Reports These included the organisation of a High-Level Conference on ‘Central Banking at Crossroads’ in X.59 During 2024-25, the Department released New Delhi in October 2024 as a part of RBI@90 the Reserve Bank’s flagship statutory reports, celebrations, where perspectives of leading viz., the RBI Annual Report and the Report on practitioners and academicians on key central Trend and Progress of Banking in India in a banking issues – inflation targeting; monetary timely manner. The reports titled ‘State Finances: policy; role of FinTech and CBDCs in fast A Study of Budgets of 2024-25’ and ‘Handbook cross-border payment systems; central banks of Statistics on Indian States 2023-24’ were also and financial stability - were deliberated upon. released. Furthermore, the ‘Report on Currency A conference focusing on digital technology, and Finance 2023-24’ based on the theme ‘India’s Digital Revolution’ and the ‘Report on productivity, employment, and economic growth Municipal Finances’ themed on ‘Own Sources of was held in Jaipur in November 2024. Revenue Generation in Municipal Corporations: X.62 For a wider dissemination of the Reserve Opportunities and Challenges’ were also released Bank’s research and report activities, the by the Department. Department conducted outreach programmes Compilation and Dissemination of Data/Statistics in the North-Eastern Hill University, Shillong; Banaras Hindu University, Varanasi; and various X.60 All primary and secondary statistics colleges and universities in India, interacting and relating to monetary aggregates, balance engaging with faculty members and students. of payments (BoP), external debt, effective exchange rates, combined government finances, X.63 The Fourth Suresh Tendulkar Memorial household financial savings and flow of funds Lecture was delivered by Dr. John C. Williams, were released on time, while maintaining data President and Chief Executive Officer (CEO), quality. During the year, KLEMS (capital, labour, Federal Reserve Bank of New York on ‘Managing energy, material, and services) data for 2022-23 the Known Unknowns’ on July 5, 2024, which were released along with its manual. The monthly highlighted key principles that are at the heart 193ANNUAL REPORT 2024-25 of inflation targeting strategies and have issues, including inflation forecasting, climate proven invaluable in managing uncertainty. The financing, financial inclusion, and merchandise Nineteenth C.D. Deshmukh Memorial Lecture trade. Several RBI Chairs conducted workshops was delivered by Dr. P. K. Mishra, Principal for students and young faculty members on issues Secretary to the Prime Minister of India on relating to open economy macroeconomics to ‘Transforming Small-holder Agriculture in India in provide an operational perspective to traditional the 21st Century: Challenges and Strategies’ on macroeconomics teaching. The Department November 28, 2024. provided faculty support for these workshops. X.64 During the year, the Central Library X.67 The Reserve Bank has also instituted focused on digital acquisition, digital access, and external research schemes to support digital preservation of the library resources to collaborative research. A study titled ‘Status of support the Reserve Bank’s research activities. Digital Financial Literacy in Lakshadweep Islands: It subscribed to two new online databases along Bottlenecks and Way Forward’ was undertaken as with RemoteX application which helps in seamless part of the Reserve Bank’s Programme Funding remote access to all subscribed e-resources. The Scheme, giving insights into the financial sector library also organised thematic display of books and digital reach in the geographically secluded on various subjects for optimal use of library and under-studied Lakshadweep islands of India. resources. As part of the DRG Study Scheme of the Reserve Bank, a study on ‘Monetary Policy Transmission X.65 The RBI Archives accessioned 4,333 files, and Labour Markets in India’ was completed and five registers, and 12 Solid State Drives (SSD) published, with focus on the impact of India’s received from various central office departments (CODs), regional offices (ROs), and training labour market on monetary policy transmission establishments. Exhibition on the history of the under the inflation targeting regime. Under the Reserve Bank was also displayed during the scholarship scheme for Faculty Members from High-Level Conference on ‘Central Banking at Academic Institutions, five scholars were selected Crossroads’ held in New Delhi. to undertake short-term research projects on various contemporary economic issues. Support to Academic/Research Institutions Engagements with Domestic/International X.66 In pursuance of Section 17(15B) of the RBI Organisation Act, 1934, the Reserve Bank provides financial assistance through the RBI Professorial Chairs X.68 The Department actively participated in and Corpus Fund Scheme to support external IMF’s Article IV meetings and the IMF - World research activities. At present, there are 20 RBI Bank’s Joint Mission on India’s FSAP. The Professorial Chairs across research institutes/ Department also contributed to the India-Japan universities spread all over India. In 2024-25, the Macroeconomic Consultation and discussions Reserve Bank created a new Chair at the Indian with Banque de France delegation. The Statistical Institute, Kolkata. During the year, Department provided support to the RBI-led research by the RBI Chairs covered wide-ranging collaborative study on ‘Implications of Climate 194COMMUNICATION, INTERNATIONAL RELATIONS, RESEARCH AND STATISTICS Change and Environmental Sustainability for 7. STATISTICS AND INFORMATION Monetary Policy in SAARC Countries’ as decided MANAGEMENT during the 44th SAARCFINANCE Governors’ X.70 The Department of Statistics and Group Meeting, held in Marrakesh, Morocco. Information Management (DSIM) continued with Other engagements included interactions on its core functions of compilation, analysis and current economic developments with credit dissemination of macro-financial statistics. The rating agencies, participation in SEACEN Department focused on improving the scope and Directors of Research and Monetary Policy quality of statistics and information management Meeting, BIS Asian Consultative Council (ACC) by adopting latest technologies. Methodologies Meeting on Research Priorities, BIS Global used for forecasting and compilation of statistics Economy Meetings, and OECD Economic Policy were refined by increasing the use of innovative Committee Meetings. techniques and models. Further, the scope and Agenda for 2025-26 coverage of surveys were expanded during the year. X.69 The Department’s agenda for 2025-26 will focus on achieving the following goals: Agenda for 2024-25 ● Maintaining the target of publishing a X.71 The Department had set out the following minimum of 100 research papers; goals for 2024-25: ● Publication of the Report on Currency ● Development and implementation of and Finance 2024-25 based on the theme standard data query engine (DQE) for ‘India’s External Sector: Navigating Global metadata-based data access and visual Turbulence’ and the Report on Finances analytics (Paragraph X.72); of Panchayati Raj Institutions; and ● Statistical data and metadata eXchange ● Undertake topical studies covering issues (SDMX) standard data reporting by major relating to core areas of central banking regulated entities, comprising 90 per as well as emerging policy issues, cent of banking business (Utkarsh 2.0) namely inflation dynamics, monetary and [Paragraph X.73]; regulatory policy, real sector, and digital ● Mobile-based application for public access technology. These studies will cover of the Database of Indian Economy (DBIE) topics, such as ‘Multivariate Core Trend portal (Paragraph X.74); Inflation: Assessing Underlying Inflation’, ● Development of framework for domestic/ ‘Wage and Inflation (Wage Phillips Curve) foreign borrowing of major companies and Dynamics: Insights from PLFS Data’, ‘Bank financial accounts linkage (Utkarsh 2.0) Competition and Monetary Transmission’, [Paragraph X.75]; ‘Drivers of FinTech App User Experience: A Text Mining Approach’, ‘Real Effective ● Development of high-frequency indicators Exchange Rate: Augmenting with of economic activity using non-traditional Services Trade Weights’, among others. data, including non-text data such as 195ANNUAL REPORT 2024-25 satellite imagery data (Utkarsh 2.0) X.75 A system has been developed in the [Paragraph X.76]; and centralised information management system (CIMS) to link borrowings of major companies from ● Refining the Reserve Bank’s data different sources. This was done by integrating the governance framework (DGF) by corporate borrowings data from various sources implementing global data quality for top 500 listed non-government non-financial assessment framework (Utkarsh 2.0) companies. The data is also linked to their financial [Paragraph X.77]. performance as reported by the companies. Implementation Status X.76 The scope of data science [artificial X.72 A metadata driven standard DQE based intelligence (AI)/machine learning (ML)] on SDMX technology has been developed and applications in functional areas of the Reserve implemented for user-friendly data access and Bank is being expanded, using traditional and visual analytics. This facilitates public access to new age data sources, in coordination with macroeconomic data at desired level of granularity other central office departments (CODs). The on the Reserve Bank’s DBIE portal. Department further leveraged the power of big X.73 The software application for collection, data analytics, ML and text mining for policy processing and building element-based data purposes, and projects were undertaken for repository has been completed. A converter various Departments. application has been developed for building SDMX X.77 Data governance framework - focusing element-based data from existing traditional data on organisational structure, technology, and architecture. Testing of SDMX element-based governance fabric - has been prepared for data has been completed for select returns. A internal use. An assessment on the global data proof of concept (PoC)14 team has been formed quality framework has been carried out and a to conduct pilot testing. data quality index (DQI) at overall reporting entity X.74 A mobile application, ‘RBIDATA App’, has level, along with sub-indices covering multiple been developed to provide user-friendly access dimensions has also been prepared. Impact of to key macro-financial data. It provides access rules under the Digital Personal Data Protection to approximately 11,000 distinct macroeconomic Act, 2023, will be suitably incorporated once they data series from real, corporate, financial, are finalised by the central government. fiscal, and external sectors as well as payment Other Initiatives indicators, and survey data. Each series is presented visually and updated in real-time, with X.78 All modules under the scope of CIMS download facility. The application also provides project have been completed. All reports, details of banking outlets on the Indian map as dashboards, ad hoc query, and other modules well as SAARC Finance database. for the RBI users (including those covered under 14 It is an exercise in which work is focused on determining whether an idea can be turned into a reality or to verify if the idea will function as envisioned. 196COMMUNICATION, INTERNATIONAL RELATIONS, RESEARCH AND STATISTICS legacy XBRL/DBIE) have been made available X.84 The nowcasting models for gross value for the users. added (GVA), non-agriculture GVA (NAGVA) and gross domestic product (GDP) were revamped, X.79 Data dissemination using application and the forecasting framework for demand side programming interface (API) enabling machine components of growth was augmented using readable data transmission is in advanced stage the seasonal autoregressive integrated moving of completion. Moreover, the URL of the Reserve average (SARIMA) approach, along with the Bank’s data dissemination, DBIE, has been experimental use of large language models changed to https://data.rbi.org.in. (LLMs) for short-term forecasting. A prototype X.80 The pilot run involving select scheduled of an atheoretical model using ML methods was commercial banks (SCBs) for the comprehensive developed for forecasting consumer price index credit information repository (CCIR) system is in (CPI) inflation in India (both headline and core), progress. After successful testing, the system is in addition to the existing inflation forecasting scheduled to go-live in a phased manner. approaches at the Reserve Bank. Furthermore, X.81 The Department refined the compilation an AI/ML-based forecasting model has been of India’s international investment position developed for onion-CPI and wheat-CPI, in respect of portfolio investment, separate integrating unstructured data sets along with identification of special drawing rights (SDRs) traditional data sources. and receivables/payables in other accounts. X.85 During August 2024, a quick survey on X.82 The rural consumer confidence survey ‘Quality Preference of Indian Consumers’ was (RCCS) launched in 2022, aims to capture conducted among 15,000 households and 235 economic sentiments of households in rural and automobile dealers in 19 cities to examine the semi-urban areas. RCCS, a bi-monthly survey, is phenomenon of rising sales of premium products conducted in sync with the monetary policy cycle. across sectors. The survey gathers current and future views on Agenda for 2025-26 the economy, employment, income, spending, prices, and inflation. It targets to cover 9,000 X.86 The Department will focus on the following households from more than 600 rural and semi- goals during 2025-26: urban areas across all Indian states and select ● Shifting the remaining paper-based/ union territories. The result of the survey was e-mail-based reporting as well as any released for the first time in the public domain ad hoc data collection to structured post announcement of monetary policy on electronic reporting in CIMS (Utkarsh 2.0); April 9, 2025. ● Shifting of CIMS’s IT infrastructure to a X.83 A system using AI/ML has been developed new data centre of the Reserve Bank; to regularly track and analyse corporate sentiments from online and print media. The information ● Modernising central information system collected through this system supplements the for banking infrastructure (CISBI) system results of regular enterprise surveys. as part of the CIMS; 197ANNUAL REPORT 2024-25 ● Phase-wise roll out of SDMX-based data Agenda for 2024-25 collection for element-based reporting X.88 The Department had set out the following (Utkarsh 2.0); goals for 2024-25: ● Leverage climate data to improve ● Digitisation of court case files of the the performance of forecasting and Reserve Bank for getting uploaded on nowcasting models by utilising advanced VIDHICaMS and updation of case status AI/ML techniques, while exploring (Utkarsh 2.0) [Paragraph X.89]; new datasets to enhance predictive ● Organising training programmes on capabilities; drafting of regulation (Paragraph X.90); ● Leverage advancements in LLMs, for and text analysis, with plans to use them for ● Harmonisation of the Reserve Bank’s pre-processing unstructured data and statutory regulations (Paragraph X.91). for extracting valuable insights. The Implementation Status pre-processed data generated by LLMs X.89 The workflow automation process can serve as input to enhance existing AI/ application, VIDHICaMS, which is being used by ML models; and law officers of the Reserve Bank, has enabled ● Expansion of coverage and base revision uploading case documents online. The application for (a) housing price index and (b) banking also allows users to update status of the cases. service price index, consistent with the X.90 The Department, in collaboration with impending revision in compilation of major the National Law School of India University, macroeconomic aggregates. Bengaluru, organised a three-day training 8. LEGAL ISSUES programme on ‘Regulation Drafting’ in December 2024 for officers from Department of Supervision, X.87 The Legal Department examines and Department of Regulation, Enforcement advises the Reserve Bank on legal issues and Department, Foreign Exchange Department facilitates the management of litigation on behalf and FinTech Department. of the Reserve Bank. The Department functions X.91 The Department has initiated work as the secretariat to the Appellate Authority under towards harmonisation (i.e., consolidation) of the the Right to Information Act, 2005 and represents Reserve Bank’s statutory regulations. the Reserve Bank in the hearing of cases before the Central Information Commission (CIC). The Other Initiatives Department also extends legal support and advice X.92 During 2024-25, the Department’s to the Deposit Insurance and Credit Guarantee Research Cell organised several sessions under Corporation (DICGC), Centre for Advanced its study circle, an in-house discussion forum Financial Research and Learning (CAFRAL), wherein officers of the Department as well as and other RBI-owned institutions on legal issues, external experts made presentations on evolving litigations, and court matters. areas of law. 198COMMUNICATION, INTERNATIONAL RELATIONS, RESEARCH AND STATISTICS X.93 The Department also provided faculty 9. CONCLUSION support to various training establishments of the X.96 The Reserve Bank broadened its Reserve Bank as well as external institutions communication toolkit to engage with wider to equip the trainees with knowledge about law audience to enhance the effectiveness of its policy actions. International economic and financial related to central banking. relations were strengthened through collaboration X.94 The Department published with global organisations, multilateral bodies, and comprehensive data on litigation in which the various regional groups. The integrated framework Reserve Bank has been impleaded on the for real-time fund transfers under CSS was internal portal of the Reserve Bank. Further, further expanded with onboarding of additional stakeholders. Foreign exchange reserves certain important judgments of different courts were managed with prudence amid uncertain were also uploaded, providing easy access geopolitical conditions and volatile global financial and reference to all the departments of the markets. Economic research on topical and Reserve Bank. emerging macroeconomic and financial issues was undertaken to aid policy formulation through Agenda for 2025-26 timely and analytical inputs. The statistics and X.95 In 2025-26, the Department will focus on information management system were refined by the following goal: adopting innovative methods, advanced models, and incorporating cutting-edge technology. ● Preparation of a research paper on The Reserve Bank embarked on digitisation ‘Leveraging of AI for Enhancing the Legal of its court cases and consolidation of statutory Function in the Financial Sector’. regulations. 199ANNUAL REPORT 2024-25 GOVERNANCE, HUMAN RESOURCES XI AND ORGANISATIONAL MANAGEMENT The Reserve Bank continued with its endeavour to strengthen its human resources to develop a diverse set of capabilities in sync with the dynamically changing requirements through recruitment and capacity building programmes. The implementation status of milestones set for the year under Utkarsh1 2.0 was reviewed and the internal risk management and the internal audit mechanism in the Reserve Bank were strengthened further. XI.1 This chapter discusses key aspects of event in Mumbai on April 1, 2025 with the Hon’ble the Reserve Bank’s organisational functioning President of India as the Chief Guest. covering activities related to governance, human XI.3 The Risk Monitoring Department (RMD) resource management, risk monitoring, corporate persisted with its efforts towards ensuring more strategy and budgeting, internal audit, Rajbhasha comprehensive management of risks facing and premises. It reviews the major developments the Reserve Bank through introduction of new during 2024-25, evaluates outcomes vis-à-vis the risk frameworks, strengthening of existing goals set at the beginning of the year and sets out frameworks, and propagation of risk culture and priorities for 2025-26. risk awareness. The Reserve Bank was assigned the highest level of operational risk management XI.2 The Human Resource Management maturity rating in an international peer group Department (HRMD) undertook several initiatives assessment. during 2024-25 to strengthen human resources along with building a conducive working XI.4 During the year, the Inspection environment through new recruitments, skill Department focused on strengthening the enhancement through in-house and external governance processes through risk-based training programmes, refining mentoring policy internal audit (RBIA) framework. The Department (SABAL) and conducting regular townhall fine-tuned the existing RBIA framework and meetings (Vartalap) for employees, besides calibrated the risk scoring methodology. Notably, undertaking leadership development programme the Department integrated all audits into the Audit Management System (AMS) a year ahead of its for senior management. To commemorate the 90th year of the Reserve Bank’s establishment, planned schedule of 2025-26. year-long events were organised during 2024- XI.5 The Corporate Strategy and Budget 25, starting with the opening ceremony on April 1, Department (CSBD) conducted the triennial 2024 inaugurated by the Hon’ble Prime Minister in review of time-sensitive critical activities (TSCAs) Mumbai. The commemoration culminated with an of the Reserve Bank. The Department also 1 Utkarsh is the Reserve Bank’s medium-term strategy framework, in line with the evolving macroeconomic environment, to achieve excellence in the performance of Reserve Bank’s mandates and strengthening the trust of citizens and other institutions. Utkarsh 2.0 covers the period January 2023 to December 2025, while those under Utkarsh 1.0 were for the period June 2019 to December 2022. 200GOVERNANCE, HUMAN RESOURCES AND ORGANISATIONAL MANAGEMENT carried out the mid-term review of Utkarsh 2.0 2. GOVERNANCE STRUCTURE and updated the rating framework for budgeting XI.9 The Central Board of Directors is units. entrusted with the governance of the Reserve XI.6 The Rajbhasha Department ensured Bank in accordance with the Reserve Bank of India (RBI) Act, 1934. It comprises the Governor compliance of various statutory requirements as the Chairperson, Deputy Governors and under the Official Language Policy and other Directors nominated by the Central Government. instructions issued by the Government of India In accordance with the RBI Act, the Central (GoI). It prioritised bilingualisation of the Reserve Government also appoints members for four Bank’s publications on its website, and further Local Boards to advise the Central Board on efforts were made to promote the original writings matters referred to them by the Board. in Hindi through its flagship publications, viz., XI.10 The Central Board is assisted by three ‘Kriti-Anukriti’ (within RBI) and ‘Banking Chintan- Committees: the Committee of the Central Board Anuchintan’ (for financial institutions). (CCB); the Board for Financial Supervision XI.7 The Premises Department pursued its (BFS); and the Board for Regulation and mandate of creating, maintaining, and upgrading Supervision of Payment and Settlement Systems the Reserve Bank’s infrastructure while integrating (BPSS). These Committees are headed by the architectural excellence with environmental Governor. In addition, the Central Board has five priorities. The Department continued its efforts Sub-Committees each headed by a non-official towards generating renewable energy through Director: the Audit and Risk Management installation of solar power plants at various Sub-Committee (ARMS); the Human Resource offices and residential colonies. Management Sub-Committee (HRM-SC); the Building Sub-Committee (B-SC); the Information XI.8 This chapter is organised into nine Technology Sub-Committee (IT-SC); and the sections. The developments relating to the Strategy Sub-Committee (S-SC). governance structure of the Reserve Bank are set out in section 2. Section 3 outlines the Central Board, CCB and Local Boards initiatives undertaken by the HRMD during the XI.11 During 2024-25, the Central Board held year in the areas of human resource management seven meetings. The CCB held 45 meetings, and development. The progress on enterprise- of which 33 were held as e-meetings and 12 in wide risk management framework is presented person. The CCB attends to the current business in section 4. The activities of the Inspection of the Reserve Bank, including approval of its Department and the CSBD are discussed in Weekly Statement of Affairs. sections 5 and 6, respectively. The activities and XI.12 During 2024-25, a Standing Committee of accomplishments of the Rajbhasha and Premises the Central Board, consisting of two non-official departments are presented in sections 7 and 8, Directors, functioned in lieu of the Northern, respectively, with concluding observations in Western, Eastern and Southern Area Local section 9. Boards. The Standing Committee held two 201ANNUAL REPORT 2024-25 meetings each for the Northern, Western, Eastern of Financial Services, Ministry of Finance, and Southern Areas (Annex Tables XI.1-4). Government of India as Director on the Central Board of Reserve Bank of India under Section XI.13 Shri Shaktikanta Das relinquished 8(1)(d) of Reserve Bank of India Act, 1934 with charge as Governor, Reserve Bank of India effect from August 30, 2024 and until further on December 10, 2024 on completion of his orders vice Dr. Vivek Joshi. tenure and the Central Government appointed Shri Sanjay Malhotra, Secretary, Department of Executive Directors Revenue, Ministry of Finance, Government of XI.19 Executive Director Shri Deepak Kumar India as Governor, Reserve Bank of India for a voluntarily retired on April 30, 2024. Executive period of three years from December 11, 2024 Director Shri R. Subramanian superannuated on under Section 8(1)(a) of the Reserve Bank of May 31, 2024; Shri Saurav Sinha on June 28, India Act, 1934. 2024; Shri Manoranjan Mishra on September 30, 2024; Dr. O.P. Mall and Shri Muneesh Kapur XI.14 The Central Government re-appointed on February 28, 2025. Shri R. Lakshmi Kanth Shri M. Rajeshwar Rao as Deputy Governor, Rao was promoted as Executive Director on Reserve Bank of India for a further period of one May 9, 2024; Shri Arnab Kumar Chowdhury on year with effect from October 9, 2024 or until June 3, 2024; Smt. Charulatha S. Kar on July 1, further orders, whichever is earlier. 2024; Shri Aviral Jain on October 1, 2024; Dr. XI.15 Dr. Michael Debabrata Patra relinquished Ajit Ratnakar Joshi on March 3, 2025 and Shri charge as Deputy Governor, Reserve Bank of Indranil Bhattacharyya on March 19, 2025. India on completion of his tenure on January 14, 2025. 3. HUMAN RESOURCE DEVELOPMENT INITIATIVES XI.16 The Central Government appointed Dr. Poonam Gupta, Director General, National XI.20 The Reserve Bank has a wide canvas Council of Applied Economic Research, New of operations, requiring diversified skills and a robust set of internal capabilities to fulfil its Delhi, as Deputy Governor, Reserve Bank of mandate. During the year, the Department India, for a period of three years from the date of remained focused on upscaling the skillset joining the post or until further orders, whichever through recruitment and training, including is earlier. Dr. Poonam Gupta assumed office on e-learning. May 2, 2025. Agenda for 2024-25 XI.17 The Central Government re-appointed Shri T. Rabi Sankar as Deputy Governor, Reserve XI.21 The Department had set out the following Bank of India for a further period of one year with goals for 2024-25: effect from May 3, 2025 or until further orders, ● The Vision Document for Sports states whichever is earlier. the initiatives of the Reserve Bank in XI.18 The Central Government nominated Shri promoting sports-related activities in a Nagaraju Maddirala, Secretary, Department focused manner. A review and redesign 202GOVERNANCE, HUMAN RESOURCES AND ORGANISATIONAL MANAGEMENT of the Document would be undertaken Staff College (RBSC) at Chennai; College of (Utkarsh 2.0) [Paragraph XI.22]; Agricultural Banking (CAB) at Pune; College of Supervisors (CoS) at Mumbai; Enterprise ● The Grade ‘B’ officers recruited by the Computing and Cybersecurity Training Institute Reserve Bank are exposed to development (ECCTI) at Bhubaneswar; and four Zonal Training centre workshops (DCW) through which Centres (ZTCs) at Mumbai (Belapur), New Delhi, their core competencies and other abilities are assessed, and feedback provided as Kolkata and Chennai help attain this objective. input for fostering their development. The The Reserve Bank’s training infrastructure design of the DCW framework would be remains dedicated to fostering both technical reviewed and revamped (Utkarsh 2.0) and behavioural skills of its employees, with a [Paragraph XI.23]; and focus on enhancing their overall efficiency and effectiveness. The programmes offered by the ● The Reserve Bank entered its 90th institutions are in the nature of training, workshops, year of existence on April 1, 2024. To seminars and conferences (Table XI.1). The commemorate this milestone in the history Reserve Bank undertook two key measures, of the Reserve Bank, various activities/ viz., a leadership development programme for events will be organised during the year the senior management; and training of in-house (Paragraph XI.24). counsellors under the employee assistance Implementation Status programme meant for mental health and employee XI.22 A review and redesign of the Vision well-being, who can act as first point of contact in Document for Sports has been initiated. case of any distress. XI.23 The design of the DCW framework is being XI.26 During the year, the Reserve Bank laid strengthened to align it with the performance emphasis on the mentoring of officers in junior management system and the process is underway. and middle management by strengthening XI.24 The Reserve Bank commemorated the its mentoring policy (SABAL) and conducted 90th year of its establishment during 2024-25 orientation sessions for mentees and specialised with year-long events and activities reflecting workshops for mentors to set the tone for the on the Reserve Bank’s legacy of nine decades redesigned mentoring policy. (RBI@90), while looking ahead towards strategies Training at External Institutions for the coming decade (RBI@100). XI.27 The Reserve Bank nominated 1,133 Major Developments officers for training programmes, seminars and In-house Training conferences conducted in India and abroad, XI.25 The Reserve Bank prioritises continuous through both online and offline modes, during skill advancement and strengthening of human 2024-25 (Table XI.2). Class III and IV employees resource capabilities. The training establishments were also deputed for training in external (TEs) of the Reserve Bank, viz., Reserve Bank institutions in India. 203ANNUAL REPORT 2024-25 Table XI.1: Programmes Conducted at Reserve Bank’s Training Establishments (April - March) Training Establishment 2022-23 2023-24 2024-25 Number of Number of Number of Number of Number of Number of Programmes Participants Programmes Participants Programmes Participants 1 2 3 4 5 6 7 RBSC, Chennai 97 2,800 109 2,437 135 3,502 (12) (42) (245) CoS# 59 2,212* 70 2,889 51 1,432 (1,191) (218) RBI Academy$ 15 1,274 17 683 20 506 (151) CAB, Pune 194 23,657* 281 44,053 238 35,969 (43,198) (34,935) ECCTI - - 23 619 24 711 (22) ZTCs (Class I) 112 2,511 118 2,260 105 2,203 ZTCs (Class III) 103 3,396 107 3,084 117 3,579 ZTCs (Class IV) 36 983 32 843 32 671 RBSC: Reserve Bank Staff College. CAB: College of Agricultural Banking. ECCTI: Enterprise Computing and Cybersecurity Training Institute. ZTCs: Zonal Training Centres. # : College of Supervisors (CoS) is administratively attached to Department of Supervision (DoS), Central Office. $ : Since closed with effect from April 1, 2025. * : Figures comprise RBI participants, non-RBI participants (domestic), foreign participants and/or participants from external institutions. - : Not applicable. Note: Figures in parentheses pertain to foreign participants and/or participants from external institutions. Source: RBI. Study Schemes overseas. Further, eight officers were selected for the Golden Jubilee Scholarship Awards 2024 for XI.28 A total of seven officers availed study pursuing courses abroad. leave scheme for pursuing higher studies, of Other Initiatives which, three officers are pursuing higher studies Grants and Endowments Table XI.2: Number of Officers Trained in External Training Institutions in India and XI.29 As a part of its mission to promote Abroad (April - March) research, training and consultancy in the banking Year Trained in India Trained Abroad and financial sector, the Reserve Bank provided (External Institutions) financial support amounting to ₹27.03 crore to 1 2 3 the Indira Gandhi Institute of Development 2022-23 401 420 (266) Research (IGIDR), Mumbai; ₹12.86 crore to the 2023-24 570 390 Centre for Advanced Financial Research and (29) Learning (CAFRAL), Mumbai; ₹2.77 crore to 2024-25 564 569 National Institute of Bank Management (NIBM), (86) Pune; ₹0.84 crore to the Indian Institute of Bank Note: Figures in parentheses indicate online mode. Source: RBI. Management (IIBM), Guwahati and ₹0.83 crore 204GOVERNANCE, HUMAN RESOURCES AND ORGANISATIONAL MANAGEMENT to the London School of Economics (LSE) India Table XI. 3: Recruitments by the Reserve Observatory and the IG Patel Chair. Bank in 2024* Category Total of which: Industrial Relations SC ST OBC EWS XI.30 Industrial relations in the Reserve Bank 1 2 3 4 5 6 remained cordial during the year. During 2024- Class I 269 34 20 72 26 25, HRMD, CO, held 21 meetings with central Class III 296 37 38 97 29 units of recognised Unions/Associations on Class IV 39 01 03 08 01 Total 604 72 61 177 56 various matters related to service conditions *: January - December, 2024. and welfare measures for employees. As per the EWS: Economically Weaker Section. extant instructions, regional offices (ROs) also Source: RBI. held meetings with local units of recognised trade (CODs). Similarly, the Reserve Bank’s townhall unions at quarterly/half-yearly intervals. meeting initiative (Vartalap) has been fruitful Interface with Employees in nurturing a listening-oriented organisational culture and promoting better employer-employee XI.31 The Reserve Bank sustained its efforts towards developing a continuous listening relationship. culture with a view to involve employees, Recruitment and Staff Strength harness their ideas and feedback, and achieve XI.32 During 2024 (January-December), the the organisation’s purposes and goals. VOICE Reserve Bank recruited a total of 604 employees (Voicing Opinion to Inspire, Contribute and Excel) in various cadres (Table XI.3). is one such initiative which provides a platform for employees to interact with the Department. XI.33 The total staff strength of the Reserve During 2024-25, the Reserve Bank conducted Bank as on December 31, 2024 was 13,520, an 6 VOICE sessions, covering 127 participants increase of 0.2 per cent over end-December 2023 from various ROs and central office departments (Table XI.4). Table XI.4: Staff Strength of the Reserve Bank* Category Total Strength Category-wise Strength Per cent to Total Strength SC ST OBC SC ST OBC 2023 2024 2023 2024 2023 2024 2023 2024 2024 1 2 3 4 5 6 7 8 9 10 11 12 Class I 7,109 7,325 1,113 1,121 504 519 1,761 1,907 15.3 7.1 26.0 Class III 3,358 3,496 537 558 244 283 1,027 1,073 16.1 8.2 30.7 Class IV 3,023 2,699 521 428 242 215 943 890 16.0 8.0 33.0 Total 13,490 13,520 2,171 2,107 990 1,017 3,731 3,870 15.7 7.5 28.6 *: End-December. Source: RBI. 205ANNUAL REPORT 2024-25 XI.34 The total strength of ex-servicemen in the issued in 2014-15 in accordance with the Sexual Reserve Bank stood at 1,087 as on December 31, Harassment of Women at Workplace (Prevention, 2024 while the total number of differently abled Prohibition and Redressal) Act and Rules, 2013. employees stood at 326 (Table XI.5). During During 2024-25, nine complaints were received, January-December, 2024, two ex-servicemen and eight cases have been disposed of. Several and 20 persons with benchmark disabilities awareness programmes on the subject were (PwBD) were recruited in the Reserve Bank. organised at various regional offices (ROs) XI.35 During 2024 (January-December), three and the Central Office for sensitising the staff, meetings were held between the management including the newly recruited employees. and representatives of the All-India Reserve Right to Information (RTI) Bank Scheduled Castes (SCs)/Scheduled Tribes XI.37 During 2024-25, the Reserve Bank (STs) and the Buddhist Employees’ Federation received 21,043 requests for information and to discuss issues pertaining to implementation of 1,764 appeals under the RTI Act. 11 training the reservation policy in the Reserve Bank based programmes and 134 sessions on RTI Act were on the Government of India’s guidelines. One also conducted. meeting was also held with the representatives of All-India Reserve Bank Other Backward Classes Commemoration of the 90th Year of the RBI Employees’ Welfare Association. (RBI@90) Prevention of Sexual Harassment of Women at XI.38 The Reserve Bank commemorated the the Workplace 90th year of its establishment during 2024-25 XI.36 The grievance redressal mechanism with year-long events and activities reflecting in the Reserve Bank for prevention of sexual on the Reserve Bank’s legacy of nine decades harassment of women at the workplace is (RBI@90), while looking ahead towards strategies governed by comprehensive set of guidelines for the coming decade (RBI@100). Table XI.5: Total Strength of Ex-Servicemen and PwBD* Category Ex-Servicemen Persons with Benchmark Disabilities (PwBD) (ESM) Visually Impaired Hearing Impaired Orthopaedically Intellectual Disabilities (VI) (HI) Handicapped (OH) (‘d’)** 1 2 3 4 5 6 Class I 260 72 16 95 4 Class III 253 42 2 38 1 Class IV 574 15 7 33 1 * : As on December 31, 2024. ** : As per Rights of Persons with Disability Act, 2016, the PwBD classification is defined as: (a) blindness and low vision; (b) deaf and hard of hearing; (c) locomotor disability including cerebral palsy, leprosy cured, dwarfism, acid attack victims and muscular dystrophy; (d) autism, intellectual disability, specific learning disabilities and mental illness; and (e) multiple disabilities from amongst persons under clauses (a) to (d) including deaf-blindness. Source: RBI. 206GOVERNANCE, HUMAN RESOURCES AND ORGANISATIONAL MANAGEMENT XI.39 The commemoration was launched with employees of the Reserve Bank and coordinates an opening ceremony graced by the Hon’ble the activities of the branch vigilance units. The Prime Minister of India as the Chief Guest in CV Cell also maintains liaison with the Central Mumbai on April 1, 2024. A commemorative coin Vigilance Commission (CVC) and the Central was released by the Hon’ble Prime Minister to Bureau of lnvestigation (CBl). The activities/ mark RBI@90. As part of year-long events and functions of the CV Cell are as under: activities, several marquee events were organised a. Implementation of anti-corruption and such as global conferences2, national level preventive vigilance measures including events3 and various activities4 organised by ROs. among others the conduct of vigilance The closing ceremony was held in Mumbai on audits of ROs/CODs/TEs, Chief Technical April 1, 2025, with the Hon’ble President of India Examiner audit of major works and as the Chief Guest. A short film on events during scrutiny of Annual Property Statements of RBI@90 was showcased and a Customised My assets/liabilities of employees; Stamp marking this milestone was released by b. Examination of vigilance cases, the Hon’ble President during the ceremony. investigation and disposal of complaints Vigilance-related Activities in the Reserve Bank received against employees from various sources, including under Public Interest XI.40 The Reserve Bank’s vigilance unit is under Disclosure and Protection of Informers the overall charge of the Chief Vigilance Officer (PIDPI) Resolution, 2004; (CVO) and is organised on a two-tier basis with the Central Vigilance Cell (CV Cell) functioning c. Promotion of vigilance awareness among at the Central Office and 52 branch vigilance the employees of the Reserve Bank and units. The overall responsibility in respect of the observance of ‘Vigilance Awareness vigilance work in the Reserve Bank vests with the Week’ and training and sensitising staff CV Cell, which exercises its jurisdiction over all on vigilance matters; 2 Include “Digital Public Infrastructure (DPI) and Emerging Technologies” (August 26-27, 2024, Bengaluru) with participations from central bank Governors, senior government officials, banking and NBFC leadership, IT firms, payment system operators (PSOs), FinTech entities and academia, among others; High-Level conference on the theme “Central Banking at Cross-roads” (October 14, 2024, New Delhi) which brought together leading central bankers, experts from multilateral financial institutions, leading policymakers, academia, heads of major domestic banks, economists and financial market participants; and High-Level policy conference of central banks in the Global South (November 21-22, 2024, Mumbai) with delegates from 18 countries, including central bank Governors, Deputy Governors and other central bank officials from the Global South. 3 Include quiz on general knowledge and awareness for undergraduate students pursuing bachelor’s degree courses across all streams; art competition for fine art students in India, with focus on themes associated with the Reserve Bank (October 22, 2024, RBI New Delhi office) with participation from students of 71 colleges across the country; a panel discussion on the evolution of Indian art, influence of social media on art, future of traditional painting forms with advent of digital tools and artificial intelligence, impact of globalisation, art fairs, biennales, etc.; and inter-institutional tournaments at an all-India level (viz., football at Kolkata during August 3-10, 2024; cricket at Jaipur during September 21-28, 2024; table tennis at Chandigarh during November 24-29, 2024; and badminton tournament at Bengaluru during January 2-5, 2025). 4 Include townhall for RBI employees, talks by eminent personalities, art competition and activities to promote the use of Rajbhasha, tree plantation drives (245 plantation drives, 16,205 saplings planted during the year), and blood donation camps (45 blood donation camps across the offices of the Reserve Bank and residential colonies during the year with participation from about 2,237 employees and their family members). 207ANNUAL REPORT 2024-25 d. Issuance of instructions to ROs/CODs/TEs 4. ENTERPRISE-WIDE RISK MANAGEMENT on vigilance matters and dissemination XI.42 The RMD forms the second line of information about CVC’s guidelines of defence5 in the three-tier internal risk by conducting workshops for the staff; management framework adopted by the Reserve and Bank and is responsible for the formulation and e. Maintaining information on sensitive operationalisation of the enterprise-wide risk posts, Agreed List, officers of doubtful management (ERM) framework. integrity and issuance of vigilance XI.43 The Reserve Bank of India had adopted clearances. the extant Economic Capital Framework (ECF) Agenda for 2025-26 in August 2019 based on the recommendations of the ‘Expert Committee to Review the Extant XI.41 The roadmap for the year would include Economic Capital Framework of the Reserve the following milestones for the Department: Bank of India’, under the Chairmanship of Dr. ● Identification and analysis of skill gaps in Bimal Jalan. The Committee had recommended the Reserve Bank; and that the framework may be periodically reviewed ● Integrating massive open online courses every five years. In line with the Committee’s (MOOCs) framework in the Reserve recommendation, the Reserve Bank has Bank’s training and development undertaken a comprehensive internal review of ecosystem (Utkarsh 2.0). the extant framework (Box XI.1). Box XI.1 Economic Capital Framework (ECF) of the Reserve Bank of India – Internal Review Over the last few years, the global macroeconomic stakeholder confidence and trust in commitment towards environment has been challenging owing to the pandemic, maintaining the Reserve Bank’s financial resilience. elevated global public debt, persistent inflation, monetary The Review observed that the extant ECF has met tightening by central banks, volatility in financial markets, its objective of ensuring a resilient balance sheet for prolonged geopolitical tensions, and geo-economic the Reserve Bank, and proposed continuation of the fragmentation. Despite the adverse macroeconomic broad principles underlying the extant ECF and the risk developments and other challenges mentioned above, the assessment methodologies adopted therein. The Review, ECF has enabled the Reserve Bank to augment its financial however, highlighted certain areas where the Framework resilience while also ensuring healthy transfer of surplus to the government, at a time when many central banks have could be further refined, to ensure continued alignment experienced depleted incomes and capital buffers. The with the core objective of ensuring financial resilience of Review also noted that the consistent implementation of the Reserve Bank. The major changes to the extant ECF the rule-based, publicly disclosed ECF has helped build are as under: (Contd.) 5 Individual business areas form the first line of defence and are primarily responsible for the identification and management of risks emanating from their respective areas of functioning, while the second line of defence is the RMD, which performs the centralised risk monitoring function, and the third line of defence is the Inspection Department, which through the inspection and audit process, performs the role of risk assurance. 208GOVERNANCE, HUMAN RESOURCES AND ORGANISATIONAL MANAGEMENT (i) The computation of market risk buffer requirement prevailing macroeconomic conditions and other may adopt an integrated approach, wherein the off- factors; balance sheet portfolio is also reckoned, together with (iv) Consequently, the Contingent Risk Buffer (CRB), the on-balance sheet portfolio. Investments in foreign which includes buffers for monetary and financial currency assets in minor currencies may also be stability risk, credit risk and operational risk, would be considered; maintained in the range of 6.0 ± 1.5 per cent of B/S size (as against the existing level of 6.5 per cent, with (ii) The Central Board would have the flexibility to maintain a lower bound of 5.5 per cent); and market risk buffers at any resilience level within the range of Expected Shortfall (ES) at 99.5 per cent confidence (v) With respect to the surplus distribution policy, any level (CL) and ES at 97.5 per cent CL, and to maintain Available Realised Equity (ARE) in excess of the risk provisions for shortfall in revaluation balances Requirement for Realised Equity (RRE) may be accordingly, based on its assessment of expected written back from the Contingency Fund (CF) to market risk factors. Under the extant ECF, additional risk income. In case the ARE is below the lower bound of provisioning was triggered only if revaluation balances its requirement, no surplus will be transferred to the were below ES at 97.5 per cent CL; government till at least the minimum level of RRE is achieved. (iii) The range for buffers for monetary and financial The reviewed ECF has been applied for determining risk stability risks has been widened to 5.0 ± 1.5 per cent provisioning requirement and surplus transferable for of balance sheet (B/S) size (vis-à-vis the existing 2024-25. range of 4.5 - 5.5 per cent), providing flexibility to the Central Board based on its assessment of the Source: RBI. Agenda for 2024-25 exchange rate and interest rate based on scenarios derived from historical periods XI.44 The Department had set out the following of market stress, augmented by forward- goals for 2024-25: looking stress scenarios (Paragraph ● Analysis of the approved risk tolerance XI.47); limits (RTLs) of all business areas (BAs) to ● Adopting international best practices of identify the inter-linkages and subsequent ERM (Utkarsh 2.0) [Paragraph XI.48]; harmonisation of similar RTLs across and departments (Paragraph XI.45); ● Assessment of emerging risks in the ● Revision of Information Security (IS) Reserve Bank (Utkarsh 2.0) [Paragraph Policy, 2022 of the Reserve Bank in order XI.49]. to fine-tune the existing policy and to provide necessary guidance in view of Implementation Status rapidly evolving technological adoption of XI.45 A harmonisation exercise was conducted artificial intelligence (AI), cloud computing wherein RTLs of all BAs were analysed to identify and advanced analytics (Paragraph common/similar processes, and uniform tolerance XI.46); limits were articulated for these processes, with ● Balance sheet stress testing with the approval of the Risk Monitoring Committee reference to simultaneous movement of (RMC). 209ANNUAL REPORT 2024-25 XI.46 Revision of IS policy, 2022 of the Reserve have been incorporated in the ERM 2.0 Bank was carried out to provide necessary framework. guidance to suit rapidly evolving technological XI.49 Emerging risk scanning framework has adoption such as AI, application programming been developed to identify and assess emerging interface (API), open-source software, analytics risks in the Reserve Bank. An internal working and governance requirements. group has been formed with the objective of XI.47 The framework for balance sheet stress providing inputs on the emerging risks and testing using scenarios based on simultaneous operationalisation of the framework. movement in exchange rates and interest rates Other Initiatives has been put in place. The Reserve Bank’s ERM Framework XI.48 A benchmarking exercise of the Reserve Bank’s ERM framework and practices vis-à-vis XI.50 The ERM framework adopted by the global best practices in risk management the Reserve Bank in 2012 for an integrated revealed that it was majorly in conformity and holistic approach towards internal risk with the international guidelines and globally management has been fine-tuned over time and accepted risk practices. The recommendations it has facilitated in building a robust architecture for strengthening the risk management for risk management in the Reserve Bank framework, which emanated from the exercise, (Box XI.2). Box XI.2 ERM in the Reserve Bank - Reflections from More Than a Decade of Implementation The ERM framework of the Reserve Bank is guided by ● Formal structure for oversight and governance of the principles of robust governance (i.e., well defined internal risks has been put in place through the Central risk management roles and responsibilities, independent Board of Directors, the Audit and Risk Management reporting lines and Board oversight); proportionality (i.e., Sub-Committee and the RMC. These collectively form risk management attuned to operational environment the three-tiered risk governance structure. and risk profile); accountability (i.e., clear mandate and ● Implementation of the three lines of defence risk well-defined risk tolerance); transparency and effective management structure with clear segregation of roles, communication (i.e., timely monitoring and reporting, while ensuring effective collaboration for a synergistic feedback loop). The risk management framework is approach towards managing risks. complemented by the presence of a conducive risk culture, ● Putting in place the institutional architecture in the which involves an appropriate ‘tone from the top’ and form of risk philosophy, appetite and tolerance through initiatives for disseminating risk awareness amongst the an enterprise-wide risk tolerance statement and staff. functional unit-level RTLs. Over the period of 13 years since the rollout of the ERM ● Implementing guidelines and methodologies, framework, the internal risk management processes in the which facilitate uniform identification, classification, Reserve Bank have considerably matured as indicated assessment, measurement, and management of risks below: (Table 1). (Contd.) 210GOVERNANCE, HUMAN RESOURCES AND ORGANISATIONAL MANAGEMENT ● Developing frameworks for reporting and aggregation towards strengthening internal risk management based of risks, and reporting of risk incidents, for organisation- on the ERM framework were recognised by the Central level and business area (BA)-level monitoring Banking, UK by awarding the Reserve Bank as the ‘Risk (Table 1). Manager of the Year 2024’. The ERM 2.0 framework seeks The findings of a recent internal survey on the to further build upon the institutional architecture and implementation of the ERM framework revealed that the framework had served its objectives and has enhanced organisational systems and processes put in place through organisational value. The concerted initiatives undertaken the ERM 1.0. Table 1: Guidelines, Tools and Methodologies - ERM Framework Identification and Assessment Management Reporting Aggregation Classification 1 2 3 4 5 1. Risk Taxonomy 1. Risk Assessment 1. Risk Tolerance Limits 1. Incident Reporting 1. Risk Dashboards Methodology - Operational Framework a) People Risk Risk (RAM-OR) 2. Policy Frameworks for b) Project Risk 2. Risk Register Management of: 2. Monitoring Module c) Physical Framework 2. Risk Assessment a) Model Risk Infrastructure and Framework/Scenario b) Outsourcing Risk Security Risk Analysis/Stress Tests c) Reputation Risk d) IT and Cyber Risk a) Credit Risk d) Transversal Risk b) Liquidity Risk e) Key Risks 2. Risk Reports c) Interest Rate Risk f) Policy Risk a) Half-yearly Report d) Exchange Rate Risk g) Information Security on Internal Risk Governance 3. Economic Capital b) Executive Risk Framework (ECF) Report a) Market Risk - Expected c) Report on Risk Shortfall Exposures and b) Credit Risk - Basel III Available Risk Standardised Approach Buffers c) Operational Risk - Basel III Standardised Approach Source: RBI. Risk Awareness Week (RAW) Agenda for 2025-26 XI.51 The first edition of the RAW was XI.52 For 2025-26, the following goals have organised in the Reserve Bank during April 22- been proposed for the Department: 26, 2024, with the objective of propagation of ● The Integrated Risk Monitoring and risk awareness and fostering of risk culture in the Incident Reporting System (IRIS) Reserve Bank as part of the larger organisational application, launched in January 2020 for framework of risk awareness programmes. The reporting of incidents and formulation of initiative has enabled the Department to actively risk registers, will be revamped to include a reach out to employees and convey the message comprehensive Risk Repository and other of risk awareness and risk culture. Going forward, advanced risk management tools so as to the RAW is planned to be held annually. enhance user experience and efficiency; 211ANNUAL REPORT 2024-25 ● The operating procedures for Agenda for 2024-25 implementation of the revised IS policy XI.54 The Department had set out the following 2024 will be issued, in line with the best goals for 2024-25: information technology (IT) practices; and ● Fine-tuning of existing RBIA based ● A framework will be developed for on ‘core’ and ‘criticality’ of operations carrying out liquidity risk stress testing undertaken by the auditee units and of the Reserve Bank’s market portfolio, make the process more risk focused by building various scenarios based on (Paragraph XI.55); analysis of historical events of market liquidity stress. The same will be integrated ● Review of working of ZIs to study their with the framework for stress testing for efficacy in strengthening the internal interest rate and exchange rate risk. control mechanism in the Reserve Bank 5. INTERNAL AUDIT / INSPECTION (Paragraph XI.56); and XI.53 The Inspection Department of the Reserve ● Carrying out thematic study on efficacy Bank examines, evaluates and reports on internal and efficiency of CSAA (Paragraph XI.57). control and governance processes and provides Implementation Status risk assurance to the top management and the XI.55 Based on ‘core’ and ‘criticality’ of the Central Board through RBIA framework. Thus, operations undertaken by the auditee units, the Department acts as the third line of defence (viz., risk assurance) under ERM function in the engagement matrix has been made operational Reserve Bank and reports to Audit and Risk and the risk scoring methodology has also been Management Sub-Committee (ARMS) of the calibrated. Central Board. The Department also oversees the XI.56 A study on working of the ZIs along with functioning of the concurrent audit (CA) system evaluating their role in strengthening the internal and control self-assessment audit (CSAA) in control mechanism was conducted and placed the Reserve Bank. The Department acts as the before the EDC and ARMS of the Central Board. Secretariat to the ARMS of the Central Board Subsequently, revised guidelines were issued. and also to the Executive Directors’ Committee (EDC) in overseeing the internal audit function. XI.57 A thematic study on efficacy and efficiency Further, Zonal Inspectorates (ZIs) in five zones of CSAA was conducted and submitted to the top help the Auditee Offices (AOs) in strengthening management. Subsequently, revised instructions the internal control system in the Reserve Bank, on CSAA were issued. by ensuring quality of compliance of various Major Development audits and assist the Department in fulfilling its mandate of providing an independent and XI.58 The Department achieved the task of objective risk assurance to the top management integrating all audits conducted by the Department on the operations of the various Business Areas into the AMS a year ahead of its schedule during of the Reserve Bank. 2024-25 (Box XI.3). 212GOVERNANCE, HUMAN RESOURCES AND ORGANISATIONAL MANAGEMENT Box XI.3 Audit Management System (AMS) AMS facilitates conduct of various types of internal audit (AMRMS). Initially the system supported only the main in the Reserve Bank. AMS, the end-to-end solution for all activities of the Department, viz., RBIA and CSAA. the audits conducted by the Department, also functions as Subsequently other modules, viz., Project Audit, Compliance the repository of the entire lifecycle of the audits. Further, Audit and Concurrent Audit, were developed and integrated the system is scalable and capable of providing insights to into the system. With the introduction of ZI, ZI module the top management through analytics and customisable was also developed and integrated into the system. As on dashboards. March 31, 2025, the workflow of all the audits conducted by AMS was rolled out in the Department on upgradation of the Department is carried out in the AMS. erstwhile Audit Management and Risk Monitoring System Source: RBI. Agenda for 2025-26 and monitors its expenditure with a view to ensuring budgetary discipline. The Department XI.59 During the year, the Department will focus also formulates and executes the Reserve Bank’s on the following goals: business continuity plan (BCP) for its critical ● Measures for strengthening the operations and acts as the nodal Department Concurrent Audit Process in the Reserve for four institutes funded by the Reserve Bank. It Bank; also maintains various superannuation and staff ● Formulation of Charter of Inspection welfare funds. Department; Agenda for 2024-25 ● Feasibility study of adoption of AI and ML in the Internal Audit Process; and XI.61 For 2024-25, the Department had set out the following goals: ● Conduct Thematic Studies on: (i) Analysis of risks associated with status ● Triennial review of time sensitive critical of implementation of annual maintenance activities (TSCAs) of the Reserve Bank contracts (AMCs)/Agreements; (ii) (Utkarsh 2.0) [Paragraph XI.62]; Adherence to internal procedures ● Review of the business continuity pertaining to Disaster Recovery and management (BCM) systems of the business continuity plan (BCP); and (iii) Reserve Bank (Paragraph XI.63); Status on implementation of Archival and Record Management Policy. ● Mid-term review of Utkarsh 2.0 (Paragraph XI.64); 6. CORPORATE STRATEGY AND BUDGET MANAGEMENT ● Review of the budget rating framework (Paragraph XI.64); and XI.60 The CSBD coordinates and formulates the Reserve Bank’s medium-term strategy ● Review of budget management of the framework (Utkarsh), prepares its annual budget, budgeting units (Paragraph XI.64). 213ANNUAL REPORT 2024-25 Implementation Status strengthened by carrying out review of TSCAs, assessing disaster recovery (DR) drills and XI.62 The triennial review of TSCAs of the performance of various business units of the Reserve Bank was done by carrying out a Reserve Bank. business impact analysis of its critical functions. The TSCAs were finalised by the Business XI.67 The Department continued to reinforce Continuity Committee and approved by the Risk governance of all four institutes funded by the Monitoring Committee of the Reserve Bank. Reserve Bank, viz., CAFRAL, IGIDR, IIBM and NIBM through meetings of their governing boards XI.63 A review of the BCM systems in the and sub-committees, quarterly monitoring of Reserve Bank was undertaken. To reap the major developments, and implementing the benefits of digitising the BCM processes and recommendations of their review Committees. system, the Department has initiated the work During the year, the governance structure of towards development of a dashboard that would CAFRAL was streamlined further by constituting provide real time alerts during disaster/crisis, for sub-committees to advise on learning activities carrying out the critical activities as per the extant and financial matters. standard operating procedures (SOPs). XI.68 Various IT initiatives were taken by the XI.64 A mid-term review of Utkarsh 2.0 was Department towards streamlining the modules completed. Rating framework for budgeting in its existing core banking solution (e-Kuber) units was reviewed, and the updated rating for automated workflow and generation framework was issued. New facilities for budget of management information system (MIS) management were provided for the budgeting reports. units in the budget module of e-Kuber system. XI.69 To create awareness on strategy, business Major Developments continuity, and budget guidelines of the Reserve XI.65 Out of 150 milestones of Utkarsh 2.0 Bank, workshops and awareness programmes due for completion as on March 31, 2025, 118 were conducted for the staff at various locations, milestones (78.7 per cent) were completed, and including TEs. the remaining 32 milestones (21.3 per cent) Agenda for 2025-26 were under various stages of implementation. In XI.70 The Department’s agenda for the year addition, 6 milestones were completed ahead of includes the following: their schedule on March 31, 2025. New facilities ● Development of a dashboard for BCM were also brought in the ‘Utkarsh’ portal enabling systems; better monitoring of achievement of milestones. ● Review of Utkarsh 2.0; XI.66 CSBD, being the nodal Department for ● Formulation of Utkarsh 3.0; and BCM framework of the Reserve Bank, plays a key role in ensuring the smooth working of critical ● Enhancing the effectiveness of the systems and business processes in the Reserve deliverables across all four institutes Bank. The business continuity framework was funded by the Reserve Bank. 214GOVERNANCE, HUMAN RESOURCES AND ORGANISATIONAL MANAGEMENT 7. RAJBHASHA ● To organise debate competition on economic, banking and financial topics XI.71 The Rajbhasha Department functions for officers at regional office and central as the nodal Department for implementing the office levels to create more awareness as Official Language Policy within the Reserve Bank. part of RBI@90 celebrations (Paragraph By devising a comprehensive action plan and XI.75); establishing a robust monitoring mechanism, the Department has ensured the progressive use of ● To provide training to newly recruited staff Hindi in the Reserve Bank along with compliance members in order to help them acquire of the provisions of the Official Language Act, the compulsory working knowledge of 1963; Rajbhasha Rules, 1976; directives issued Hindi (Paragraph XI.75); by the President of India and instructions of the ● To organise training programmes related GoI; and the Committee of Parliament on Official to various Rajbhasha inspections for Language. Through targeted initiatives such as Rajbhasha officers (Paragraph XI.75); Hindi training programmes, lectures and incentive and schemes, the Department has actively fostered ● To organise faculty development the propagation of Hindi while cultivating an programme for Rajbhasha officers environment conducive to its widespread usage. (Paragraph XI.75). Agenda for 2024-25 Implementation Status XI.72 The Department had set out the following XI.73 A total of 145 additional sections were goals for the year: specified for carrying out entire work in Hindi ● To increase the number of sections vis-à-vis the target of 120 sections. During the specified to do their entire work in Hindi year, a total of 298 additional staff members have with an addition of 120 sections by received Parangat training. December 2024 (Utkarsh 2.0) [Paragraph XI.74 A special programme for the Regional XI.73]; Directors/CGMs/Officers-in-Charge on inspection ● To increase the number of staff members questionnaire of Hon’ble Committee of Parliament proficient in Hindi by imparting training on Official Language was organised at Pench, under Parangat course (Paragraph XI.73); Madhya Pradesh during September 22-23, 2024, ● To organise a special programme for in which 23 Regional Directors and Officers- the Regional Directors on inspection in-Charge participated from various ROs and questionnaire of Hon’ble Committee CODs. Programmes to impart Hindi training to of Parliament on Official Language the members of faculty of CAB, Pune and RBSC, (Paragraph XI.74); Chennai were organised on August 16, 2024 and August 20, 2024, respectively. ● To impart Hindi training to the members of faculty of RBSC, Chennai and CAB, XI.75 Under the aegis of RBI@90, debate Pune (Paragraph XI.74); competitions on economic, banking and 215ANNUAL REPORT 2024-25 financial topics for officers of ROs and CODs 23, 2024, featuring winners from the zonal/ were organised. A total of 129 additional staff cluster-level competitions. members acquired working knowledge of Agenda for 2025-26 Hindi during the year, including newly recruited XI.80 During the year, the Department plans to staff. A training programme related to various focus on the following: Rajbhasha inspections for Rajbhasha officers was organised at CAB, Pune during July 18-19, ● To organise training programme on 2024. Two Faculty Development Programmes Rajbhasha inspection for Rajbhasha were organised for Rajbhasha officers at CAB, officers; Pune during February 10-12, 2025 and February ● To organise faculty development 27- March 1, 2025. programme for Rajbhasha officers; Major Developments ● To organise a Hindi workshop for private Visits by Hon’ble Committee of Parliament on secretaries of the Reserve Bank; Official Language in the Reserve Bank ● To organise a special programme for XI.76 The Hon’ble Committee of Parliament the Regional Directors/CGMs/Officers- on Official Language inspected the Hyderabad in-Charge on inspection questionnaire office of the Reserve Bank on October 23, 2024. of Hon’ble Committee of Parliament on Training/Conference Official Language; and XI.77 In order to cater to the needs of different ● To publish a new magazine showcasing segments of the Reserve Bank staff, various the select contributions made by the staff training programmes were conducted throughout of various ROs and CODs in their Hindi the year. Rajbhasha conference and Heerak e-House magazines. Jayanti function was organised at Rajgir, Bihar 8. PREMISES DEPARTMENT during January 31-February 1, 2025. XI.81 The vision of the Premises Department Publications is to provide ‘best in class’ and environment- XI.78 The Department’s half-yearly magazine, friendly physical infrastructure by integrating ‘Kriti-Anukriti’, served as a platform to highlight architectural excellence and aesthetic appeal Rajbhasha related key activities and initiatives with green ratings in the Reserve Bank’s taken in various CODs, ROs and TEs. Featuring premises while ensuring the highest level of the contemporary issues in Banking and Finance, cleanliness. two editions of the Hindi journal ‘Banking Chintan- Anuchintan’ were published. Agenda for 2024-25 Commemorating the 90th Year of the Reserve XI.82 For 2024-25, the Department had set out Bank the following goals: XI.79 Under the aegis of RBI@90, a national ● Achieve the targets set under Utkarsh 2.0 level debate competition was held on December for December 2024 (Paragraph XI.83); 216GOVERNANCE, HUMAN RESOURCES AND ORGANISATIONAL MANAGEMENT ● Complete construction of Raipur office colonies. As at end-March 2025, 29 office project (Paragraph XI.84); premises and 61 residential premises have solar power plants with power generation capacity at ● Take forward various construction 4,650 kWp (Kilowatt-peak). projects currently in planning stage at various ROs (Paragraph XI.84); and Other Initiatives ● Complete acquisition of residential space XI.86 The Department is exploring to avail in Mumbai (Paragraph XI.84). project management consultancy (PMC) services from various central public-sector undertakings Implementation Status (CPSUs) under different categories. XI.83 As against the goal for obtaining relevant XI.87 The Department has been prioritising skill green rating from IGBC/GRIHA6 for at least 9 enhancement of the staff of estate departments office buildings and 16 residential buildings by through targeted training programmes on various December 2025, green rating has already been functional aspects covering fixed asset policy, received for 11 office buildings and 13 residential e-tendering through MSTC portal, procurement buildings up to December 2024. As against the through Government e-Marketplace (GeM) target of achieving power consumption from portal, centralised insurance of assets, renewable sources at 7 per cent of consumption familiarisation and training programmes for by December 2024 (base year June 2018), 8.3 smooth implementation of enterprise project per cent has been achieved across all office management software. premises till December 2024. Moreover, the Reserve Bank has achieved energy savings XI.88 The Department has revised policy on of 10.4 per cent till December 2024 as against disposal of surplus property and procurement the target of 6.5 per cent set for period ending policy. The GREEN7 data platform has been December 2024 (base year June 2018). further strengthened by adding a new module of submission of monthly information from ROs. XI.84 The construction of office building at Further, a project dashboard named ‘Pari-Drishti’ Raipur is at an advanced stage and expected to has been developed as a part of improvement in be completed shortly. Various other construction MIS. projects have also been taken forward for a timely completion. Agenda for 2025-26 Major Development XI.89 For the year 2025-26, the Department has set the following goals: XI.85 The Reserve Bank has been generating renewable energy through solar power plants ● Achieve the targets set under Utkarsh 2.0 installed at various offices and residential for December 2025; 6 Indian Green Building Council (IGBC)/Green Rating for Integrated Habitat Assessment (GRIHA). 7 A web-based platform named GREEN (Generation of Renewable Energy, Energy Conservation and Neer Conservation) has been developed for consolidation and analysis of data and information on other green initiatives and energy/water audit received from the ROs with an aim to improve energy efficiency/conservation. 217ANNUAL REPORT 2024-25 ● Strive to ensure sufficient office/ were strengthened through new recruitments residential space as per the Reserve and trainings along with efforts towards Bank’s requirement; and promoting greater harmony between employer and employees. The Reserve Bank enhanced ● Take forward various construction its internal risk management by further projects currently in planning stage at strengthening the ERM, RBIA and business various ROs. continuity frameworks. Rajbhasha Department ensured compliance with the statutory provisions 9. CONCLUSION of the Official Languages Act of the GoI, while XI.90 The Reserve Bank commemorated the the Premises Department continued with its 90th year of its establishment through year- efforts to provide environment friendly physical long events and activities. Human resources infrastructure. 218GOVERNANCE, HUMAN RESOURCES AND ORGANISATIONAL MANAGEMENT Annex Table XI.1: Attendance in the Meeting of the Central Board of Directors during April 1, 2024 – March 31, 2025 Name of the Member Appointed/Nominated Number of Meetings Number of Meetings under RBI Act, 1934 Held Attended 1 2 3 4 Shaktikanta Das$ 8(1)(a) 4 4 Sanjay Malhotra% 8(1)(a) 3 3 Michael Debabrata Patra@ 8(1)(a) 5 5 M. Rajeshwar Rao 8(1)(a) 7 7 T. Rabi Sankar 8(1)(a) 7 7 Swaminathan J. 8(1)(a) 7 6 Revathy Iyer 8(1)(b) 7 7 Sachin Chaturvedi 8(1)(b) 7 6 Satish Kashinath Marathe 8(1)(c) 7 7 Swaminathan Gurumurthy 8(1)(c) 7 2 Anand Gopal Mahindra 8(1)(c) 7 2 Venu Srinivasan 8(1)(c) 7 4 Pankaj Ramanbhai Patel 8(1)(c) 7 4 Ravindra H. Dholakia 8(1)(c) 7 6 Ajay Seth 8(1)(d) 7 5 Vivek Joshi* 8(1)(d) 2 1 Nagaraju Maddirala# 8(1)(d) 5 4 $: Relinquished charge as Governor on December 10, 2024. %: Took charge as Governor on December 11, 2024. @: Deputy Governor till January 14, 2025. *: Director till August 29, 2024. #: Director w.e.f. August 30, 2024. 219ANNUAL REPORT 2024-25 Table XI.2: Attendance in the Meeting of the Committees of the Central Board during April 1, 2024 – March 31, 2025 Name of the Member Appointed/Nominated Number of Number of under RBI Act,1934 Meetings Held Meetings Attended 1 2 3 4 I. Committee of the Central Board (CCB) Shaktikanta Das$ 8(1)(a) 32 25 Sanjay Malhotra% 8(1)(a) 13 12 Michael Debabrata Patra@ 8(1)(a) 36 27 M. Rajeshwar Rao 8(1)(a) 45 41 T. Rabi Sankar 8(1)(a) 45 43 Swaminathan J. 8(1)(a) 45 41 Revathy Iyer 8(1)(b) 17 17 Sachin Chaturvedi 8(1)(b) 26 26 Satish Kashinath Marathe 8(1)(c) 34 34 Swaminathan Gurumurthy 8(1)(c) 14 1 Anand Gopal Mahindra 8(1)(c) 11 8 Venu Srinivasan 8(1)(c) 15 15 Pankaj Ramanbhai Patel 8(1)(c) 23 23 Ravindra H. Dholakia 8(1)(c) 41 41 Name of the Member Position Number of Number of Meetings Held Meetings Attended II. Board for Financial Supervision (BFS) Shaktikanta Das$ Chairman 8 7 Sanjay Malhotra% Chairman 4 4 Swaminathan J. Vice-Chairman 12 12 Michael Debabrata Patra@ Member 9 6 M. Rajeshwar Rao Member 12 11 T. Rabi Sankar Member 12 12 Satish Kashinath Marathe Member 12 9 Sachin Chaturvedi Member 12 10 Ravindra H. Dholakia Member 12 9 Revathy Iyer Member 12 9 III. Board for Regulation and Supervision of Payment and Settlement Systems (BPSS) Shaktikanta Das$ Chairman 1 1 Sanjay Malhotra% Chairman 1 1 T. Rabi Sankar Vice-Chairman 2 2 Michael Debabrata Patra@ Member 1 1 M. Rajeshwar Rao Member 2 2 Swaminathan J. Member 2 2 Sachin Chaturvedi Member 2 2 Ravindra H. Dholakia Member 2 2 $: Relinquished charge as Governor on December 10, 2024. %: Took charge as Governor on December 11, 2024. @: Deputy Governor till January 14, 2025. 220GOVERNANCE, HUMAN RESOURCES AND ORGANISATIONAL MANAGEMENT Table XI.3: Attendance in the Meeting of the Sub-Committees of the Board during April 1, 2024 – March 31, 2025 Name of the Member Position Number of Number of Meetings Meetings Held Attended 1 2 3 4 I. Audit & Risk Management Sub-Committee (ARMS) Revathy Iyer Chairperson 7 7 Sachin Chaturvedi Member 7 5 Venu Srinivasan^ Member 7 1 Pankaj Ramanbhai Patel Member 7 0 Swaminathan J. Member 7 7 ^: Member till April 4, 2025. II. Building Sub-Committee (BSC) Pankaj Ramanbhai Patel Chairman 1 1 Anand Gopal Mahindra Member 1 1 III. Human Resource Management Sub-Committee (HRM-SC) Anand Gopal Mahindra Chairman 2 1 Pankaj Ramanbhai Patel Member 2 2 IV. Information Technology Sub-Committee (IT-SC) Sachin Chaturvedi Chairman 3 3 Satish Kashinath Marathe Member 3 3 V. Strategy Sub-Committee (S-SC) Revathy Iyer Chairperson Nil Nil Anand Gopal Mahindra Member Nil Nil Michael Debabrata Patra@ Member Nil Nil Swaminathan J.& Member Nil Nil Venu Srinivasan Member Nil Nil @: Member till January 14, 2025. &: Member w.e.f. January 15, 2025. 221ANNUAL REPORT 2024-25 Table XI.4: Attendance in the Meeting of Standing Committee of the Central Board of Directors in lieu of Local Board/s during April 1, 2024 – March 31, 2025* Name of the Member Position Number of Meetings Number of Meetings Held Attended 1 2 3 4 Revathy Iyer Chairperson 8 8 Satish Kashinath Marathe Member 8 8 *: Standing Committee of the Central Board is functioning in lieu of Northern, Western, Eastern and Southern Area Local Boards. Note: Two meetings each were held for the Northern, Western, Eastern and Southern Areas. 222THE RESERVE BANK’S ACCOUNTS FOR 2024-25 THE RESERVE BANK’S XII ACCOUNTS FOR 2024-25 The size of the Reserve Bank’s balance sheet as on March 31, 2025 increased by 8.20 per cent year on year. While income for the year increased by 22.77 per cent, expenditure increased by 7.76 per cent. The year ended with an overall surplus of ₹2,68,590.07 crore as against ₹2,10,873.99 crore in the previous year, resulting in an increase of 27.37 per cent. XII.1 The balance sheet of the Reserve Bank assets constituted 25.73 per cent while foreign reflects activities carried out in pursuance of its currency assets, gold (including gold deposit various functions including issuance of currency as and gold held in India) and loans and advances well as monetary policy and reserve management to financial institutions outside India constituted objectives. 74.27 per cent of total assets as on March 31, XII.2 Key financial results of the Reserve Bank’s 2025 as against 23.31 per cent and 76.69 per operations during the year 2024-25 are set out in cent, respectively, as on March 31, 2024. following paragraphs. XII.4 A provision of ₹44,861.70 crore was made XII.3 The size of the balance sheet increased and transferred to Contingency Fund (CF). No by ₹5,77,718.72 crore, i.e., 8.20 per cent from provision was made towards Asset Development ₹70,47,703.21 crore as on March 31, 2024 to Fund (ADF). Trends in income, expenditure, net ₹76,25,421.93 crore as on March 31, 2025. income and surplus transferred to the Central Increase on assets side was due to rise in gold, Government are given in Table XII.1. domestic investments and foreign investments by XII.5 Independent Auditors’ Report, Balance 52.09 per cent, 14.32 per cent and 1.70 per cent, Sheet and Income Statement for the year respectively. On liabilities side, expansion was due ended March 31, 2025 along with schedules, to increase in notes issued, revaluation accounts, statement of Significant Accounting Policies and and other liabilities by 6.03 per cent, 17.32 per supporting Notes to Accounts are given in ensuing cent and 23.31 per cent, respectively. Domestic paragraphs. Table XII.1: Trends in Income, Expenditure, Net Income and Surplus Transferred to the Central Government (Amount in ₹ crore) Item 2020-21 2021-22 2022-23 2023-24 2024-25 1 2 3 4 5 6 a) Income 1,33,272.75 1,60,112.13 2,35,457.26 2,75,572.32 3,38,308.09 b) Total Expenditure1 34,146.752 1,29,800.683 1,48,037.044 64,694.335 69,714.026 c) Net Income (a-b) 99,126.00 30,311.45 87,420.22 2,10,877.99 2,68,594.07 d) Transfer to funds7 4.00 4.00 4.00 4.00 4.00 e) Surplus transferred to the Central Government (c-d) 99,122.00 30,307.45 87,416.22 2,10,873.99 2,68,590.07 Note: 1. Include provisions towards CF and ADF. 2. Includes a provision of ₹20,710.12 crore towards transfer to CF. 3. Include provisions of ₹1,14,567.01 crore and ₹100 crore towards transfer to CF and ADF, respectively. 4. Includes a provision of ₹1,30,875.75 crore towards transfer to CF. 5. Includes a provision of ₹42,819.91 crore towards transfer to CF. 6. Includes a provision of ₹44,861.70 crore towards transfer to CF. 7. An amount of ₹1 crore each has been transferred to the National Industrial Credit (Long Term Operations) Fund, the National Housing Credit (Long Term Operations) Fund, the National Rural Credit (Long Term Operations) Fund and the National Rural Credit (Stabilisation) Fund during each of the five years. 223ANNUAL REPORT 2024-25 INDEPENDENT AUDITORS’ REPORT To, The President of India Report on Audit of Financial Statements of the Reserve Bank of India Opinion We, the undersigned auditors of the Reserve Bank of India (hereinafter referred to as the “Bank”), do hereby report to the Central Government upon the Balance Sheet of the Bank as on March 31, 2025, the Income Statement read with Schedules and Significant Accounting Policies as at and for the year ended on that date (hereinafter referred to as “Financial Statements”), which have been audited by us. In our opinion and to the best of our information and according to explanations given to us and as shown by the books of accounts of the Bank, the Balance Sheet read with Schedules and Significant Accounting Policies is a full and fair Balance Sheet containing all necessary particulars and is properly drawn up in accordance with the requirements of the provisions of the Reserve Bank of India Act, 1934 (“the RBI Act, 1934”) and Regulations framed there under, as amended, so as to exhibit true and correct view of the state of affairs of the Bank as on March 31, 2025 and its results of operations for the year ended on that date. Basis for Opinion We conducted our audit of the aforesaid Financial Statements in accordance with the Standards on Auditing (“SAs”) issued by the Institute of Chartered Accountants of India (“ICAI”). Our responsibilities under those Standards are further described in the Auditors’ Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Bank in accordance with the Code of Ethics issued by the ICAI together with the ethical requirements that are relevant to our audit of the Financial Statements under the provisions of the Reserve Bank of India Act, 1934 and Regulations framed thereunder, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion on the Financial Statements. Information Other than the Financial Statements and Auditor’s Report Thereon The Management is responsible for the other information. The other information comprises the information included in the Notes to Accounts but does not include the Financial Statements and our auditors’ report thereon. Our opinion on the Financial Statements does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the Financial Statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the Financial Statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of Management and Those Charged with Governance for the Financial Statements The Bank’s Management and Those Charged with Governance for the Financial Statements are responsible for the preparation of the Financial Statements that give a true and correct view of the state of affairs and results of operations of the Bank in accordance with the requirements of the provisions of the RBI Act, 1934 and Regulations framed thereunder and the accounting policies and practices followed by the Bank. This responsibility also includes maintenance of adequate accounting records for safeguarding of the assets of the Bank and preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgements and estimates that are reasonable and prudent; and design, implementation and maintenance of internal control relevant to the preparation and presentation of the Financial Statements that give a true and correct view and are free from material misstatement, whether due to fraud or error. The Management is also responsible for assessing the Bank’s ability to continue as a ‘Going Concern’ and using the ‘Going Concern’ basis of accounting. As per the RBI Act, 1934, the Bank can be liquidated only by the Central Government by order and in any other manner as it may direct. Those Charged with Governance are also responsible for overseeing the Bank’s financial reporting process. Auditor’s Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the Financial Statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with SAs will always detect a material 224THE RESERVE BANK’S ACCOUNTS FOR 2024-25 misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these Financial Statements. Reasonable assurance includes aforesaid concepts of materiality and use of test-checks in line with the Standards on Auditing. As part of an audit in accordance with SAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the Financial Statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Bank’s internal financial control. • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Management. • Conclude on the appropriateness of Management’s use of the Going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Bank’s ability to continue as a Going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the Financial Statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors’ report. • Evaluate the overall presentation, structure and content of the Financial Statements, are drawn up in accordance with the requirements of the provisions of the RBI Act, 1934 and Regulations framed there under and whether the Financial Statements represent the underlying transactions and events in a manner that achieves fair presentation. We communicate with Those Charged with Governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide Those Charged with Governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. Other Matters The audit of the Financial Statements of the Bank for the year ended March 31, 2024, was carried out and reported jointly by M/s Chandabhoy & Jassoobhoy, Chartered Accountants and M/s Ford Rhodes Parks & Co. LLP, Chartered Accountants, who have expressed an unmodified opinion vide their audit report dated May 22, 2024, which has been furnished to us by the Management and has been relied upon by us for the purpose of our audit of the Financial Statements. We report that we have called for information and explanations from the Bank considered necessary for the purpose of our audit and such information and explanations have been given to our satisfaction. We also report that the Financial Statements include the accounts of twenty-five accounting units of the Bank which have been audited by Statutory Branch Auditors, and we have relied on their report in this regard. Our opinion is not modified in respect of these matters. For Sorab S. Engineer & Co. For Kalyaniwalla & Mistry LLP Chartered Accountants Chartered Accountants (ICAI Firm Registration No. 110417W) (ICAI Firm Registration No. 104607W/W100166) Naushir D. Anklesaria Daraius Z. Fraser Partner Partner Membership No. 010250 Membership No. 042454 UDIN: 25010250BMOKKD2705 UDIN: 25042454BMOETV3890 Place: Mumbai Date: May 23, 2025 225ANNUAL REPORT 2024-25 RESERVE BANK OF INDIA BALANCE SHEET AS ON MARCH 31, 2025 (Amount in ₹ crore) Liabilities Schedule 2023-24 2024-25 Assets Schedule 2023-24 2024-25 Capital 5.00 5.00 Assets of Banking Department (BD) Reserve Fund 6,500.00 6,500.00 Notes, Rupee Coin, Small Coin 6 10.13 11.26 Other Reserves 1 240.00 242.00 Gold-BD 7 2,74,714.27 4,31,624.80 Deposits 2 17,19,838.56 17,17,404.03 Investments-Foreign-BD 8 14,89,081.42 14,32,572.10 Risk Provisions Investments-Domestic-BD 9 13,63,368.97 15,58,573.83 Contingency Fund 4,28,621.03 5,42,426.96 Bills Purchased and Discounted 0.00 0.00 Asset Development Fund 22,974.68 22,974.68 Loans and Advances 10 3,75,593.49 4,34,710.24 Revaluation Accounts 3 11,30,963.71 13,26,793.43 Investment in Subsidiaries 11 2,063.60 2,063.60 Other Liabilities 4 2,60,520.73 3,21,248.79 Other Assets 12 64,831.83 78,039.06 Liabilities of Issue Department Assets of Issue Department (ID) (As backing for Notes Issued) Notes Issued 5 34,78,039.50 36,87,827.04 Gold-ID 7 1,64,604.91 2,36,537.54 Rupee Coin 458.54 328.76 Investments-Foreign-ID 8 33,12,976.05 34,50,960.74 Investments-Domestic-ID 9 0.00 0.00 Domestic Bills of Exchange and 0.00 0.00 other Commercial Papers 34,78,039.50 36,87,827.04 Total Liabilities 70,47,703.21 76,25,421.93 Total Assets 70,47,703.21 76,25,421.93 Sangeeta Lalwani Poonam Gupta Swaminathan J T. Rabi Sankar M. Rajeshwar Rao Sanjay Malhotra Chief General Manager-In-Charge Deputy Governor Deputy Governor Deputy Governor Deputy Governor Governor 226THE RESERVE BANK’S ACCOUNTS FOR 2024-25 RESERVE BANK OF INDIA INCOME STATEMENT FOR THE YEAR ENDED MARCH 31, 2025 (Amount in ₹ crore) INCOME Schedule 2023-24 2024-25 Interest 13 1,88,605.73 2,10,687.64 Other Income 14 86,966.59 1,27,620.45 Total 2,75,572.32 3,38,308.09 EXPENDITURE Printing of Notes 5,101.40 6,372.82 Expenditure on Remittance of Currency 128.39 151.02 Agency Charges 15 3,976.31 3,669.56 Employee Cost 7,890.11 9,146.71 Interest 2.19 2.44 Postage and Telecommunication Charges 242.75 106.43 Printing and Stationery 29.53 24.24 Rent, Taxes, Insurance, Lighting, etc. 254.14 274.65 Repairs and Maintenance 173.07 177.55 Directors’ and Local Board Members’ Fees and Expenses 5.75 4.80 Auditors’ Fees and Expenses 7.37 7.24 Law Charges 18.06 17.67 Depreciation 370.62 623.63 Miscellaneous Expenses 3,674.73 4,273.56 Provisions 42,819.91 44,861.70 Total 64,694.33 69,714.02 Available Balance 2,10,877.99 2,68,594.07 Less: (a) Contribution to: (i) National Industrial Credit (Long Term Operations) Fund 1.00 1.00 (ii) National Housing Credit (Long Term Operations) Fund 1.00 1.00 (b) Transferable to NABARD: (i) National Rural Credit (Long Term Operations) Fund1 1.00 1.00 (ii) National Rural Credit (Stabilisation) Fund1 1.00 1.00 (c) Others Surplus payable to the Central Government 2,10,873.99 2,68,590.07 1. These funds are maintained by the National Bank for Agriculture and Rural Development (NABARD). Sangeeta Lalwani Poonam Gupta Swaminathan J T. Rabi Sankar M. Rajeshwar Rao Sanjay Malhotra Chief General Manager-In-Charge Deputy Governor Deputy Governor Deputy Governor Deputy Governor Governor 227ANNUAL REPORT 2024-25 SCHEDULES FORMING PART OF BALANCE SHEET AND INCOME STATEMENT (Amount in ₹ crore) 2023-24 2024-25 Schedule 1: Other Reserves (i) National Industrial Credit (Long Term Operations) Fund 33.00 34.00 (ii) National Housing Credit (Long Term Operations) Fund 207.00 208.00 Total 240.00 242.00 Schedule 2: Deposits (a) Government (i) Central Government 5,000.30 5,000.85 (ii) State Governments 42.46 42.48 Sub total 5,042.76 5,043.33 (b) Banks (i) Scheduled Commercial Banks 9,56,010.64 9,26,001.43 (ii) Scheduled State Co-operative Banks 10,934.25 8,439.50 (iii) Other Scheduled Co-operative Banks 12,272.97 11,606.14 (iv) Non-Scheduled State Co-operative Banks 6,515.91 6,569.07 (v) Other Banks 39,714.96 38,872.35 Sub total 10,25,448.73 9,91,488.49 (c) Financial Institutions outside India (i) Repo Borrowing-Foreign 1,61,402.27 1,11,579.53 (ii) Reverse Repo Margin-Foreign 2,146.54 1,092.49 Sub total 1,63,548.81 1,12,672.02 (d) Others (i) Administrators of RBI Employee PF A/c 4,778.94 4,902.84 (ii) Depositor Education and Awareness Fund 78,212.53 97,545.12 (iii) Balances of Foreign Central Banks 1,702.86 348.37 (iv) Balances of Indian Financial Institutions 7,727.18 10,159.58 (v) Balances of International Financial Institutions 501.00 501.14 (vi) Mutual Funds 1.33 1.32 (vii) Others 4,32,874.42 4,94,741.82 Sub total 5,25,798.26 6,08,200.19 Total 17,19,838.56 17,17,404.03 Schedule 3: Revaluation accounts (i) Currency and Gold Revaluation Account (CGRA) 11,30,793.34 13,02,964.89 (ii) Investment Revaluation Account-Foreign Securities (IRA-FS) 0.00 0.00 (iii) Investment Revaluation Account-Rupee Securities (IRA-RS) 0.00 16,843.35 (iv) Foreign Exchange Forward Contracts Valuation Account (FCVA) 170.37 6,985.19 Total 11,30,963.71 13,26,793.43 Schedule 4: Other Liabilities (i) Provision for Forward Contracts Valuation Account (PFCVA) 0.00 0.00 (ii) Provision for payables 4,827.02 4,088.31 (iii) Gratuity and Superannuation Fund 33,321.37 36,470.57 (iv) Surplus payable to the Central Government 2,10,873.99 2,68,590.07 (v) Bills Payable 11.35 0.09 (vi) Miscellaneous 11,487.00 12,099.75 Total 2,60,520.73 3,21,248.79 Schedule 5: Notes Issued (i) Notes held in the Banking Department 10.06 11.19 (ii) Notes in circulation 34,77,795.32 36,86,799.39 (iii) CBDC-W 0.08 0.00 (iv) CBDC-R 234.04 1,016.46 Total 34,78,039.50 36,87,827.04 228THE RESERVE BANK’S ACCOUNTS FOR 2024-25 2023-24 2024-25 Schedule 6: Notes, Rupee Coin, Small Coin (i) Notes 10.06 11.19 (ii) Rupee Coin 0.06 0.06 (iii) Small Coin 0.01 0.01 Total 10.13 11.26 Schedule 7: Gold (a) Banking Department (i) Gold 2,60,537.16 4,17,205.49 (ii) Gold deposit 14,177.11 14,419.31 Sub Total 2,74,714.27 4,31,624.80 (b) Issue Department 1,64,604.91 2,36,537.54 Total 4,39,319.18 6,68,162.34 Schedule 8: Investments-Foreign (i) Investments-Foreign-BD 14,89,081.42 14,32,572.10 (ii) Investments-Foreign-ID 33,12,976.05 34,50,960.74 Total 48,02,057.47 48,83,532.84 Schedule 9: Investments-Domestic (i) Investments-Domestic-BD 13,63,368.97 15,58,573.83 (ii) Investments-Domestic-ID 0.00 0.00 Total 13,63,368.97 15,58,573.83 Schedule 10: Loans and Advances (a) Loans and Advances to: (i) Central Government 0.00 0.00 (ii) State Governments 6,599.94 32,688.09 Sub total 6,599.94 32,688.09 (b) Loans and Advances to: (i) Scheduled Commercial Banks 1,93,341.00 2,53,663.00 (ii) Scheduled State Co-operative Banks 0.00 0.00 (iii) Other Scheduled Co-operative Banks 0.00 0.00 (iv) Non-Scheduled State Co-operative Banks 0.00 0.00 (v) NABARD 0.00 0.00 (vi) Others 12,397.51 36,426.09 Sub total 2,05,738.51 2,90,089.09 (c) Loans and Advances to Financial Institutions outside India (i) Reverse Repo Lending-Foreign 1,62,822.88 1,11,579.53 (ii) Repo Margin-Foreign 432.16 353.53 Sub total 1,63,255.04 1,11,933.06 Total 3,75,593.49 4,34,710.24 Schedule 11: Investment in Subsidiaries/Associates (i) Deposit Insurance and Credit Guarantee Corporation (DICGC) 50.00 50.00 (ii) Bharatiya Reserve Bank Note Mudran (P) Ltd. (BRBNMPL) 1,800.00 1,800.00 (iii) Reserve Bank Information Technology (P) Ltd. (ReBIT) 50.00 50.00 (iv) National Centre for Financial Education (NCFE) 30.00 30.00 (v) Indian Financial Technology & Allied Services (IFTAS) 33.60 33.60 (vi) Reserve Bank Innovation Hub (RBIH) 100.00 100.00 Total 2,063.60 2,063.60 229ANNUAL REPORT 2024-25 2023-24 2024-25 Schedule 12: Other Assets (i) Fixed Assets (net of accumulated depreciation) 2,042.64 2,512.81 (ii) Accrued income (a + b) 58,878.51 64,001.01 a. on loans to employees 421.47 479.85 b. on other items 58,457.04 63,521.16 (iii) Swap Amortisation Account (SAA) 0.00 0.00 (iv) Revaluation of Forward Contracts Account (RFCA) 170.37 6,985.19 (v) Miscellaneous 3,740.31 4,540.05 Total 64,831.83 78,039.06 Schedule 13: Interest (a) Domestic Sources (i) Interest on holding of Rupee Securities 92,589.51 85,524.67 (ii) Net Interest on LAF Operations -7,052.08 -4,739.82 (iii) Interest on SDF -5,616.80 -5,844.65 (iv) Interest on MSF Operations 3,413.37 464.22 (v) Interest on Loans and Advances 2,094.09 1,922.77 Sub total 85,428.09 77,327.19 (b) Foreign Sources (i) Interest Income from Foreign Securities 65,327.93 97,006.66 (ii) Net Interest on Repo/ Reverse Repo transactions 228.64 158.59 (iii) Interest on Deposits 37,621.07 36,195.20 Sub total 1,03,177.64 1,33,360.45 Total 1,88,605.73 2,10,687.64 Schedule 14: Other Income (a) Domestic Sources (i) Exchange 0.00 0.00 (ii) Discount 0.00 0.00 (iii) Commission 3,886.95 4,131.64 (iv) Rent Realised 9.19 9.00 (v) Profit/ Loss on sale and redemption of Rupee Securities 859.32 1,105.16 (vi) Depreciation on Rupee Securities inter portfolio transfer -68.74 -69.50 (vii) Amortisation of premium/ discount on Rupee Securities -2,394.71 -2,681.71 (viii) Profit/ Loss on sale of Bank’s property 1.73 2.16 (ix) Provision no longer required and Miscellaneous Income 379.29 -353.40 Sub total 2,673.03 2,143.35 (b) Foreign Sources (i) Amortisation of premium/ discount on Foreign Securities 2,235.86 13,686.63 (ii) Profit/ Loss on sale and redemption of Foreign Securities -630.56 661.64 (iii) Exchange gain/ loss from Foreign Exchange transactions 83,615.86 1,11,143.38 (iv) Miscellaneous Income -927.60 -14.55 Sub total 84,293.56 1,25,477.10 Total 86,966.59 1,27,620.45 Schedule 15: Agency Charges (i) Agency Commission on Government Transactions 3,806.71 3,531.76 (ii) Underwriting Commission paid to the Primary Dealers 48.47 15.78 (iii) Sundries (Handling charges and turnover commission paid to banks for 28.12 6.47 Relief/ Savings Bonds subscriptions; SBLA, etc.) (iv) Fees paid to the External Asset Managers, Custodians, Brokers, etc. 93.01 115.55 Total 3,976.31 3,669.56 230THE RESERVE BANK’S ACCOUNTS FOR 2024-25 STATEMENT OF SIGNIFICANT ACCOUNTING Banking Department, and the assets of the Issue POLICIES FOR THE YEAR ENDED MARCH 31, Department shall not be subject to any liability 2025 other than the liabilities of the Issue Department. The RBI Act, 1934 requires that the assets of (a) General the Issue Department shall consist of gold coins, 1.1 Among other things, the Reserve Bank was gold bullion, foreign securities, rupee coins and established under the Reserve Bank of India rupee securities to such aggregate amount as is Act, 1934 (RBI Act, 1934) “to regulate the issue not less than the total of the liabilities of the Issue of banknotes and the keeping of reserves with Department. The RBI Act, 1934 requires that the a view to securing monetary stability in India liabilities of the Issue Department shall be an and generally to operate the currency and credit amount equal to the total of the amount of the system of the country to its advantage”. currency notes of the Government of India and 1.2 The main functions of the Reserve Bank are:- banknotes for the time being in circulation. a) Issue of banknotes and circulation of (b) Significant Accounting Policies coins; 2.1 Convention b) Acts as monetary authority and The Financial Statements are prepared formulates, implements and monitors in accordance with the RBI Act, 1934 and the monetary policy, including acting as notifications issued thereunder and, in the the Lender of Last Resort; form, prescribed by the Reserve Bank of India c) Regulation and supervision of the General Regulations, 1949. These are based on financial system; historical cost except where it is modified to reflect d) Regulation and supervision of the revaluation and/or amortisation. The accounting payment and settlement systems; policies followed in preparing financial statements are consistent with those followed in the previous e) Acts as manager of foreign exchange; year unless otherwise stated. f) Maintaining and managing the country’s 2.2 Revenue Recognition foreign exchange reserves; a) Income and expenditure are recognised on g) Acting as the banker to banks and the accrual basis except penal interest charged governments; from banks which is accounted for only when h) Acting as the debt manager of the there is certainty of realisation. Dividend governments; income on shares is recognised on accrual i) Developmental functions to support basis when the right to receive the same is national objectives. established. 1.3 The RBI Act, 1934 requires that the issue of b) Balances unclaimed and outstanding banknotes should be conducted by the Reserve for more than three clear consecutive Bank in an Issue Department which shall be accounting years in certain transit accounts separated and kept wholly distinct from the including Drafts Payable Account, Payment 231ANNUAL REPORT 2024-25 Orders Account, Sundry Deposit Account- Foreign securities, other than Treasury Bills Miscellaneous-BD, Remittance Clearance (T-Bills), Commercial Papers and certain ‘Held Account, Earnest Money Deposit Account to Maturity’ securities [such as investments in and Security Deposit Account are reviewed notes issued by the International Monetary and written back to income. Claims, if any, Fund and bonds issued by India Infrastructure are considered and charged against income Finance Company (IIFC), UK which are in the year of payment. valued at cost] are marked-to-market on c) Income and expenditure in foreign currency a daily basis. Unrealised gains/losses on are recorded at exchange rates prevailing on revaluation are recorded in ‘Investment the day. Revaluation Account-Foreign Securities’ (IRA-FS). Credit balance in IRA-FS is carried d) Exchange gains/losses on sale of foreign currencies and gold are accounted for using forward to subsequent accounting year. Debit the weighted average cost method for arriving balance in IRA-FS, if any, on the balance at the cost. sheet date, is charged to Contingency Fund (CF) and the same is reversed on the first 2.3 Gold & Foreign Currency Assets and working day of the following accounting year. Liabilities Foreign T-Bills and Commercial Papers Transactions in gold & foreign currency assets are carried at cost as adjusted by daily and liabilities are accounted for on settlement date basis. amortisation of discount/premium. Premium or discount on foreign securities is amortised a) Gold daily. Profit/ loss on sale of foreign securities Gold (including gold deposit) is revalued on is recognised with respect to the amortised a daily basis at ninety (90) per cent of the book value. London Bullion Market Association (LBMA) c) Forward/ Swap Contracts gold price in US dollar and Rupee-US dollar market exchange rate. Unrealised valuation Forward contracts entered into by the gains/losses are accounted for in Currency Reserve Bank are revalued on a half-yearly and Gold Revaluation Account (CGRA). basis. While mark-to-market net gain is b) Foreign Currency Assets and Liabilities credited to ‘Foreign Exchange Forward Contracts Valuation Account’ (FCVA) with All foreign currency assets and liabilities contra debit to ‘Revaluation of Forward (excluding foreign currency received under Contracts Account’ (RFCA), mark-to-market swaps that are in the nature of repos net loss is debited to FCVA with contra and contracts where the rates are fixed contractually) are translated on a daily basis credit to ‘Provision for Forward Contracts at market exchange rates prevailing on the Valuation Account’ (PFCVA). On maturity of day. Unrealised gains/losses arising from the contract, actual gain or loss is recognised such translation of foreign currency assets in the income account and unrealised gains/ and liabilities are accounted for in CGRA. losses previously recorded in FCVA, RFCA 232THE RESERVE BANK’S ACCOUNTS FOR 2024-25 and PFCVA are reversed. At the time of e) Transactions in Derivatives half-yearly revaluation, balance in FCVA Transactions in derivatives like Interest and RFCA or PFCVA as on that day is Rate Futures, Currency Futures, Interest reversed and fresh revaluation is done for all Rate Swaps and Overnight Indexed Swaps outstanding forward contracts. undertaken as part of Reserve Management Debit balance in FCVA, if any, on the balance operations are marked-to-market periodically sheet date, is charged to CF and reversed and resultant gain/loss is booked in income on the first working day of the following account. accounting year. The balance in RFCA and f) Security Lending Transactions PFCVA represents net unrealised gains and The Reserve Bank participates in Security losses, respectively, on valuation of forward Lending transactions as part of Reserve contracts. Management operations. The securities In case of swaps at off-market rates that are lent remain a part of the Reserve Bank’s in the nature of repo, the difference between Investments and continue to be amortised, future contract rate and the rate at which the accrue interest and are marked-to-market. contract is entered into is amortised over 2.4 Transactions in Exchange Traded the period of the contract and recorded in Currency Derivatives (ETCD) income account with contra entry in ‘Swap Amortisation Account’ (SAA). Amounts ETCD transactions undertaken by the Reserve recorded in SAA are reversed on maturity Bank, as part of its intervention operations, are of underlying contracts. Further, amounts marked-to-market on a daily basis and resultant received under these swaps are not subject gain/ loss is booked in income account. to periodic revaluation. 2.5 Domestic Investments While FCVA forms part of ‘Revaluation a) Rupee Securities and Oil Bonds, except Accounts’, PFCVA forms part of ‘Other T-Bills and those mentioned in (d), are Liabilities’ and RFCA and SAA form part of marked-to-market as on the last business ‘Other Assets’. day of each week ending Friday and the d) Repurchase Transactions last business day of each month. Unrealised gains/losses on revaluation are recorded The Reserve Bank participates in foreign in ‘Investment Revaluation Account-Rupee Repurchase transactions (Repo and Reverse Repo) as part of Reserve Management Securities’ (IRA-RS). Credit balance in operations. Repo transactions are treated IRA-RS is carried forward to subsequent as borrowing of foreign currencies and are accounting year. Debit balance in IRA-RS, if shown under ‘Deposits’, whereas Reverse any, on the balance sheet date, is charged Repo transactions are treated as lending to CF and the same is reversed on the first of foreign currencies and are shown under working day of the following accounting year. ‘Loans and Advances’. On sale/redemption of Rupee Securities/ 233ANNUAL REPORT 2024-25 Oil Bonds, valuation gain/ loss thereof, lying like laptop/e-book reader) are charged to in IRA-RS, is transferred to income account. income in the year of acquisition. Easily Rupee Securities and Oil Bonds are also portable electronic assets, such as laptops, subjected to daily amortisation. etc. costing more than ₹10,000 are capitalised and depreciation is calculated on monthly b) T-Bills are carried at cost as adjusted by daily pro-rata basis at the applicable rate. amortisation of discount/premium. b) Individual items of computer software costing c) Investments in shares of subsidiaries are more than ₹1 lakh are capitalised, and valued at cost. depreciation is calculated on monthly pro- d) Rupee Securities and Oil Bonds earmarked rata basis at applicable rates. for various staff funds [like Gratuity and c) Depreciation on fixed assets acquired and Superannuation Fund, Provident Fund, Leave capitalised during the accounting year would Encashment Fund, Medical Assistance Fund be reckoned on a monthly pro-rata basis (MAF)], Depositor Education and Awareness from the month of capitalisation and effected (DEA) Fund and Payments Infrastructure Development Fund (PIDF) are treated as on a half-yearly basis at prescribed rates ‘Held to Maturity’ and are held at amortised depending upon the useful life of assets cost. applied. e) Transactions in domestic investment are d) Depreciation on fixed assets is provided on accounted for on settlement date basis. a straight-line basis depending on the useful life of an asset in the following manner: 2.6 Liquidity Adjustment Facility (LAF) Repo/ Reverse Repo, Marginal Standing Facility Asset Category Useful life (Rate of Depreciation) (MSF) and Standing Deposit Facility (SDF) 1 2 Repo transactions under LAF and MSF are treated Electrical installations, UPS, Motor 5 years Vehicles, Furniture, Fixtures, CVPS/ (20 per cent) as lending and are accordingly being shown under SBS Machines, etc. ‘Loans and Advances’ whereas Reverse Repo Computers, Servers, Micro- 3 years processors, Printers, Software, (33.33 per cent) transactions under LAF and SDF are being treated Laptops, e-book reader/i-Pad, etc. as deposits and shown under ‘Deposits-Others’. e) Depreciation is provided on half-year end 2.7 Fixed Assets balances of fixed assets on monthly pro- Fixed Assets are stated at cost less depreciation rata basis. In case of additions/deletions except art and paintings and freehold land which of assets, depreciation is calculated on are held at cost. monthly pro-rata basis including the month of addition/deletion of such assets. 2.7.1 Fixed Assets other than Land and Buildings f) Depreciation on subsequent expenditure: a) Fixed Assets, costing up to ₹1 lakh i. Subsequent expenditure incurred on (except easily portable electronic assets an existing fixed asset which has not 234THE RESERVE BANK’S ACCOUNTS FOR 2024-25 been fully depreciated in the books of ii. Impairment of buildings: For assessment accounts, is depreciated over remaining of impairment, buildings are classified useful life of the principal asset. into two categories, as under: ● Buildings which are in use but have ii. Subsequent expenditure incurred on been identified for demolition in modernisation/addition/overhauling future or will be discarded in future: of an existing fixed asset, which has The value in use of such buildings already been fully depreciated in the is the aggregate of depreciation books of accounts, is first capitalised for the future period up to the date and thereafter, depreciated fully in it is expected to be discarded/ the year in which the expenditure is demolished. The difference between incurred. the book value and aggregate 2.7.2 Land and Buildings: Accounting of depreciation so arrived at, is treatment in respect of land and buildings is as charged as depreciation. follows: ● Buildings which have been a) Land discarded/vacated: These buildings are shown at realisable value (net i. Land acquired on leasehold basis selling price if the asset is likely to for a period of more than 99 years is be sold in future) or scrap value treated as on perpetual lease basis. less demolition cost (if it is to Such leases are considered as freehold be demolished). If the resultant properties and accordingly not subjected amount is negative, then the to amortisation. carrying value of such buildings is shown at ₹1. The difference ii. Land acquired on lease up to 99 years is between book value and realisable amortised over the period of lease. value (net selling price)/scrap value iii. Land acquired on a freehold basis is not less demolition cost is charged as subject to any amortisation. depreciation. b) Buildings 2.8 Employee Benefits i. The life of all buildings is assumed as a) The Reserve Bank contributes monthly at 30 years and depreciation is charged a determined rate to Provident Fund for on a ‘straight-line’ basis over a period eligible employees and these contributions of 30 years. In respect of buildings are charged to income in the year to which it constructed on lease hold land relates. (where the lease period is less than b) Other liability on account of long-term 30 years) depreciation is charged on employee benefits is provided based on an ‘straight-line’ basis over the lease period actuarial valuation under ‘Projected Unit of the land. Credit’ method. 235ANNUAL REPORT 2024-25 NOTES TO ACCOUNTS for financial assistance to eligible financial institutions. Since 1992-93, a token amount XII.6 LIABILITIES OF THE RESERVE BANK of ₹1 crore is being contributed each year to XII.6.1 Capital the Fund. The balance in the Fund stood at The Reserve Bank was constituted as a private ₹34 crore as on March 31, 2025. shareholders’ bank in 1935 with an initial paid- b) National Housing Credit (Long Term up capital of ₹5 crore. The Reserve Bank was Operations) Fund nationalised with effect from January 1, 1949 and its entire ownership remains vested with This Fund was set up in January 1989, in the Government of India. The paid-up capital terms of Section 46D of the RBI Act, 1934 continues to be ₹5 crore in terms of Section 4 of for extending financial accommodation to the RBI Act, 1934. the National Housing Bank (NHB). The initial XII.6.2 Reserve Fund corpus of ₹50 crore has been enhanced by annual contributions from the Reserve Bank The original Reserve Fund of ₹5 crore was thereafter. Since 1992-93, a token amount of created in terms of Section 46 of the RBI ₹1 crore is being contributed each year to the Act, 1934 as contribution from the Central Fund. The balance in the Fund stood at ₹208 Government for currency liability of the then crore as on March 31, 2025. sovereign government taken over by the Reserve Bank. Thereafter, an amount of ₹6,495 crore Note: Contribution to other Funds was credited to this fund from out of gains on There are two other Funds constituted in periodic revaluation of gold up to October 1990, terms of Section 46A of the RBI Act, 1934, taking it to ₹6,500 crore. The fund has been static viz., National Rural Credit (Long Term since then as unrealised gain/loss on account of Operations) Fund and National Rural Credit valuation of gold and foreign currency is since being booked in Currency and Gold Revaluation (Stabilisation) Fund which are maintained by Account (CGRA) which appears under the head the National Bank for Agriculture and Rural ‘Revaluation Accounts’. Development (NABARD) for which a token amount of ₹1 crore each is set aside and XII.6.3 Other Reserves transferred to NABARD every year. This includes National Industrial Credit (Long Term Operations) Fund and National Housing XII.6.4 Deposits Credit (Long Term Operations) Fund. These represent balances maintained with the a) National Industrial Credit (Long Term Reserve Bank by banks, the Central and State Operations) Fund Governments, All India Financial Institutions, such This fund was created in July 1964, in terms as, Export Import Bank (EXIM Bank), NABARD, of Section 46C of the RBI Act, 1934 with an etc., Foreign Central Banks, International initial corpus of ₹10 crore. The fund witnessed Financial Institutions, balances in Administrators annual contributions from the Reserve Bank of RBI Employee Provident Fund, DEA Fund, 236THE RESERVE BANK’S ACCOUNTS FOR 2024-25 amount outstanding against Reverse Repo, SDF, March 31, 2025, reflecting the outstanding MAF, PIDF, etc. Total deposits decreased by 0.14 repo transactions. per cent from ₹17,19,838.56 crore as on March d. Deposits-Others 31, 2024 to ₹17,17,404.03 crore as on March 31, ‘Deposits-Others’ consist of balances of 2025. Administrators of RBI Employee Provident a. Deposits-Government Fund, DEA Fund, Foreign Central Banks, The Reserve Bank acts as the banker to the Indian and International Financial Institutions, Central Government in terms of Sections 20 MAF, PIDF, amount outstanding under and 21, and as banker to State Governments Reverse Repo, SDF, etc. ‘Deposits-Others’ by mutual agreement in terms of Section 21A increased by 15.67 per cent from ₹5,25,798.26 of the RBI Act, 1934. Accordingly, the Central crore as on March 31, 2024 to ₹6,08,200.19 and State Governments maintain deposits crore as on March 31, 2025 primarily due to with the Reserve Bank. The balances held increase in deposits under SDF. by the Central and State Governments XII.6.5 Risk Provisions were ₹5,000.85 crore and ₹42.48 crore, respectively, as on March 31, 2025 as The extant Economic Capital Framework (ECF) compared to ₹5,000.30 crore and ₹42.46 was adopted by the Reserve Bank in August 2019, crore, respectively, as on March 31, 2024. subsequent to the approval and acceptance of the recommendations of the ‘Expert Committee to b. Deposits-Banks Review the Extant Economic Capital Framework Banks maintain balance in their current of the Reserve Bank of India’ (Chairman: Dr. Bimal accounts with the Reserve Bank to provide for Jalan) by the Central Board in its meeting held in the Cash Reserve Ratio (CRR) requirements August 2019. In line with the recommendation and for working funds to meet payment of the Expert Committee, the Reserve Bank and settlement obligations. Deposits held undertook an internal review of the framework. by banks decreased by 3.31 per cent from The outcome of the review was considered ₹10,25,448.73 crore as on March 31, 2024, to ₹9,91,488.49 crore as on March 31, 2025. The by the Central Board in its meeting held decrease in this head is mainly on account of on May 15, 2025, and a revised framework was reduction in CRR in December 2024, with the approved. banks required to maintain CRR at 4 per cent Risk provisions maintained by the Reserve of Net Demand and Time Liabilities (NDTL) Bank comprise Contingency Fund (CF) and as on March 31, 2025, as compared to CRR Asset Development Fund (ADF). These risk requirement of 4.5 per cent of NDTL as on provisions, along with Capital and Reserve Fund, March 31, 2024. are components of the Reserve Bank’s Available c. Deposits-Financial Institutions Outside India Realised Equity (ARE) under the Economic The balance under the head decreased by Capital Framework (ECF) adopted by the Reserve 31.11 per cent from ₹1,63,548.81 crore as on Bank. Details of Capital and Reserve Fund have March 31, 2024 to ₹1,12,672.02 crore as on been given in earlier paragraphs. 237ANNUAL REPORT 2024-25 a. Contingency Fund (CF) b. Asset Development Fund (ADF) This is a specific provision meant for meeting Asset Development Fund was created in unexpected and unforeseen contingencies, 1997-98 and the balance therein represents including depreciation in value of securities, provision specifically made till date towards risks arising out of monetary/exchange rate investments in subsidiaries and associate policy operations, systemic risks and any risk institutions and to meet internal capital arising on account of special responsibilities expenditure. No provision was made towards enjoined upon the Reserve Bank. As on March ADF in the year 2024-25. As on March 31, 31, 2025, an amount of ₹81,366.87 crore was 2025, the balance in ADF at ₹22,974.68 crore charged to CF on account of debit balance remains the same as on March 31, 2024 in IRA-FS. The charge to CF is reversed on (Table XII.2). first working day of the following accounting XII.6.6 Revaluation Accounts year. Further, an amount of ₹44,861.70 crore was also provided towards CF to maintain Unrealised mark-to-market gains/losses are the Available Realised Equity at the level of recorded in revaluation heads, viz., Currency and 7.50 per cent of the size of the balance sheet. Gold Revaluation Account (CGRA), Investment Accordingly, balance in CF as on March 31, Revaluation Accounts (IRA) and Foreign 2025 was ₹5,42,426.96 crore as compared to Exchange Forward Contracts Valuation Account ₹4,28,621.03 crore as on March 31, 2024. (FCVA). Details of the same are given here: Table XII.2: Balances in Capital, Reserve Fund and Risk Provisions [Available Realised Equity (ARE)] (₹ crore) As on Capital Reserve Fund CF ADF ARE ARE as a per cent of balance sheet 1 2 3 4 5 6 = (2+3+4+5) 7 March 31, 2021 5.00 6,500.00 2,84,542.12@ 22,874.68 3,13,921.80 5.50 March 31, 2022 5.00 6,500.00 3,10,986.94$ 22,974.68$$ 3,40,466.62 5.50 March 31, 2023 5.00 6,500.00 3,51,205.69* 22,974.68 3,80,685.37 6.00 March 31, 2024 5.00 6,500.00 4,28,621.03^ 22,974.68 4,58,100.71 6.50 March 31, 2025 5.00 6,500.00 5,42,426.96^^ 22,974.68 5,71,906.64 7.50 @: Increase in CF is the net impact of provision of ₹20,710.12 crore and charging of the debit balance in FCVA amounting to ₹6,127.35 crore. $: Increase in CF is the net impact of provision of ₹1,14,567.01 crore and charging of the debit balance in IRA-FS amounting to ₹94,249.54 crore. $$: Increase in ADF is due to provision of ₹100 crore on account of investment in RBIH. *: Increase in CF is the net impact of provision of ₹1,30,875.75 crore and charging of debit balances in IRA-FS and IRA-RS amounting to ₹1,65,488.93 crore and ₹19,417.61 crore, respectively. ^: Increase in CF is the net impact of provision of ₹42,819.91 crore and charging of debit balances in IRA-FS and IRA-RS amounting to ₹1,43,220.82 crore and ₹7,090.29 crore, respectively. ^^: Increase in CF is the net impact of provision of ₹44,861.70 crore and charging of debit balance in IRA-FS amounting to ₹81,366.87 crore. 238THE RESERVE BANK’S ACCOUNTS FOR 2024-25 a. Currency and Gold Revaluation Account first working day of the following accounting (CGRA) year. Accordingly, balance in IRA-FS as on March 31, 2025 was Nil. Major sources of market risk faced by the Reserve Bank are currency risk, interest c. Investment Revaluation Account-Rupee rate risk and movement in gold prices. Securities (IRA-RS) Unrealised gains/losses on valuation of Rupee Securities and Oil Bonds (with Foreign Currency Assets (FCA) and gold exception as mentioned under Significant are not taken to income account but instead Accounting Policies) held as assets of the accounted for in CGRA. Net balance in Banking Department are marked-to-market CGRA, therefore, varies with size of the as on the last business day of each week asset base, its valuation and movement ending Friday and the last business day of in exchange rate and price of gold. CGRA each month and unrealised gains/losses provides a buffer against exchange rate/gold arising therefrom are accounted for in IRA- price fluctuations. It can come under pressure RS. The balance in IRA-RS increased from if there is an appreciation of rupee vis-à-vis ₹(-)7,090.29 crore as on March 31, 2024 to major currencies or a fall in price of gold. ₹16,843.35 crore as on March 31, 2025 due When CGRA is not sufficient to fully meet to softening of yields across the curve. As per exchange losses, it is replenished from the extant policy, credit balance of ₹16,843.35 CF. The balance in CGRA increased from crore in IRA-RS is carried forward to the next ₹11,30,793.34 crore as on March 31, 2024 to financial year. ₹13,02,964.89 crore as on March 31, 2025 d. Foreign Exchange Forward Contracts mainly due to depreciation of rupee against Valuation Account (FCVA) major currencies and increase in price of gold. Marking to market of outstanding forward contracts as on March 31, 2025 b. Investment Revaluation Account-Foreign resulted in net unrealised gain of ₹6,985.19 Securities (IRA-FS) crore, which was credited to FCVA with Foreign dated securities are marked-to- contra debit to Revaluation of Forward market on a daily basis and unrealised gains/ Contracts Account (RFCA) as compared to losses arising therefrom are accounted for net unrealised gain of ₹170.37 crore as on in IRA-FS. The balance in IRA-FS increased March 31, 2024. from ₹(-)1,43,220.82 crore as on March 31, XII.6.7 Other Liabilities 2024 to ₹(-)81,366.87 crore as on March 31, 2025 because of softening of yields across ‘Other Liabilities’ increased by 23.31 per cent the yield curve in major currencies. As per from ₹2,60,520.73 crore as on March 31, 2024 the extant policy, debit balance of ₹81,366.87 to ₹3,21,248.79 crore as on March 31, 2025, crore in IRA-FS was adjusted against CF on primarily due to increase in surplus payable to the March 31, 2025 which was reversed on the Central Government. 239ANNUAL REPORT 2024-25 Table XII.3: Balances in Currency and Gold Revaluation Account (CGRA), Investment Revaluation Account-Foreign Securities (IRA-FS), Investment Revaluation Account-Rupee Securities (IRA-RS), Foreign Exchange Forward Contracts Valuation Account (FCVA) and Provision for Forward Contracts Valuation Account (PFCVA) (₹ crore) As on CGRA IRA-FS IRA-RS FCVA PFCVA 1 2 3 4 5 6 March 31, 2021 8,58,877.53 8,853.67 56,723.79 0.00 6,127.35 March 31, 2022 9,13,389.29 0.00 18,577.81 2,576.90 0.00 March 31, 2023 11,24,733.16 0.00 0.00 1,354.96 0.00 March 31, 2024 11,30,793.34 0.00 0.00 170.37 0.00 March 31, 2025 13,02,964.89 0.00 16,843.35 6,985.19 0.00 i. Provision for Forward Contracts Valuation Reserve Bank is required to be paid to the Account (PFCVA) Central Government. Under Section 48 of the RBI Act, 1934, the Reserve Bank is not liable The balance was Nil in this account as on to pay income tax or super tax on any of its March 31, 2025 as well as on March 31, income, profits or gains. Accordingly, after 2024. adjusting the expenditure including provision Balances in Revaluation Accounts and for CF and contribution of ₹4 crore to four PFCVA for the last five years are given in statutory funds, the surplus payable to the Table XII.3. Central Government for the year 2024-25 ii. Provision for Payables amounted to ₹2,68,590.07 crore (including ₹228.62 crore as against ₹291.42 crore This represents year-end provisions made in the previous year payable towards the for expenditure incurred but not defrayed and difference in interest expenditure borne by the income received in advance/payable, if any. The balance under this head decreased by Government, consequent on conversion of 15.30 per cent from ₹4,827.02 crore as on special securities into marketable securities). March 31, 2024 to ₹4,088.31 crore as on iv. Bills Payable March 31, 2025. The Reserve Bank provides remittance iii. Surplus Payable to the Central Government facilities for its constituents through issue Under Section 47 of the RBI Act, 1934, after of Demand Drafts (DDs) and Payment making provisions for bad and doubtful debts, Orders (POs) [besides electronic payment depreciation in assets, contribution to staff mechanism]. The balance under this head and superannuation funds and for all matters represents unclaimed DDs/ POs. The amount for which provisions are to be made by or outstanding under this head decreased from under the Act or that are usually provided ₹11.35 crore as on March 31, 2024 to ₹0.09 by bankers, the balance of the profits of the crore as on March 31, 2025. 240THE RESERVE BANK’S ACCOUNTS FOR 2024-25 v. Miscellaneous Table XII.4: Physical holding of Gold As on As on This is a residual head representing items March 31, 2024 March 31, 2025 such as interest earned on earmarked Volume in metric Volume in tonnes metric tonnes securities, amounts payable on account of 1 2 3 leave encashment, medical provisions for Gold held as backing for 308.03 311.38 employees, global provision, etc. The balance Notes Issued (held in India) under this head increased from ₹11,487.00 Gold (including Gold Deposit) 514.07# 568.20* held as asset of Banking crore as on March 31, 2024 to ₹12,099.75 Department (including gold crore as on March 31, 2025. held abroad) Total 822.10 879.58 XII.6.8 Liabilities of Issue Department-Notes #: 100.28 metric tonnes held in India and 413.79 metric tonnes held abroad. Issued *: 200.60 metric tonnes held in India and 367.60 metric tonnes held abroad. Liabilities of Issue Department reflect quantum of currency notes in circulation. Section 34(1) XII.7 ASSETS OF THE RESERVE BANK of the RBI Act, 1934 requires that all banknotes XII.7.1 ASSETS OF BANKING DEPARTMENT issued by the Reserve Bank since April 1, 1935 i) Notes, Rupee Coin, Small Coin and currency notes issued by the Government of This head represents the balances of India before the commencement of operations banknotes, one-rupee notes, rupee coins of of the Reserve Bank, be part of the liabilities of ₹1, 2, 5, 10 and 20 and small coins kept for the Issue Department. ‘Notes Issued’1 increased meeting day-to-day requirements of banking by 6.03 per cent from ₹34,78,039.50 crore as functions conducted by the Reserve Bank. on March 31, 2024 to ₹36,87,827.04 crore as The balance as on March 31, 2025 was on March 31, 2025. The value of banknotes ₹11.26 crore as against ₹10.13 crore as on in circulation in digital form e₹-Retail (e₹-R) March 31, 2024. stood at ₹1,016.46 crore as on March 31, ii) Gold-Banking Department (BD) 2025 as compared to ₹234.04 crore as on As on March 31, 2025, total gold held by the March 31, 2024. Reserve Bank was 879.58 metric tonnes as Earlier, an amount of ₹10,719.37 crore, compared to 822.10 metric tonnes as on representing the value of Specified Bank Notes March 31, 2024 reflecting an increase of (SBNs) not paid was transferred to ‘Other 57.48 metric tonnes of gold during the year. Liabilities’ as on June 30, 2018. The Reserve Of 879.58 metric tonnes as on March 31, Bank has made payments to the extent of ₹10.28 2025, 311.38 metric tonnes of gold is held as crore towards exchange value of SBNs to eligible an asset of the Issue Department as compared tenderers during the year ended March 31, 2025 to 308.03 metric tonnes as on March 31, and the cumulative payment made against the 2024. The remaining 568.20 metric tonnes as head stands at ₹46.42 crore. on March 31, 2025 is treated as asset of the 1 Includes banknotes in physical and digital form 241ANNUAL REPORT 2024-25 Banking Department as compared to 514.07 activity was undertaken in the year 2024-25. metric tonnes on March 31, 2024 (Table Consequently, there was no such asset in the XII.4). books of the Reserve Bank as on March 31, 2025. The value of gold (including gold deposit) held as asset of Banking Department increased iv) Investments-Foreign-Banking Department by 57.12 per cent from ₹2,74,714.27 crore (BD) as on March 31, 2024 to ₹4,31,624.80 crore Foreign Currency Assets (FCA) of the as on March 31, 2025. This increase is on Reserve Bank include: (i) deposits with account of addition of 54.13 metric tonnes of other Central Banks; (ii) deposits with the gold and also due to increase in price of gold Bank for International Settlements (BIS); (iii) and depreciation of INR vis-à-vis USD. deposits with commercial banks overseas; iii) Bills Purchased and Discounted (iv) investments in foreign T-Bills and securities; and (v) Special Drawing Rights Though the Reserve Bank can undertake (SDR) acquired from the Government of India purchase and discounting of commercial (GoI). bills under the RBI Act, 1934, no such Table XII.5: Details of Foreign Currency Assets (FCA) (₹ crore) As on March 31 Particulars 2024 2025 1 2 3 I Investments-Foreign-BD* 14,89,081.42 14,32,572.10 II Investments-Foreign-ID 33,12,976.05 34,50,960.74 Total 48,02,057.47 48,83,532.84 *: Includes Shares in BIS and Society for Worldwide Interbank Financial Telecommunications (SWIFT) and SDR transferred from GoI valued at ₹13,361.50 crore as on March 31, 2025 compared to ₹12,553.70 crore as on March 31, 2024. Note: 1. T he Reserve Bank has agreed to make resources available under the IMF’s New Arrangements to Borrow (NAB). Effective January 01, 2021, India’s commitment under NAB stands at SDR 8.88 billion (₹1,00,631.55 crore/US$ 11.77 billion). As on March 31, 2025, no investments are outstanding under NAB. 2. The Reserve Bank has agreed to invest up to an amount, the aggregate of which shall not exceed US$ 5 billion (₹42,734.30 crore), in the bonds issued by India Infrastructure Finance Company (UK) Limited. As on March 31, 2025, the Reserve Bank has invested US$0.40 billion (₹3,418.74 crore) in such bonds. 3. During the year 2013-14, the Reserve Bank and GoI entered into a MoU for transfer of SDR holdings from GoI to RBI in a phased manner. As on March 31, 2025, SDR 1.15 billion (₹13,024.49 crore/US$ 1.52 billion) were held by the Reserve Bank. 4. With a view to strengthening regional financial and economic cooperation, the Reserve Bank has agreed to offer an amount of US$ 2 billion both in foreign currency and Indian rupee under SAARC Swap Arrangement to SAARC member countries. As on March 31, 2025, amount lent under SAARC and ACU currency swap arrangements stood at US$1.90 billion (₹16,255.62 crore). 5. The nominal value of foreign securities posted as collateral and margin in repurchase and IRF transactions was ₹1,19,719.62 crore/ US$ 14.01 billion and the nominal value of those received under reverse repurchase transactions was ₹1,28,132.06 crore/US$14.99 billion as on March 31, 2025. 6. The nominal value of foreign securities lent under Security Lending arrangement was ₹1,04,213.03 crore/ US$ 12.19 billion as on March 31, 2025. 7. The notional amount of IRF contracts and currency futures contracts was US$ 1.99 billion and Nil, respectively. The notional amount of futures contracts is used to compute daily margin payable/receivable and does not necessarily require settlement. 8. The notional amount outstanding under cross-currency forwards/swaps (other than USD-INR deals) was US$ 3.03 billion. 242THE RESERVE BANK’S ACCOUNTS FOR 2024-25 FCA is reflected under two heads in the State Governments, in terms of Section balance sheet: (a) ‘Investments-Foreign-BD’ 17(5) of the RBI Act, 1934. The WMA shown as asset of Banking Department; and limit, in case of the Central Government, (b) ‘Investments-Foreign-ID’ shown as asset is fixed from time to time in consultation of Issue Department. with the Government of India and in case of State Governments, the limit ‘Investments-Foreign-ID’ are FCA, eligible as for individual State/Union Territory is per Section 33(6) of the RBI Act, 1934, used fixed based on the recommendations of for backing of Notes Issued. The remaining of Advisory Committee/Group constituted FCA constitutes ‘Investments-Foreign-BD’. for this purpose. The position of WMA The position of FCA for the last two years has for the Central Government was Nil as been given in Table XII.5. on March 31, 2025, similar to March 31, v) Investments-Domestic-Banking Department 2024. However, there was an increase (BD) of 395.28 per cent in the loans and advances to State Governments which Investments comprise dated Government rose from ₹6,599.94 crore as on March Rupee Securities, State Government 31, 2024, to ₹32,688.09 crore as on Securities and Special Oil Bonds. The March 31, 2025. Reserve Bank’s holding of domestic securities increased by 14.32 per cent, from b) Loans and Advances to Commercial, ₹13,63,368.97 crore as on March 31, 2024 and Co-operative Banks, NABARD and to ₹15,58,573.83 crore as on March 31, Others 2025. The increase was mainly on account of ● Loans and advances to Commercial liquidity management operations conducted and Co-operative Banks: by way of net purchase, after redemption of These include amounts outstanding the securities, of government securities in the against Repo under Liquidity portfolio. Adjustment Facility (LAF), Marginal A part of Investments-Domestic-BD is also Standing Facility (MSF) and special earmarked for various staff funds, DEA Fund liquidity facility to banks. The amount and PIDF as explained in para 2.5(d). As on outstanding increased by 31.20 per March 31, 2025, ₹1,43,476 crore (face value) cent from ₹1,93,341.00 crore as on was earmarked for the said funds. March 31, 2024 to ₹2,53,663.00 vi) Loans and Advances crore as on March 31, 2025 due to higher borrowings by banks under a) Central and State Governments Repo Operations. These loans are extended in the form ● Loans and Advances to NABARD: of Ways and Means Advances (WMA) and Overdraft (OD) to the Central The Reserve Bank can extend loans Government and in the form of WMA, OD to NABARD under Section 17(4E) and Special Drawing Facility (SDF) to of the RBI Act, 1934. No loans 243ANNUAL REPORT 2024-25 and advances were outstanding vii) Investment in Subsidiaries/Associates as on March 31, 2025, as well The comparative position of investment in as on March 31, 2024 and subsidiaries/associate institutions as on accordingly, balance in this account March 31, 2024 and March 31, 2025 has was Nil. been given in Table XII.6. Total holding as on March 31, 2025 was ₹2,063.60 crore, same ● Loans and Advances to Others: as on March 31, 2024. The balance under this head viii) Other Assets represents loans and advances to National Housing Bank (NHB), ‘Other Assets’ comprise fixed assets (net Small Industries Development of depreciation), accrued income, Swap Bank of India (SIDBI) and liquidity Amortisation Account (SAA), Revaluation of Forward Contracts Account (RFCA) and support provided to Primary Dealers miscellaneous assets. Miscellaneous assets (PDs). The balance under this head comprise mainly loans and advances to increased by 193.82 per cent from staff, amount spent on projects pending ₹12,397.51 crore as on March 31, completion, security deposit paid, etc. The 2024 to ₹36,426.09 crore as on amount outstanding under ‘Other Assets’ March 31, 2025. increased by 20.37 per cent from ₹64,831.83 c) Loans and Advances to Financial crore as on March 31, 2024 as compared to Institutions Outside India ₹78,039.06 crore as on March 31, 2025. Balances under the head decreased a. Swap Amortisation Account (SAA) by 31.44 per cent from ₹1,63,255.04 As on March 31, 2025, as well as on crore as on March 31, 2024 to March 31, 2024, the balance in SAA ₹1,11,933.06 crore as on March 31, was Nil as there were no outstanding 2025 reflecting the outstanding reverse contracts of swaps which were in nature repo transactions. of repo at off-market rate. Table XII.6: Holdings in Subsidiaries/Associates (₹ crore) 2023-24 2024-25 Per cent holding as on March 31, 2025 1 2 3 4 a) Deposit Insurance and Credit Guarantee Corporation (DICGC) 50.00 50.00 100 b) Bharatiya Reserve Bank Note Mudran (P) Ltd. (BRBNMPL) 1,800.00 1,800.00 100 c) Reserve Bank Information Technology (P) Ltd. (ReBIT) 50.00 50.00 100 d) National Centre for Financial Education (NCFE) 30.00 30.00 30 e) Indian Financial Technology & Allied Services (IFTAS) 33.60 33.60 100 f) Reserve Bank Innovation Hub (RBIH) 100.00 100.00 100 Total 2,063.60 2,063.60 244THE RESERVE BANK’S ACCOUNTS FOR 2024-25 b. Revaluation of Forward Contracts gold, increase in price of gold and depreciation of Account (RFCA) INR vis-à-vis USD. The balance in RFCA was ₹6,985.19 Consequent upon increase in Notes Issued, crore as on March 31, 2025 representing Investments-Foreign-ID held as its backing net mark-to-market gain on outstanding increased by 4.16 per cent from ₹33,12,976.05 forward contracts as against ₹170.37 crore as on March 31, 2024 to ₹34,50,960.74 crore on March 31, 2024. crore as on March 31, 2025. XII.7.2 Assets of Issue Department The balance of Rupee Coins held by the Issue Department decreased by 28.30 per cent from The eligible assets of the Issue Department held ₹458.54 crore as on March 31, 2024 to ₹328.76 as backing for Notes Issued consist of gold coins, crore as on March 31, 2025. gold bullion, foreign securities, rupee coins, rupee securities and Domestic Bills of Exchange and FOREIGN EXCHANGE RESERVES other Commercial Papers. The Reserve Bank XII.8 Foreign Exchange Reserves (FER) comprise holds 879.58 metric tonnes of gold, of which Foreign Currency Assets (FCA), Gold (including 311.38 metric tonnes are held as backing for Notes gold deposit), Special Drawing Rights (SDR) Issued as on March 31, 2025 (Table XII.4). The holdings and Reserve Tranche Position (RTP). value of gold held as asset of Issue Department SDR holdings acquired from GoI form part of the increased by 43.70 per cent from ₹1,64,604.91 Reserve Bank’s balance sheet and are included crore as on March 31, 2024 to ₹2,36,537.54 crore under ‘Investments-Foreign-BD’. SDR holdings as on March 31, 2025. remaining with GoI and RTP, which represents This increase in the value of gold during the year India’s quota contribution to IMF in foreign is on account of addition of 3.35 metric tonnes of currency, is not a part of the Reserve Bank’s Table XII.7(a): Foreign Exchange Reserves (Rupee) (₹ crore) Components As on Variation March 31, 2024 March 31, 2025 Absolute Per cent 1 2 3 4 5 Foreign Currency Assets (FCA) 47,61,844.48^ 48,50,833.99# 88,989.51 1.87 Gold (including gold deposit) 4,39,319.18@ 6,68,162.34* 2,28,843.16 52.09 Special Drawing Rights (SDR) 1,51,223.44 1,55,289.18 4,065.74 2.69 Reserve Tranche Position (RTP) in IMF 38,868.77 37,855.07 -1,013.70 -2.61 Foreign Exchange Reserves (FER) 53,91,255.87 57,12,140.58 3,20,884.71 5.95 ^: Excludes (a) SDR Holdings of the Reserve Bank amounting to ₹12,225.23 crore, which is included under the SDR holdings; (b) Investment of ₹7,773.08 crore in bonds issued by IIFC (UK); and (c) ₹20,214.68 crore lent under SAARC and ACU currency arrangements. #: Excludes (a) SDR Holdings of the Reserve Bank amounting to ₹13,024.49 crore, which is included under the SDR holdings; (b) Investment of ₹3,418.74 crore in bonds issued by IIFC (UK); and (c) ₹16,255.62 crore lent under SAARC and ACU currency arrangements. @: Of this, Gold valued at ₹1,64,604.91 crore is held as an asset of Issue Department and Gold (including gold deposit) valued at ₹2,74,714.27 crore is held as an asset of Banking Department. *: Of this, Gold valued at ₹2,36,537.54 crore is held as an asset of Issue Department and Gold (including gold deposit) valued at ₹4,31,624.80 crore is held as an asset of Banking Department. 245ANNUAL REPORT 2024-25 Table XII.7(b): Foreign Exchange Reserves (USD) (US$ billion) Components As on Variation March 31, 2024 March 31, 2025 Absolute Per cent Foreign Currency Assets (FCA) 570.95* 567.56** -3.39 -0.59 Gold (including gold deposit) 52.67 78.18 25.51 48.43 Special Drawing Rights (SDR) 18.13 18.17 0.04 0.22 Reserve Tranche Position (RTP) in IMF 4.66 4.42 -0.24 -5.15 Foreign Exchange Reserves (FER) 646.41 668.33 21.92 3.39 *: Excludes (a) SDR Holdings of the Reserve Bank amounting to US$ 1.46 billion, which is included under SDR holdings; (b) US$ 0.93 billion invested in bonds of IIFC (UK); and (c) US$ 2.42 billion lent under the SAARC and ACU currency swap arrangements. **: Excludes (a) SDR Holdings of the Reserve Bank amounting to US$ 1.52 billion, which is included under SDR holdings; (b) US$ 0.40 billion invested in bonds of IIFC (UK); and (c) US$ 1.90 billion lent under the SAARC and ACU currency swap arrangements. balance sheet. The position of FER as on March Loss on sale of Bank’s property (ix) Provision no 31, 2024 and March 31, 2025 in Indian Rupees longer required and (x) Miscellaneous Income. and US dollars, which is the numéraire currency Certain items of income such as interest on LAF for the Reserve Bank’s FER, has been furnished repo, Repo in foreign security and exchange in Tables XII.7 (a) and (b). gain/loss from foreign exchange transactions are reported on net basis. ANALYSIS OF INCOME AND EXPENDITURE INCOME Earnings from Foreign Sources XII.9 The components of Reserve Bank’s XII.10 Income from foreign sources increased income are ‘Interest’ and ‘Other Income’ including: by 38.07 per cent from ₹1,87,471.20 crore in the (i) Discount (ii) Exchange (iii) Commission year 2023-24 to ₹2,58,837.55 crore in the year (iv) Amortisation of premium/discount on Foreign 2024-25. The rate of earnings on foreign currency and Rupee Securities (v) Profit/Loss on sale and assets was 5.31 per cent in the year 2024-25 as redemption of Foreign and Rupee Securities (vi) Depreciation on Rupee Securities inter compared to 4.21 per cent in the year 2023-24 portfolio transfer (vii) Rent Realised (viii) Profit/ (Table XII.8). Table XII.8: Earnings from Foreign Sources (₹ crore) Item 2023-24 2024-25 Variation Absolute Per Cent 1 2 3 4 5 Foreign Currency Assets (FCA) 48,02,057.47 48,83,532.84 81,475.37 1.70 Average FCA 44,52,358.86 48,73,053.30 4,20,694.44 9.45 Earnings from FCA (interest, discount, exchange gain/loss, capital gain/loss 1,87,471.20 2,58,837.55 71,366.35 38.07 on securities) Earnings from FCA as per cent of average FCA 4.21 5.31 1.10 26.15 246THE RESERVE BANK’S ACCOUNTS FOR 2024-25 Earnings from Domestic Sources XII.13 Net Interest Income from Liquidity Adjustment Facility (LAF)/Marginal Standing XII.11 Net income from domestic sources Facility (MSF)/Standing Deposit Facility (SDF) decreased by 9.80 per cent from ₹88,101.12 crore operations decreased from ₹(-)9,255.51 crore in in the year 2023-24 to ₹79,470.54 crore in the year the year 2023-24 to ₹(-)10,120.25 crore in the 2024-25 mainly on account of decrease in Interest year 2024-25. on holding of Rupee Securities (Table XII.9). XII.12 Interest on holding of Rupee Securities XII.14 Profit on sale and redemption of Rupee (including Oil Bonds) decreased from ₹92,589.51 Securities increased from ₹859.32 crore in the crore in the year 2023-24 to ₹85,524.67 crore in year 2023-24 to ₹1,105.16 crore in the year the year 2024-25. 2024-25 primarily on account of higher sale of Table XII.9: Earnings from Domestic Sources (₹ crore) Item 2023-24 2024-25 Variation Absolute Per cent 1 2 3 4 5 Earnings (I+II+III+IV) 88,101.12 79,470.54 -8,630.58 -9.80 I. Earnings from Rupee Securities and discounted instruments i) Interest on holding of Rupee Securities (including Oil Bonds) 92,589.51 85,524.67 -7,064.84 -7.63 ii) Profit/Loss on sale and redemption of Rupee Securities 859.32 1,105.16 245.84 28.61 iii) Depreciation on Rupee securities inter portfolio transfer -68.74 -69.50 -0.76 -1.11 iv) Amortisation of premium/discount on Rupee securities (including Oil Bonds) -2,394.71 -2,681.71 -287.00 -11.98 v) Discount 0.00 0.00 0.00 0.00 Sub Total (i+ii+iii+iv+v) 90,985.38 83,878.62 -7,106.76 -7.81 II. Interest on LAF/MSF/SDF i) Net Interest on LAF Operations -7,052.08 -4,739.82 2,312.26 32.79 ii) Interest on SDF -5,616.80 -5,844.65 -227.85 -4.06 iii) Interest on MSF operations 3,413.37 464.22 -2,949.15 -86.40 Sub Total (i+ii+iii) -9,255.51 -10,120.25 -864.74 -9.34 III. Interest on other loans and advances i) Government (Central & States) 1,294.43 1,259.20 -35.23 -2.72 ii) Banks & Financial Institutions 718.92 564.32 -154.60 -21.50 iii) Employees 80.74 99.25 18.51 22.93 Sub Total (i+ii+iii) 2,094.09 1,922.77 -171.32 -8.18 IV. Other Earnings i) Exchange 0.00 0.00 0.00 0.00 ii) Commission 3,886.95 4,131.64 244.69 6.30 iii) Rent Realised, Profit or Loss on sale of Bank’s Property, Provision no longer 390.21 -342.24 -732.45 -187.71 required and Miscellaneous Income Sub Total (i+ii+iii) 4,277.16 3,789.40 -487.76 -11.40 247ANNUAL REPORT 2024-25 securities and softening of yields across the yield b. Banks & Financial institutions: curve in the current year which led to higher Interest income from loans and advances to realisation on the sale. In the year 2024-25, sale banks and financial institutions decreased operations amounted to ₹24,090 crore (Face by 21.50 per cent from ₹718.92 crore in the Value). year 2023-24 to ₹564.32 crore in the year 2024-25. XII.15 Amortisation of Premium/Discount on Rupee Securities (including Oil Bonds): Premium/ c. Employees: Discount on Rupee Securities and Oil Bonds held Interest income from loans and advances to by the Reserve Bank, are amortised on a daily employees increased by 22.93 per cent from basis during the period of residual maturity. Net ₹80.74 crore in the year 2023-24 to ₹99.25 income from premium/discount on amortisation crore in the year 2024-25. of Rupee Securities decreased from ₹(-)2,394.71 XII.18 Commission: Commission income crore in the year 2023-24 to ₹(-)2,681.71 crore in increased by 6.30 per cent from ₹3,886.95 crore the year 2024-25. in the year 2023-24 to ₹4,131.64 crore in the year XII.16 Discount: There was no income from 2024-25, primarily on account of increase in: holding of discounted instruments (T-Bills) in the a) management commission received for year 2024-25, same as the year 2023-24. servicing outstanding Central Government loans; and b) management commission received XII.17 Interest on loans and advances for servicing outstanding State Governments a. Central and State Governments: loans. Interest income on loans and advances XII.19 Rent Realised, Profit/Loss on sale of extended to Central and State Governments Bank’s property, Provision no longer required and Miscellaneous Income: Earnings from these taken together decreased by 2.72 per cent income heads decreased from ₹390.21 crore in from ₹1,294.43 crore in the year 2023-24 the year 2023-24 to ₹(-)342.24 crore in the year to ₹1,259.20 crore in the year 2024-25. The 2024-25. interest income from the Central Government decreased by 94.77 per cent from ₹385.71 EXPENDITURE crore in the year 2023-24 to ₹20.16 crore XII.20 The Reserve Bank incurs expenditure in in the year 2024-25. Interest income from the course of performing its statutory functions State Governments increased by 36.35 per by way of agency charges/commission, printing cent from ₹908.72 crore in the year 2023-24 of notes, expenditure on remittance of currency, to ₹1,239.04 crore in the year 2024-25. The besides employee related and other expenses. marginal decline in overall interest income is The Bank has taken a policy decision to avail and attributed to lower interest income on funds utilise Input Tax Credit (ITC) as per section 17(4) availed by Central Government. of the Central Goods and Services Tax (CGST) 248THE RESERVE BANK’S ACCOUNTS FOR 2024-25 Table XII.10: Expenditure (₹ crore) Item 2020-21 2021-22 2022-23 2023-24 2024-25 1 2 3 4 5 6 i. Interest 1.10 1.77 1.92 2.19 2.44 ii. Employee Cost 4,788.03 3,869.43 6,003.93 7,890.11 9,146.71 iii. Agency Charges/Commission 3,280.06 4,400.62 4,068.62 3,976.31 3,669.56 iv. Printing of Notes 4,012.09 4,984.80 4,682.80 5,101.40 6,372.82 v. Provisions 20,710.12 1,14,667.01 1,30,875.75 42,819.91 44,861.70 vi. Others 1,355.35 1,877.05 2,404.02 4,904.41 5,660.79 Total (i+ii+iii+iv+v+vi) 34,146.75 1,29,800.68 1,48,037.04 64,694.33 69,714.02 Act, 2017, i.e., fifty per cent of eligible ITC, with iii) Agency Charges/Commission effect from April 1, 2024. Total expenditure of a. Agency Commission on Government the Reserve Bank increased by 7.76 per cent Transactions from ₹64,694.33 crore in the year 2023-24 to The Reserve Bank discharges the ₹69,714.02 crore in the year 2024-25 (Table function of banker to governments XII.10). through a large network of agency bank i) Interest branches that serve as retail outlets for During the year 2024-25, an amount of governments’ receipts and payments. ₹2.44 crore was paid as interest to Dr. B. The Reserve Bank pays commission to R. Ambedkar Birth Centenary Year Fund these agency banks at prescribed rates. and RBI Employees’ Benevolent Fund. In Net agency commission paid on account the previous year, i.e., 2023-24, the interest of government business decreased by payment in these Funds was ₹2.19 crore. 7.22 per cent from ₹3,806.71 crore in Increase in interest expenditure by ₹25 lakh the year 2023-24 to ₹3,531.76 crore in is due to increase in Fund balances as on the year 2024-25. March 31, 2025. b. Underwriting Commission paid to Primary Dealers ii) Employee Cost Employee cost increased by 15.93 per cent The expenditure on account of from ₹7,890.11 crore in the year 2023-24 to underwriting commission paid to ₹9,146.71 crore in the year 2024-25. The Primary Dealers (PDs) decreased from increase was due to increase in the Reserve ₹48.47 crore in the year 2023-24 to Bank’s provision towards accrued liabilities ₹15.78 crore in the year 2024-25. The of various superannuation funds in the year reduction in underwriting commission 2024-25. during the current year may be attributed 249ANNUAL REPORT 2024-25 to the orderly market conditions and Accordingly, a provision of ₹44,861.70 crore strong demand from investors. was made and transferred to CF during the year (Table XII.2). c. Sundries vi) Others This includes expenses incurred on handling charges, turnover commission Other expenses comprise expenditure paid to banks for Relief/Savings on remittance of currency, printing and Bonds subscriptions and Commission stationery, audit fees and related expenses, paid on Securities Borrowing and miscellaneous expenses, etc. which Lending Arrangement (SBLA), etc. increased by 15.42 per cent from ₹4,904.41 The commission paid under this head crore in the year 2023-24 to ₹5,660.79 crore decreased from ₹28.12 crore in the in the year 2024-25. year 2023-24 to ₹6.47 crore in the year Contingent Liabilities 2024-25. XII.21 Total contingent liabilities of the Reserve d. Fees paid to the External Asset Bank amounted to ₹1,031.64 crore, the main Managers, Custodians, Brokers, etc. component of this being partly paid shares, Expenditure under the head increased denominated in SDR, of the Bank for International from ₹93.01 crore in the year 2023-24 Settlements (BIS) held by the Reserve Bank. The to ₹115.55 crore in the year 2024-25. uncalled liability on partly paid shares of the BIS as on March 31, 2025 was ₹1,010.99 crore. The iv) Printing of Notes balances are callable at three months’ notice by The supply of notes increased by 24.69 a decision of the BIS Board of Directors. per cent from 2,43,000 lakh pieces during Prior Period Transactions the year 2023-24 to 3,03,000 lakh pieces during the year 2024-25. Expenditure XII.22 For the purpose of disclosure, prior period incurred on printing of banknotes increased transactions of ₹1 lakh and above only have been from ₹5,101.40 crore in the year 2023-24 to considered. The prior period transactions under ₹6,372.82 crore in the year 2024-25. expenditure and income amounted to ₹15.88 crore and ₹0.01 crore, respectively. v) Provisions Payment to Micro and Small Enterprises The ECF requires Contingent Risk Buffer under the Micro, Small & Medium Enterprises (CRB) to be maintained in the range of 4.50 Development Act, 2006 per cent to 7.50 per cent of the size of the balance sheet. The Central Board approved XII.23 The following table sets forth the cases that CRB may be maintained at 7.50 per of delayed payments of the principal amount cent of the size of the balance sheet of the or interest due thereon to Micro and Small Reserve Bank for the year 2024-25. Enterprises: 250THE RESERVE BANK’S ACCOUNTS FOR 2024-25 (₹ crore) Particulars 2023-24 2024-25 Principal Interest Principal Interest 1 2 3 4 5 i. the principal amount and the interest due thereon remaining unpaid to any - - - - supplier as at March 31; ii. the amount of interest paid by the buyer in terms of section 16, along with the - - 0.0057 0.0004 amount of the payment made to the supplier beyond the appointed day during the accounting year; iii. the amount of interest due and payable for the period of delay in making payment - - - - (which have been paid but beyond the appointed day during the year) but without adding the interest specified under the Act; iv. the amount of interest accrued and remaining unpaid at the end of the accounting - - - - year; v. the amount of further interest remaining due and payable even in the succeeding NA NA NA NA years, until such date when the interest dues as above are actually paid to the small enterprise, for the purpose of disallowance as a deductible expenditure under section 23. -: Nil. NA: Not Applicable. Previous Year’s Figures of Section 50 of the RBI Act, 1934. The accounts of the Reserve Bank for the year 2024-25 were XII.24 Figures for the previous year have been audited by M/s Sorab S. Engineer & Co., Mumbai rearranged, wherever necessary to make them and M/s Kalyaniwalla & Mistry LLP, Mumbai, as comparable with the current year. the Statutory Central Auditors and M/s Lodha Auditors & Co. LLP, Kolkata, M/s S. Viswanathan LLP, XII.25 The statutory auditors of the Reserve Bank Chennai and M/s Walker Chandiok & Co. LLP, are appointed by the Central Government in terms New Delhi as Statutory Branch Auditors. 251CHRONOLOGY OF CHRONOLOGYA ONNF UMAALJ ORERP POORLTIC 2Y0 2A4N-2N5OUNCEMENTS ANNEX I MAJOR POLICY ANNOUNCEMENTS: APRIL 2024 TO MARCH 20251 Date of Policy Initiative Announcement Monetary Policy Department April 5, 2024 The monetary policy committee (MPC) decided to keep the policy repo rate unchanged at 6.50 per cent. The MPC also decided to remain focused on withdrawal of accommodation to ensure that inflation progressively aligns to the target, while supporting growth. The policy repo rate and stance remained unchanged till August 2024 policy. October 9, 2024 The MPC decided to keep the policy repo rate unchanged at 6.50 per cent. The MPC decided to change the stance to neutral and to remain unambiguously focused on a durable alignment of inflation with target, while supporting growth. December 6, 2024 • The MPC decided to keep the policy repo rate unchanged at 6.50 per cent. The MPC also decided to continue with neutral policy stance to ensure that inflation aligns with target, while supporting growth. • Cash reserve ratio (CRR) was reduced by 50 basis points (bps) to 4.0 per cent in two equal tranches of 25 bps each with effect from the fortnight beginning December 14, 2024, and December 28, 2024. February 7, 2025 The MPC decided to reduce the policy repo rate by 25 bps from 6.50 per cent to 6.25 per cent. Consequently, the standing deposit facility (SDF) rate was adjusted to 6.00 per cent and marginal standing facility (MSF) rate and Bank rate to 6.50 per cent. The MPC decided to continue with the neutral stance and remain unambiguously focused on aligning inflation with the target, while supporting growth. Financial Inclusion and Development Department April 16, 2024 The Master Circular on Deendayal Antyodaya Yojana - National Rural Livelihoods Mission (DAY-NRLM) was updated. The major modification was the introduction of ‘Women Enterprise Acceleration Fund’ (WEAF), set up by the Ministry of Rural Development, Government of India (GoI), to make available medium to long term debt financing to women entrepreneurs under DAY-NRLM, to enable them to invest in viable enterprises, by providing interest subvention for prompt repayment and reimbursement of credit guarantee fee to banks. The ‘Master Direction on Lending to the Micro, Small and Medium Enterprise (MSME) Sector’ was updated on June 11, 2024, to incorporate the following provisions: • Scheduled commercial banks (SCBs) have been advised to have a uniform turnaround time (TAT) of 14 days for loans up to ₹25 lakh for micro and small enterprise (MSE) borrowers to ensure faster disposal of such loan applications, and clearly display all credit related information under a separate tab on their websites; • It was reiterated to banks to implement a credit proposal tracking system (CPTS) and inform the MSME borrowers in writing, the main reason(s) of rejection of loan applications; June 11, 2024 • Banks have also been advised to furnish MSME borrowers with an indicative checklist of documents required for processing the loan application at the time of applying for the loan, display the pendency position on their websites and monitor the pendency beyond sanction timeline norms at appropriate levels on a quarterly basis; and • MSE clusters have been defined as those identified by the Ministry of MSME, GoI and state governments. Further, lead banks have been advised to promote credit linkage in all clusters in their districts directly or facilitating their linkage with other banks, create awareness among the MSE units and incorporate the credit needs of clusters in the branch/block level credit plans so that the same can be aggregated to prepare the annual credit plan (ACP). 1 The list is indicative in nature and details are available on the Reserve Bank’s website. 225522CHRONOLOGY OF MAJOR POLICY ANNOUNCEMENTS Date of Policy Initiative Announcement August 6, 2024 GoI approved the continuation of the modified interest subvention scheme (MISS) for short term loans for agriculture and allied activities availed through kisan credit card (KCC) during 2024-25. December 6, 2024 Keeping in view the overall inflation and rise in agricultural input cost over the years, the limit for collateral free agricultural loans was raised from the existing limit of ₹1.6 lakh to ₹2 lakh per borrower, effective January 1, 2025. March 24, 2025 Master Directions on priority sector lending (PSL) targets and their classification were issued after a comprehensive review of the existing guidelines. The revised guidelines came into effect on April 1, 2025. Financial Markets Regulation Department April 15, 2024 In order to provide more flexibility and easier access to derivative products in hedging their exposure to gold prices, resident entities were permitted to hedge price risk of gold using over-the-counter (OTC) derivatives in the international financial services centre (IFSC), in addition to the derivatives on the exchanges in the IFSC. May 3, 2024 Directions on risk management and inter-bank dealings were amended to reflect the applicability of the provisions to the standalone primary dealers (SPDs) authorised as Authorised Dealer (AD) Category-III. May 8, 2024 ‘Master Direction – Reserve Bank of India (Margining for Non-Centrally Cleared OTC Derivatives) Directions, 2024’ were issued, mandating covered entities to exchange initial and variation margin for non-centrally cleared derivative (foreign exchange, interest rate and credit) transactions. Amendments were also made to the directions on margin for derivative contracts issued under Foreign Exchange Management Act (FEMA), 1999, to enable, inter alia, exchange of margin with non-residents. August 19, 2024 In view of the potential role of self-regulatory organisations (SROs) in strengthening compliance culture among their members and also providing a consultative platform for policy making, the framework for recognition of SROs in financial markets was issued. August 29, 2024 A scheme for trading and settlement of sovereign green bonds (SGrBs) in the IFSC in India by eligible foreign investors was issued, with a view to facilitating wider non-resident participation in SGrBs. October 18, 2024 Directions on access criteria for negotiated dealing system-order matching (NDS-OM) electronic trading platform were reviewed and the revised access criteria for NDS-OM platform were notified. November 7, 2024 The list of specified securities under the fully accessible route (FAR) was augmented by including the SGrBs of 10-year tenor issued by the government in the second half of the year 2024-25 under the FAR. November 8, 2024 ADs were mandated to report transactions in foreign exchange cash, tom and spot - both inter-bank and those executed with clients - to the trade repository (TR) of Clearing Corporation of India Limited (CCIL). December 27, 2024 AD Category-I banks were mandated to report transactions in gold derivatives undertaken by them and their customers/constituents to the TR of CCIL. January 7, 2025 To improve ease of doing business, operational instructions contained in all the relevant circulars pertaining to investments by non-residents in debt instruments (63 circulars issued during 2008-2024) were consolidated under a single Master Direction. 253ANNUAL REPORT 2024-25 Date of Policy Initiative Announcement February 7, 2025 As a further measure of facilitating retail participation in government securities (G-secs), a new facility, viz., ‘stock broker connect’ was introduced in the NDS-OM platform - an electronic trading for secondary market transactions in G-secs. Under this facility, Securities and Exchange Board of India (SEBI)- registered stock brokers have been permitted to directly access NDS-OM on behalf of their individual constituents/clients. February 17, 2025 To bring uniformity in the trading and settlement norms for all transactions in G-secs, matching of primary member (PM) - gilt account holder (GAH) and GAH-GAH trades of the same PM on NDS-OM was permitted, along with guaranteed settlement of such trades. An option to settle reported PM-GAH and GAH-GAH trades of same PM through CCIL was also enabled. February 21, 2025 To enable long-term investors such as insurance funds to manage their interest rate risk across interest rate cycles, forward contracts in G-secs were introduced. Introduction of these forward contracts will also facilitate efficient pricing of derivatives that use bonds as underlying instruments. Financial Markets Operations Department January 15, 2025 It was decided to conduct daily variable rate repo (VRR) auctions on all working days in Mumbai with reversal taking place on the next working day, until further notice. The auction amount is decided by the Reserve Bank, based on assessment of the liquidity conditions, and is announced separately via a press release on the Reserve Bank’s website. SPDs were allowed to participate in these auctions, along with all other eligible participants. March 26, 2025 It was decided to allow SPDs to participate in all repo operations conducted by the Reserve Bank, irrespective of the tenor. Foreign Exchange Department April 23, 2024 Amendments to Foreign Exchange Management (Mode of Payment and Reporting of Non-Debt Instruments) Regulations, 2019 were made for mode of payment and reporting applicable for the transactions pertaining to the listing of Indian companies on international exchanges. Further, the Foreign Exchange Management (Foreign Currency Accounts by a Person Resident in India) Regulations, 2015, was amended to permit such Indian companies to open foreign currency accounts with banks outside India for keeping the funds raised through listing of equity shares on international exchanges, pending their utilisation or repatriation to India. May 6, 2024 The Foreign Exchange Management (Deposit) Regulations, 2016 were amended by allowing a person resident outside India (PROI) to open, hold and maintain an interest-bearing account in Indian Rupees (INR) and/or foreign currency for the purpose of posting and collecting margin in India for a permitted derivative contract entered into by such person in terms of extant regulations. May 21, 2024 The Department of Economic Affairs, Ministry of Finance (MoF) notified an amendment to the Foreign Exchange Management (Non-debt Instruments) Rules, 2019 dated March 14, 2024, to enable the issuance of partly paid units to PROIs by investment vehicles in India. In this regard, the Reserve Bank, in consultation with the Government of India, decided to regularise the issuances of partly paid units by Alternative Investment Funds to PROIs prior to the said amendment through compounding under Foreign Exchange Management Act, 1999. May 27, 2024 To ensure the reach and prevent potential misuse of permitted money changing activities, it was advised that from July 1, 2024, value of foreign currency notes sold by full-fledged money changers (FFMCs)/ non-bank AD Category-II to the public for permitted purposes should not be less than 75 per cent of the value of foreign currency notes purchased from other FFMCs/ADs, on a quarterly basis. 254CHRONOLOGY OF MAJOR POLICY ANNOUNCEMENTS Date of Policy Initiative Announcement June 11, 2024 To provide operational flexibility, the facility of opening an additional special current account by the AD Category-I banks for its constituents has been extended for settlement of their export as well as import transactions. July 3, 2024 To improve ease of doing business, ADs were permitted to facilitate remittances on the basis of online/ physical submission of Form A2 and other related documents, subject to Section 10(5) of FEMA 1999. Accordingly, the limit on the amount being remitted on the basis of ‘online’ Form A2 was removed. Further, ADs were permitted to obtain Form A2 in physical or digital form for all cross-border remittances irrespective of the value of transaction. July 10, 2024 Authorised Persons (APs) were permitted to facilitate remittances for all permissible purposes under liberalised remittances scheme (LRS) to IFSCs for availing financial services or financial products as per the International Financial Services Centres Authority (IFSCA) Act, 2019 within IFSCs. Additionally, they were allowed to facilitate all permissible current or capital account transactions under LRS in any other foreign jurisdiction (other than IFSCs) through a foreign currency account (FCA) held in IFSCs. September 6, 2024 With a view to streamline the reporting framework for AD Category-I banks, the submission of ‘LRS monthly return’ has been discontinued. October 1, 2024 The Foreign Exchange (Compounding Proceedings) Rules, 2024 (‘new Rules’) were notified by the GoI, in consultation with the Reserve Bank, on September 12, 2024. Accordingly, the Directions issued under earlier circulars were reviewed and new guidelines for compounding were issued for the APs. November 11, 2024 The Reserve Bank, in consultation with the GoI and SEBI, finalised an operational framework for reclassification of foreign portfolio investment (FPI) as foreign direct investment (FDI) under Foreign Exchange Management (Non-Debt Instruments) Rules, 2019. As per the framework, in case of any breach of the investment limit (10 per cent of the total paid-up capital on a fully diluted basis) by any FPI concerned, would be having the option of reclassifying such holdings as FDI in addition to the earlier option of divesting their holdings. November 19, 2024 The definition of ‘Startup’ was amended in Foreign Exchange Management (Foreign Currency Accounts by a Person Resident in India) Regulations, 2015, upon receipt of concurrence from the Department of Economic Affairs, MoF, GoI. January 14, 2025 • The Foreign Exchange Management (Deposit) Regulations, 2016 were amended to allow PROIs (other than banks) to open INR accounts with the overseas branches of AD banks. As per the amendment, all permissible current and capital account transactions with persons resident in India (PRIs) and all transactions with other PROIs were allowed to be settled through special non- resident rupee (SNRR) accounts. Further, transfers between repatriable INR accounts [SNRR/ special rupee vostro account (SRVA)/non-resident external (NRE) Account /vostro account] were also allowed. • The Foreign Exchange Management (Mode of Payment and Reporting of Non-Debt Instruments) Regulations, 2019, were amended to enable balances in SRVA and SNRR accounts to be used for making foreign investment in India. • Foreign Exchange Management (Foreign Currency Accounts by a Person Resident in India) Regulations, 2015 were amended to permit all resident exporters to open foreign currency accounts overseas for settling trade transactions, subject to ensuring the applicable realisation and repatriation provisions. It was clarified that exporters receiving payments in local currencies can use these currencies to pay for imports from that territory. 255ANNUAL REPORT 2024-25 Date of Policy Initiative Announcement February 10, 2025 To facilitate alignment of the external trade and payment/receipt regulations with the Asian Clearing Union (ACU) agreement, the Foreign Exchange Management (Manner of Receipt and Payment) Regulations, 2023 were amended so that the trade related payments/receipts are routed through the ACU mechanism only if they were between two residents in the territory of ACU member countries. March 17, 2025 In the wake of signing of Memorandum of Understanding (MoU) between the Reserve Bank and Maldives Monetary Authority in November 2024 for establishing a framework to promote the use of local currencies, i.e., INR and Maldivian Rufiyaa (MVR) for bilateral transactions, the settlement of bilateral trade transactions with the Maldives was allowed in local currencies, in addition to the ACU mechanism, as hitherto. Department of Regulation April 1, 2024 • Master Circular on Board of Directors - Primary (Urban) Co-operative Banks (UCBs): The Master Circular consolidated and updated all the governance related instructions/guidelines issued till March 31, 2024. • Master Circular - Guarantees and Co-acceptances: The Master Circular consolidated the instructions issued by the Reserve Bank relating to the conduct of guarantee business by banks. • Master Circular - Guarantees, Co-Acceptances and Letters of Credit - UCBs: In view of the risks involved in the business of issuance of guarantees, the UCBs should extend guarantees within restricted limits so that their financial position is not impaired. The banks should follow certain broad guidelines in respect of their guarantee business as indicated in the circular. • Master Circular - Basel III Capital Regulations: The instructions contained in the Master Circular have been suitably updated/amended by incorporating relevant guidelines, issued as on date. Small finance banks (SFBs) and payments banks (PBs) have been advised to refer to their respective licensing guidelines and operating guidelines issued by Reserve Bank, for prudential guidelines on capital adequacy. • Master Circular - Prudential Norms on Capital Adequacy - UCBs: The Master Circular consolidated and updated all the instructions/guidelines on the subject issued up to March 31, 2024. April 2, 2024 • MasterCircular-PrudentialnormsonIncomeRecognition,AssetClassificationandProvisioning Pertaining to Advances: In line with the international practices and as per the recommendations made by the Committee on the Financial System (Chairman: Shri M. Narasimham), the Reserve Bank introduced, in a phased manner, prudential norms for income recognition, asset classification and provisioning for the advances portfolio of the banks so as to move towards greater consistency and transparency in the published accounts. • MasterCircular-IncomeRecognition,AssetClassification,ProvisioningandOtherRelatedMatters - UCBs: In order to reflect a bank’s actual financial health in its balance sheet and as per the recommendations made by the Committee on Financial System (Chairman: Shri M. Narasimham), the Reserve Bank introduced, in a phased manner, prudential norms for income recognition, asset classification and provisioning for the advances portfolio of the banks. April 15, 2024 • CIMS Project Implementation - Submission of Statutory Returns (Form A, Form VIII and Form IX) on CIMS Portal: Following the launch of CIMS on June 30, 2023, banks have been advised to shift the submission of Form A, Form VIII and Form IX Returns from the eXtensible Business Reporting Language (XBRL) portal to the Centralised Information Management System (CIMS) portal. 256CHRONOLOGY OF MAJOR POLICY ANNOUNCEMENTS Date of Policy Initiative Announcement April 15, 2024 • Key Facts Statement (KFS) for Loans and Advances: In order to enhance transparency and reduce information asymmetry on financial products being offered by regulated entities (REs) and empower borrowers in making an informed financial decision, a harmonised circular has been issued on April 15, 2024, advising REs to provide a KFS to prospective borrowers in respect of all retail, and micro, small and medium enterprise (MSME) term loans. April 23, 2024 • Review of Requirement of Counter-Cyclical Capital Buffer (CCyB): Based on the review and empirical analysis of CCyB indicators as per the guidelines issued by Reserve Bank on February 5, 2015, it was decided not to activate CCyB. • Dealing in Rupee Interest Rate Derivative Products - SFBs: With a view to provide SFBs greater flexibility in managing their interest rate risks due to some issues, SFBs have been permitted to participate in rupee interest derivative products for hedging their interest rate risk in terms of Rupee Interest Rate Derivatives (Reserve Bank) Directions, 2019 dated June 26, 2019. April 30, 2024 GuidanceNoteonOperationalRiskManagementandOperationalResilience: Aligns the Reserve Bank’s regulatory guidance with the Basel Committee on Banking Supervision (BCBS) Principles, viz., (a) ‘Revisions to the Principles for the Sound Management of Operational Risk’; and (b) ‘Principles for Operational Resilience’ (both issued in March 2021), while adopting the global best practices including those on operational resilience. The erstwhile ‘Guidance Note on Management of Operational Risk’ dated October 14, 2005 has been repealed. May 3, 2024 Banks’ Exposure to Capital Markets - Issue of Irrevocable Payment Commitments (IPCs): The risk mitigation measures prescribed in the earlier guidelines for issuance of IPCs by custodian banks were based on T+2 rolling settlement for equities (T being the trade day). With introduction of T+1 rolling settlement, it was advised that intraday exposures shall be reckoned as capital market exposure at 30 per cent of the settlement amount. This exposure to the counterparty shall also be subject to large exposure limits. The exposure can, however, be offset by margin paid in cash or permitted securities, subject to haircuts prescribed by the exchange. June 7, 2024 Amendment to Master Direction - Reserve Bank of India (Interest Rate on Deposits) Directions, 2016: Banks have discretion to offer differential rate of interest on the bulk deposits as per their requirements and asset-liability management (ALM) projections. The bulk deposits limit was enhanced in 2019 for scheduled commercial banks (SCBs) [excluding regional rural banks (RRBs)] and SFBs as ‘Single Rupee Term Deposits of ₹2 Crore and Above’. On a review, these instructions have been revised and bulk deposits are now defined as ‘Single Rupee Term Deposits of ₹3 Crore and Above’ for SCBs (excluding RRBs) and SFBs. Further, bulk deposit limit for local area banks (LABs) is defined as ‘Single Rupee Term Deposits of ₹1 Crore and Above’ as applicable in case of RRBs. June 19, 2024 InvitationofApplicationsforRecognitionofSelf-regulatoryOrganisations(SROs)forNBFCs: A press release inviting applications from interested applicants seeking recognition as an SRO for the non- banking financial company (NBFC) sector has been issued under the aegis of the ‘Omnibus SRO Framework’ dated March 21, 2024. July 10, 2024 Basel III Capital Regulations - Eligible Credit Rating Agencies (ECAI): Based on various regulatory concerns, Securities and Exchange Board of India (SEBI) had directed Brickwork Ratings India Pvt. Ltd. (BRIPL) to wind down its operations. Consequently, the Reserve Bank had advised its REs/market participants not to obtain any fresh ratings/evaluations from the credit rating agency (CRA). On review, banks have now been permitted, vide the circular, to use the bank loan ratings of the CRA, subject to certain conditions. 257ANNUAL REPORT 2024-25 Date of Policy Initiative Announcement July 25, 2024 • Small Value Loans - UCBs: The timeline to achieve the target of 50 per cent for small value loans have been extended by two more years (i.e., till March 2026) and an intermediate target of 40 per cent for March 2025 was also prescribed. • BankFinanceAgainstSharesandDebentures: The overall ceiling of 20 per cent for loans given by UCBs against the security of shares and debentures has been linked with Tier-I capital, instead of owned funds, with effect from January 1, 2025. July 30, 2024 • Guidelines on ‘Treatment of Dividend Equalisation Fund (DEF) - UCBs’ was issued. • Master Direction on Treatment of Wilful Defaulters and Large Defaulters: The existing instructions on wilful defaulters were reviewed taking into consideration various judgments/orders from the Hon’ble Supreme Court and Hon’ble High Courts, as well as representations/suggestions received from banks and other stakeholders and the draft Master Direction on ‘Treatment of Wilful Defaulters and Large Defaulters’ was issued for public comments on September 21, 2023. Based on the feedback received, the final Master Direction was issued. August 2, 2024 Prudential Treatment of Bad and Doubtful Debt Reserve (BDDR) by Co-operative Banks: With a view to bring uniformity in the treatment of BDDR for prudential purposes, a circular was issued. August 8, 2024 Frequency of Reporting Credit Information by Credit Institutions (CIs) to Credit Information Companies (CICs): In order to ensure that credit information reports provided by CICs reflect a more recent information, the frequency of reporting of credit information by CIs to CICs has now been increased from monthly to fortnightly intervals or at such shorter intervals as mutually agreed upon between the CI and the CIC. August 12, 2024 • ReviewofRiskWeightsforHousingFinanceCompanies(HFCs): In order to avoid anomalies observed on application of risk weights for undisbursed housing loans and commercial real estate- residential building, certain revisions have been made in the HFC regulations. • ReviewofRegulatoryFrameworkforHFCsandHarmonisationofRegulationsApplicabletoHFCs and NBFCs: The extant regulations applicable to HFCs have been revised with an objective of harmonising the same, duly considering their specialised nature. Further, certain regulations applicable to NBFCs have also been reviewed. August 16, 2024 Review of Master Direction - Non-Banking Financial Company - Peer to Peer Lending Platform (Reserve Bank) Directions, 2017: To ensure proper implementation of the regulatory guidelines, a circular was issued elaborating and clarifying certain existing provisions. August 29, 2024 InterestEqualisationScheme(IES)onPreandPostShipmentRupeeExportCredit: Director General of Foreign Trade (DGFT), which administers the scheme, allowed for the extension of the scheme from July 1, 2024 to August 31, 2024, with some modifications. On September 20, 2024, DGFT allowed for a further extension of the scheme from September 1, 2024 to September 30, 2024, with some modifications. On October 9, 2024, DGFT allowed for another extension of the scheme for three months from October 1, 2024, to December 31, 2024, with some modifications. October 9, 2024 Creation of Reserve Bank Climate Risk Information System (RB-CRIS): In order to bridge data related gaps for enabling comprehensive climate risk assessments by REs, RB-CRIS is being formulated which will comprise: (i) a web-based directory, listing various data sources, and will be publicly accessible on the Reserve Bank’s website; and (ii) a data portal comprising datasets (processed data in standardised formats) that will be only accessible to REs in a phased manner. The datasets in RB- CRIS are envisaged to pertain to data inputs for physical risk assessment such as hazard data, loss data, vulnerability data, damage functions, transition risk assessment such as India specific scenarios, sectoral transition pathways, and carbon emission factor database. 258CHRONOLOGY OF MAJOR POLICY ANNOUNCEMENTS Date of Policy Initiative Announcement October 10, 2024 • Submission of Information to CICs by Asset Reconstruction Companies (ARCs): The revised guidelines, inter alia, require ARCs to become members of all four CICs, submit data to CICs on a fortnightly basis or shorter intervals as mutually agreed and rectify rejected data within seven days of receipt of such data from CICs. • ImplementationofCreditInformationReportingMechanismSubsequenttoCancellationofLicense orCertificateofRegistration: As per Credit Information Companies (Regulation) Act, 2005 (CICRA) only CIs can submit credit information to CICs. When RE’s license or Certificate of Registration (CoR) is cancelled by the Reserve Bank, it is no longer deemed as CI and thus is unable to submit credit information of its borrowers to CICs, leading to gaps in borrowers’ repayment history. To address the hardship faced by borrowers of such entities, a credit information reporting mechanism subsequent to the cancellation of the license/CoR has been prescribed. November 6, 2024 • The know your customer (KYC) identifier issued by central KYC records registry (CKYCR) has been made the first resort for KYC and re-KYC purposes, thus, making the KYC process simpler, convenient and paperless. • AmendmenttotheMasterDirection-KYCDirection,2016: Certain provisions of the Master Direction have been amended. November 13, 2024 Domestic Systemically Important Banks (D-SIBs) List of 2024: The list of D-SIBs was published in 2024. State Bank of India (SBI), HDFC Bank and ICICI Bank continue to be identified as D-SIBs. SBI remains in Bucket-4, HDFC in Bucket-2 and ICICI Bank in Bucket-1, entailing additional common equity tier 1 (CET1) capital requirement of 0.8 per cent, 0.4 per cent and 0.2 per cent of risk-weighted assets (RWAs), respectively. December 6, 2024 • Interest Rates on Foreign Currency (Non-resident) Accounts (Banks) [FCNR(B)] Deposits: The interest rates ceiling on fresh FCNR(B) deposits raised by the banks was increased with effect from December 6, 2024. For period of deposit 1 year to less than 3 years, the ceiling rate will be overnight alternative reference rate for the respective currency/swap plus 400 bps, and for period of deposit 3 years and above up to and including 5 years, the ceiling rate will be overnight alternative reference rate for the respective currency/swap plus 500 bps. However, such relaxation is available till March 31, 2025. • Maintenance of CRR: As announced in the Statement on Developmental and Regulatory Policies dated December 6, 2024, it has been decided to reduce the CRR of all banks by 50 bps in two equal tranches of 25 bps each to 4 per cent of net demand and time liabilities (NDTL). Accordingly, banks are required to maintain the CRR at 4.25 per cent of their NDTL, effective the reporting fortnight beginning December 14, 2024, and 4 per cent of their NDTL, effective the fortnight beginning December 28, 2024. December 31, 2024 GovernmentDebtReliefSchemes(DRS): The circular contains, inter alia, the prudential treatment to be followed by REs while implementing DRS. It also contains model operating procedure (MOP) which was also sent to state governments for their consideration while designing and implementing such DRS through a consultative approach, to avoid any non-alignment of expectations of the stakeholders involved, including the government, lenders and borrowers. January 6, 2025 Master Direction - Reserve Bank of India (Credit Information Reporting) Directions, 2025: The Master Direction consolidates the existing instructions on credit information reporting and related aspects issued to the REs. 259ANNUAL REPORT 2024-25 Date of Policy Initiative Announcement January 16, 2025 A list of 15 NBFCs in the Upper Layer, identified as per the methodology specified under scale-based regulation for NBFCs, was released. January 20, 2025 Guidelines on Settlement of Dues of Borrowers by ARCs: The revised guidelines, inter alia, require settlement of accounts having aggregate outstanding value of more than ₹1 crore and of all accounts classified as fraud or wilful defaulter to be done after the proposal is examined by an independent Advisory Committee followed by a review by the Board of Directors comprising at least two independent Directors. Further, settlement of accounts having aggregate outstanding value of up to ₹1 crore shall be done as per Board approved policy, subject to the conditions. January 29, 2025 PrivatePlacementofNon-convertibleDebentures(NCDs)withMaturityPeriodofMorethanOneYear byHFCs-ReviewofGuidelines: As regulatory expectations associated with private placement of NCDs are similar across all categories of NBFCs, subsequent to review of the HFC guidelines, it has been decided that regulations on private placement of NCDs prescribed for HFCs shall be completely aligned with those prescribed for NBFCs. February 7, 2025 ChangeinBankRate: As announced in the Monetary Policy Statement 2024-25 dated February 7, 2025, the Bank Rate was revised downwards by 25 bps from 6.75 per cent to 6.50 per cent with effect from February 7, 2025. All penal interest rates on shortfall in reserve requirements, which are specifically linked to the Bank Rate, also stand revised. February 24, 2025 Review and Rationalisation of Prudential Norms - UCBs: (a) The definition of small value loans has been revised as loans of value not more than ₹25 lakh or 0.4 per cent of their Tier I capital, whichever is higher, subject to a ceiling of ₹3 crore per borrower. The timelines and the intermediate targets have been kept unchanged; (b) The ceilings on amount of housing loans to be extended by Tier- 3 and Tier- 4 UCBs to individuals have been increased to ₹2 crore and ₹3 crore, respectively, from the extant limit of ₹1.4 crore, subject to extant single borrower exposure limits; (c) The ceiling on UCBs’ aggregate exposure to real estate sector was rationalised. Accordingly, aggregate exposure of a UCB to residential mortgages (housing loans to individuals), other than those eligible to be classified as priority sector, shall not exceed 25 per cent of its total loans and advances, and aggregate exposure of a UCB to real estate sector, excluding housing loans to individuals, shall not exceed five per cent of its total loans and advances; and (d) The existing glide path (till 2025-26) prescribed for provisioning requirement due to valuation differential on the Security Receipts (SRs) held against the assets transferred by UCBs to ARCs, has been extended by another two years till 2027-28. February 25, 2025 • ReviewofRiskWeightsonMicrofinanceLoans: SCBs’ microfinance loans that are in the nature of consumer credit shall be subject to a risk weight of 100 per cent. Such loans qualifying as regulatory retail in terms of Master Circular on ‘Basel III Capital Regulations’ shall continue to attract a risk weight of 75 per cent. Further, all microfinance loans extended by RRBs and local area banks (LABs) shall attract a risk weight of 100 per cent. February 25, 2025 • Exposures of SCBs to NBFCs: To address the concerns on post-COVID risk build-up in certain segments of consumer credit and NBFCs’ growing reliance on SCBs for funding, a circular was issued on November 16, 2023 which, inter alia, increased the risk weights by 25 percentage points for certain consumer credit exposures of SCBs and NBFCs. Additionally, risk weight on SCB’s exposure to NBFCs was increased by 25 percentage points in cases where the existing risk weight based on external ratings was below 100 per cent. On a review, vide a circular dated February 25, 2025, it has been decided to restore the risk weight on SCBs exposure to NBFCs to the risk weight associated with the given external rating of NBFCs. 260CHRONOLOGY OF MAJOR POLICY ANNOUNCEMENTS Date of Policy Initiative Announcement March 12, 2025 FrameworkforRecognisingSROsfortheAccountAggregatorEcosystem(SRO-AA): A Framework for SROs for the AA Ecosystem was issued. The framework provides a comprehensive outline of characteristics, functions, responsibilities, eligibility criteria, governance requirements, etc., addressing the needs of the AA ecosystem. Applications for recognition as an SRO for AA ecosystem have been invited, with a submission deadline of June 15, 2025. March 20, 2025 • Guidelines on Amortisation of Additional Pension Liability by RRBs: RRBs were earlier permitted to amortise their pension liability on account of RRB (Employee) Pension Scheme 2018 over a period of five years, beginning with financial year ending March 31, 2019. RRBs are now required to implement the pension scheme with effect from November 1, 1993. However, in view of the difficulties expressed in absorbing the increased liability in a single year, RRBs were advised that the expenditure, on account of revision in the pension, may, if not fully charged to the profit and loss account during 2024-25, be amortised over a period not exceeding five years beginning with the financial year ending March 31, 2025, subject to a minimum of 20 per cent of the total pension liability involved being expensed every year. Pension related unamortised expenditure would not be reduced from Tier 1 capital of the RRBs. • Reserve Bank of India (Financial Statements - Presentation and Disclosures) Directions, 2021 -Clarifications: Clarifications were issued on instructions for compilation of balance sheet and disclosure requirements for lien marked deposits, advances covered by Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE), Credit Risk Guarantee Fund Trust for Low Income Housing (CRGFTLIH) and individual schemes under National Credit Guarantee Trustee Company Ltd. (NCGTC), which are backed by explicit central government guarantee and repo/ reverse repo transactions. March 21, 2025 TreatmentofRight-of-Use(ROU)AssetforRegulatoryCapitalPurposes: The circular exempts ROU assets linked to tangible assets from deduction from owned fund/CET1/Tier 1 capital and instead mandating a 100 per cent risk weight thereof. March 24, 2025 Review of Priority Sector Lending (PSL) Target - UCBs: From 2024-25 onwards, the overall PSL target for UCBs has been revised to 60 per cent of adjusted net bank credit or credit equivalent amount of off-balance sheet exposure, whichever is higher. March 25, 2025 • Master Direction - Reserve Bank of India (Prudential Norms on Capital Adequacy for RRBs) Directions, 2025: The existing guidelines have been consolidated, harmonised and rationalised, wherever deemed fit. • Government of India, vide its press release, decided to discontinue the Medium Term and Long Term Government Deposit (MLTGD) components of Gold Monetisation Scheme with effect from March 26, 2025. In consultation with the Government, the Master Direction on Gold Monetisation Scheme, 2015 was suitably amended to discontinue mobilisation/renewal of existing MLTGD and updated frequently asked questions (FAQs) were issued on the subject. FinTech Department April 5, 2024 To make central bank digital currency-Retail (CBDC-R) accessible to a broader segment of users in a sustained manner, non-bank payment system operators were made eligible to offer CBDC wallets in the retail segment. 261ANNUAL REPORT 2024-25 Date of Policy Initiative Announcement May 28, 2024 The ‘FinTech Repository’ was launched on May 28, 2024, which aims to capture essential information about FinTech entities, their activities, technology uses, etc. Simultaneously, a related repository for only regulated entities (REs) of the Reserve Bank on their adoption of emerging technologies [like artificial intelligence (AI), machine learning (ML), cloud computing, distributed ledger technology (DLT), quantum computing, etc.] called ‘EmTech Repository’ was also launched. The repositories would enable the availability of aggregate sectoral level data, trends, analytics, etc., that would be useful for both policymakers and participating industry members. May 30, 2024 The Reserve Bank published the ‘Framework for Recognising Self-Regulatory Organisation(s) for FinTech Sector’ (SRO-FT framework). The framework was finalised based on the examination of the comments and feedback received from stakeholders on the ‘Draft Framework for Recognising Self- Regulatory Organisations (SRO) for FinTech Sector’ released on January 15, 2024. August 28, 2024 Fintech Association for Consumer Empowerment (FACE) was recognised as an SRO in the FinTech sector under the SRO-FT framework. December 6, 2024 The Reserve Bank encouraged banks to collaborate with Reserve Bank Innovation Hub (RBIH) to further develop the ‘MuleHunter.AITM’ initiative to deal with the issue of mule bank accounts being used for committing financial frauds. December 26, 2024 The Reserve Bank announced the setting up of a committee to develop a Framework for Responsible and Ethical Enablement of Artificial Intelligence (FREE-AI) in the Financial Sector. Department of Supervision April 29, 2024 To improve fairness and transparency in charging of interest by the lenders, while providing adequate freedom to REs as regards their loan pricing policy, the Reserve Bank issued guidelines on ‘Fair Practices Code for Lenders – Charging of Interest’. July 15, 2024 The Reserve Bank of India had issued three revised ‘Master Directions on Fraud Risk Management’ for the REs, viz., (i) Commercial banks (including regional rural banks) and all-India financial institutions (AIFIs); (ii) cooperative banks [urban cooperative banks (UCBs)/state cooperative banks/central cooperative banks]; and (iii) non-banking financial companies (NBFCs) [including housing finance companies (HFCs)]. July 26, 2024 The Reserve Bank introduced a prompt corrective action (PCA) framework for UCBs, replacing the extant supervisory action framework (SAF). The framework, effective from April 1, 2025, is applicable to all UCBs under Tier 2, Tier 3 and Tier 4 categories, except UCBs under all-inclusive Directions. Tier 1 UCBs, though not covered under the PCA framework, will be subjected to enhanced monitoring under the extant supervisory framework. September 30, 2024 In view of several irregularities observed in grant of loans against gold ornaments and jewellery, including top-up loans, the Reserve Bank advised the supervised entities (SEs) to comprehensively review their policies, processes, and practices on gold loans to identify gaps and initiate appropriate remedial measures in a time-bound manner. December 2, 2024 The banks have been advised to take necessary steps urgently to bring down the number of inoperative/frozen accounts and make the process of activation of such accounts smoother and hassle free, including by enabling seamless updation of know your customer (KYC) through mobile/internet banking, non-home branches, video customer identification process, etc. 262CHRONOLOGY OF MAJOR POLICY ANNOUNCEMENTS Date of Policy Initiative Announcement January 17, 2025 To avoid inconvenience and undue hardship to survivors/family members of deceased depositors, the Reserve Bank has advised the supervised entities’ customer service committees (CSC) of the Board/Board of Directors to review the progress in nomination coverage on a periodic basis. Enforcement Department January 30, 2025 In view of the amendments to the provisions of the Payment and Settlement Systems Act, 2007 (PSS Act), and with the objective of rationalising and consolidating enforcement action by the Reserve Bank, the framework for imposing monetary penalty and compounding of offences under the PSS Act was issued. Consumer Education and Protection Department January 17, 2025 A circular on ‘Prevention of Financial Frauds Perpetrated Using Voice Calls and Short Message Service (SMS) – Regulatory Prescriptions and Institutional Safeguards’ was issued to all REs of the Reserve Bank to put in place a mechanism to mitigate the potential misuse of mobile numbers by fraudsters. Internal Debt Management Department March 27, 2024 • The ways and means advances (WMA) limit for the GoI for H1:2024-25 (April to September 2024) was fixed at ₹1,50,000 crore. • Based on market feedback and in line with global market practices, the Reserve Bank, in consultation with the GoI, introduced a new dated government security (G-sec) of 15-year tenor, replacing the existing 14-year G-sec. June 28, 2024 • Based on the recommendations made by the Group comprising of select Finance Secretaries the WMA limits of the state governments/union territories (UTs) were revised to ₹60,118 crore from ₹47,010 crore, with effect from July 1, 2024. • Based on the recommendations made by the Working Group on Consolidated Sinking Fund (CSF) and Guarantee Redemption Fund (GRF), the methodology to determine the special drawing facility (SDF) limits of the state governments against their investments in CSF/GRF/Auction Treasury Bills (ATBs) has also been revised since July 1, 2024. September 26, 2024 The WMA limit for the GoI for H2:2024-25 (October 2024 to March 2025) was fixed at ₹50,000 crore. Department of Currency Management June 4, 2024 With a view to encourage banks to further fine-tune their systems and processes for detection, reporting and monitoring of counterfeit notes, the penal provisions in respect of counterfeit notes have been revised with provision of graded penalties in certain cases. October 30, 2024 To further strengthen the banknote sorting infrastructure across the country, the Bureau of Indian Standards (BIS) in consultation with the Reserve Bank of India published standards IS 18663:2024 titled ‘Note Sorting Machines - Specifications’. Accordingly, the Reserve Bank advised banks to deploy only such note sorting machines models that conform to the published Indian Standards and are duly certified by BIS. Department of Payment and Settlement Systems April 5, 2024 The Reserve Bank announced operationalisation of cash deposit facility through use of unified payments interface (UPI). 263ANNUAL REPORT 2024-25 Date of Policy Initiative Announcement June 7, 2024 • The Reserve Bank proposed to set up Digital Payments Intelligence Platform which will harness advanced technologies to mitigate payment fraud risks. • The Reserve Bank brought UPI Lite facility within the ambit of the e-mandate framework by introducing an auto-replenishment facility for loading the UPI Lite wallet if the balance goes below a threshold amount set by the customer. July 24, 2024 The framework for domestic money transfer (DMT) was revised to enhance the safety of cash-based remittances by mandating various due diligence processes. July 30, 2024 The Reserve Bank issued ‘Master Directions on Cyber Resilience and Digital Payment Security Controls for Non-bank Payment System Operators (PSOs)’, which cover robust governance mechanisms for identification, analysis, monitoring and management of cyber security risks and vulnerabilities by providing a framework for overall information security preparedness, with an emphasis on cyber resilience. August 8, 2024 • The Reserve Bank announced introduction of ‘Delegated Payments’ in UPI which will enable individuals (primary user) to allow another individual (secondary user) to make UPI transactions up to a limit from the primary user’s bank account without the need for the secondary user to have a separate bank account linked to UPI. • The Reserve Bank enhanced the transaction limits for tax payments through UPI from ₹ 1 lakh to ₹ 5 lakh per transaction. • The Reserve Bank announced continuous clearing of cheques under cheque truncation system (CTS) to improve the efficiency of cheque clearing, reduce settlement risk for participants and enhance customer experience. August 22, 2024 The Reserve Bank permitted auto-replenishment of FASTag and national common mobility card (NCMC) as and when the balance falls below a threshold set by the customer under the e-mandate framework. These payments for auto-replenishment will be exempt from the requirement of pre-debit notification. October 9, 2024 Limits were enhanced for the following products of UPI: • UPI123Pay: In consultation with the stakeholders, the per-transaction limit was increased to ₹10,000 from ₹5,000. • UPI Lite: UPI Lite wallet limit of ₹500 per transaction and an overall limit of ₹2,000 per UPI Lite wallet were increased to ₹1,000 and ₹5,000, respectively. October 11, 2024 The Reserve Bank issued guidelines for facilitating accessibility to digital payment systems for persons with disabilities (PwD). October 25, 2024 The Reserve Bank revised the real time gross settlement (RTGS) regulations and the national electronic funds transfer (NEFT) procedural guidelines on October 25, 2024, which include instructions on access criteria for membership to centralised payment systems (CPS), periodic review of membership, adherence to cyber security guidelines by CPS members on an ongoing basis and instructions from extant circulars concerning RTGS and NEFT. October 28, 2024 The Reserve Bank revised the directions for central counterparties (CCPs) to strengthen corporate governance in CCPs with measures like increased representation of independent directors in Board meetings as well as in important committees such as Nomination and Remuneration Committee, Risk Management Committee and Audit Committee. 264CHRONOLOGY OF MAJOR POLICY ANNOUNCEMENTS Date of Policy Initiative Announcement December 4, 2024 The Reserve Bank amended ‘Framework for Facilitating Small Value Digital Payments in Offline Mode’ to enhance the limits for UPI Lite to ₹1,000 per transaction, with ₹5,000 being the total limit at any point in time. December 27, 2024 The Reserve Bank permitted linking of prepaid payment instruments (PPIs) through third-party UPI applications. This will enable PPI holders to make/receive UPI payments through third-party UPI applications. December 30, 2024 The Reserve Bank issued a circular on introduction of beneficiary bank account name look-up facility for RTGS and NEFT systems, which shall enable the remitters using RTGS and NEFT systems to verify the name of the bank account to which money is being transferred before initiating the fund transfer and thereby avoid mistakes and prevent frauds. February 7, 2025 To provide a similar level of safety for online international transactions using cards issued in India, the Reserve Bank proposed to enable additional factor of authentication (AFA) for international card not present (online) transactions as well. February 12, 2025 The Reserve Bank permitted small finance banks to extend pre-sanctioned credit lines through the UPI. March 28, 2025 The Reserve Bank issued revised instructions on interchange fee structure for ATM transactions wherein it has been prescribed that the ATM interchange fee will be as decided by the ATM networks. Further, with effect from May 1, 2025, banks may charge customers a maximum fee of ₹23 per ATM transaction, beyond the mandatory free number of free transactions. 265Regulatory Measures1 Undertaken ANNUAL REPORT 2024-25 ANNEX II Post Public Consultations: April 2022 to March 2025 Year Date Topic Financial Markets Regulation Department June 1, 2022 Master Direction - Reserve Bank of India (Variation Margin) Directions, 2022, were issued, mandating covered entities to exchange variation margin for non-centrally cleared derivative (foreign exchange, interest rate and credit) transactions. 2022-23 June 16, 2022 Draft directions prescribing guidelines for exchange of initial margin for non-centrally cleared derivatives (NCCDs) were issued. February 17, 2023 Draft directions to permit lending and borrowing of G-secs were issued. Final directions were issued on December 27, 2023. December 28, 2023 Draft directions to introduce bond forwards on G-secs were issued. January 3, 2024 Directions on commercial paper (CP) and non-convertible debentures (NCDs) of original maturity up to one year were reviewed and revised directions were issued to bring consistency across products in terms of issuers, investors and other participants in these markets. 2023-24 January 5, 2024 The regulatory framework for hedging of foreign exchange (FX) risks was reviewed and revised directions were issued, consolidating the previous rules and notifications in respect of all types of transactions - OTC and exchange traded - under a single Master Direction, expanding the suite of permitted FX derivative products and refining the user classification framework to enable a larger set of users with the necessary risk management capabilities to efficiently manage their risks. April 29, 2024 Draft Master Direction – Reserve Bank of India (Electronic Trading Platforms) Directions, 2024, were issued to review the regulatory framework for electronic trading platforms. May 8, 2024 Master Direction – Reserve Bank of India (Margining for Non-Centrally Cleared OTC Derivatives) Directions, 2024 were issued, mandating covered entities to exchange initial and variation margin for non-centrally cleared derivative (foreign exchange, interest rate and 2024-25 credit) transactions. February 21, 2025 Reserve Bank of India (Forward Contracts in Government Securities) Directions, 2025 were issued to enable long-term investors such as insurance funds to manage their interest rate risk across interest rate cycles. Introduction of these forward contracts will also facilitate efficient pricing of derivatives that use bonds as underlying instruments. Foreign Exchange Department August 22, 2022 Rationalisation of overseas investment framework under Foreign Exchange Management 2022-23 Act (FEMA), 1999 was undertaken. Based on feedback/comments from all stakeholders, rationalised ‘Overseas Investment Regulations’ were issued. 2023-24 December 26, 2023 Draft Licensing Framework for Authorised Persons (APs) under FEMA, 1999 was issued. July 2, 2024 To liberalise policies governing foreign exchange transactions under FEMA, 1999, the ‘Draft 2024-25 Regulations and Directions on Foreign Trade’ were issued. 1 Include new/major regulatory policies as well as incremental changes and comprehensive reviews of the existing guidelines, post consultations through draft circulars, reports, discussion papers and stakeholder engagements. Public consultations for some draft circulars/ draft guidelines/discussion papers included in this Annex are still in progress. 266REGULATORY MEASURES UNDERTAKEN POST PUBLIC CONSULTATIONS Year Date Topic Department of Regulation July 27, 2022 Discussion paper on climate risk and sustainable finance. September 2, 2022 Guidelines on digital lending. October 11, 2022 Review of regulatory framework for asset reconstruction companies (ARCs). 2022-23 January 16, 2023 Discussion paper on expected loss (EL) - based approach for loan loss provisioning by banks. January 25, 2023 Discussion paper on securitisation of stressed assets framework (SSAF). February 17, 2023 Draft guidelines on minimum capital requirements for market risk under Basel III. April 28, 2023 Amendment to the Master Direction on KYC to align with Prevention of Money Laundering (PML) Rules, 2005 (amended from time to time) and Financial Action Task Force (FATF) recommendations. May 4, 2023 Amendment to Master Direction on KYC - instructions on wire transfer. June 8, 2023 Guidelines on default loss guarantee (DLG) in digital lending. June 26, 2023 Master Direction on minimum capital requirements for operational risk. August 18, 2023 • Reset of floating interest rate on equated monthly instalment (EMI) based personal loans. • Fair Lending Practice - Penal Charges in Loan Accounts. September 12, 2023 Master Direction on classification, valuation and operation of investment portfolio of commercial banks. September 13, 2023 Circular on ‘Responsible Lending Conduct - Release of Movable/Immovable Property Documents on Repayment/Settlement of Personal Loans’. September 21, 2023 • Draft Master Direction on treatment of wilful defaulters and large defaulters. 2023-24 • Master Direction - Reserve Bank of India (Prudential Regulations on Basel III Capital Framework, Exposure Norms, Significant Investments, Classification, Valuation and Operation of Investment Portfolio Norms and Resource Raising Norms for All India Financial Institutions) Directions, 2023. October 17, 2023 Amendment to Master Direction on KYC to align with PML Rules, 2005 (amended from time to time) and FATF recommendations. October 26, 2023 • Draft Master Direction on managing risks and code of conduct in outsourcing of financial services. • Review of instructions on bulk deposits for Regional Rural Banks (RRBs). January 1, 2024 Circular on inoperative accounts/unclaimed deposits in banks – revised instructions. January 2, 2024 Draft circular on declaration of dividend by banks and remittance of profits to head office by foreign bank branches in India. January 15, 2024 • Draft circular on credit/investment concentration norms – government owned non-banking financial companies (NBFCs). • Draft circular on review of regulatory framework for housing finance companies (HFCs) and harmonisation of regulations applicable to HFCs and NBFCs. 267ANNUAL REPORT 2024-25 Year Date Topic February 9, 2024 Circular on participation of Indian banks on India International Bullion Exchange IFSC Ltd. (IIBX). February 28, 2024 Draft disclosure framework on climate-related financial risks, 2024. March 7, 2024 Amendments to Master Direction – Credit Card and Debit Card – Issuance and Conduct 2023-24 Directions, 2022 – updated guidelines, along with related frequently asked questions (FAQs), were issued as Appendix to the above Master Direction and also placed on the Reserve Bank’s website. March 21, 2024 Omnibus framework for recognition of self-regulatory organisations (SROs) for REs of the Reserve Bank. August 5, 2024 Draft circular on regulatory principles for management of model risks in credit. October 4, 2024 Draft circular on ‘Forms of Business and Prudential Regulation for Investments’ was released seeking public feedback till November 20, 2024. Paragraphs 4 and 5 of the Master Direction- Reserve Bank of India (Financial Services provided by Banks) Directions, 2016 dated May 2024-25 26, 2016, consolidate the regulations on forms of business and prudential regulation for investments by banks. The draft circular reviews these regulations with an objective to ringfence the banks’ core business from other risk bearing non-core businesses as well as to provide operational freedom to banks for making investments in financial services/non- financial services companies and Alternative Investment Funds. FinTech Department 2023-24 January 15, 2024 Draft framework for recognising SROs for FinTech sector was issued. May 30, 2024 ‘Framework for Recognising Self-Regulatory Organisation(s) for FinTech Sector’ (SRO-FT 2024-25 framework) was announced on May 30, 2024, based on comments and feedback received from stakeholders on the draft released for the purpose on January 15, 2024. Department of Supervision March 6, 2023 Revised guidelines for appointment/re-appointment of statutory branch auditors (SBAs) of 2022-23 public sector banks (PSBs)/norms on business coverage under statutory branch audit of PSBs were issued. April 10, 2023 Master Direction on outsourcing of information technology services was issued. October 13, 2023 General approval to PSBs was granted for deciding remuneration payable to their SBAs for audit of non-performing asset (NPA) recovery branches and branches with zero advances. 2023-24 November 7, 2023 Master Direction on information technology governance, risk, controls and assurance practices was issued. January 15, 2024 Guidelines on appointment/re-appointment of statutory auditors of state co-operative banks and central co-operative banks were issued. 268REGULATORY MEASURES UNDERTAKEN POST PUBLIC CONSULTATIONS Year Date Topic Department of Payment and Settlement Systems May 19, 2022 Interoperable card-less cash withdrawal (ICCW) at ATMs was enabled. May 26, 2022 Guidelines on BharatBill Payment System were amended. June 16, 2022 On a review of implementation of the e-mandate framework and the protection available to customers, the limit for relaxation of additional factor of authentication (AFA) was increased 2022-23 from ₹5,000 to ₹15,000 per transaction. July 28, 2022 Regulation of Payment Aggregators – timeline for submission of applications for authorisation was reviewed. August 17, 2022 Discussion paper on charges in payment systems was issued. June 2, 2023 Draft Master Directions on cyber resilience and digital payment security controls for payment system operators (PSOs) were issued. June 7, 2023 The scope of trade receivables discounting system was expanded. July 5, 2023 Draft circular on arrangements with card networks for issue of debit, credit, and prepaid cards was issued. August 24, 2023 Transaction limits for small value digital payments in offline mode were enhanced. October 31, 2023 Circular on ‘Regulation of Payment Aggregator – Cross Border’ was issued. 2023-24 December 12, 2023 Limits for subsequent recurring transactions undertaken without AFA under the e-mandate framework were enhanced for specified categories. December 20, 2023 Card-on-File Tokenisation (CoFT) – tokenisation through card issuing banks was enabled. December 29, 2023 Payments Infrastructure Development Fund (PIDF) scheme was enhanced and extended by a further period of two years, i.e., up to December 31, 2025. February 23, 2024 Master Direction on Prepaid Payment Instruments (PPIs) was amended. February 29, 2024 Master Direction on BharatBill Payment System was issued. March 6, 2024 Circular on ‘Arrangements with Card Networks for Issue of Credit Cards’ was issued. April 16, 2024 Draft directions on regulation of Payment Aggregators were issued. This covers new draft directions on regulation of Payment Aggregators, encompassing physical point of sale as well as amendments to the existing directions on Payment Aggregators. July 30, 2024 ‘Master Directions on Cyber Resilience and Digital Payment Security Controls for Non-bank PSOs’ was issued. July 31, 2024 • Draft Framework on Alternative Authentication Mechanisms for Digital Payment Transactions was issued. 2024-25 • Draft Directions on Due Diligence of Aadhaar Enabled Payment System (AePS) Touchpoint Operators were issued. December 27, 2024 Unified payments interface (UPI) payments from / to full-KYC PPIs through third-party UPI applications were enabled. February 7, 2025 Draft Directions on AFA for Cross-border Card Not Present (CNP) Transactions were issued. March 28, 2025 ATM networks were permitted to decide the ATM interchange fee. Further, maximum permissible customer charges for ATM transactions, beyond the mandatory number of free transactions, were revised. 269Customer Centric Measures1: ANNEX III April 2022 to March 2025 Year Date Topic Financial Inclusion and Development Department - Scaling-up Centres for Financial Literacy (CFL) project - additional 362 CFLs were established. 2022-23 - 60 town hall meetings were conducted by the Reserve Bank across India which benefitted approximately 5,784 entrepreneurs. - Scaling-up CFL project - additional 952 CFLs were established. 2023-24 - 60 town hall meetings were conducted by the Reserve Bank across India which benefitted approximately 6,352 entrepreneurs. - 63 town hall meetings were conducted by the Reserve Bank across India which benefitted approximately 6,073 entrepreneurs. June 11, 2024 Directions were issued to scheduled commercial banks (SCBs) stipulating a uniform 2024-25 turnaround time (TAT) of 14 days for loans up to ₹25 lakh for micro and small enterprise borrowers. December 6, 2024 The limit of collateral free agricultural loans was increased from ₹1.6 lakh to ₹2 lakh per borrower. Financial Markets Regulation Department September 7, 2022 • An ‘Alert List’ of entities which are neither authorised to deal in forex under the Foreign Exchange Management Act (FEMA), 1999 nor authorised to operate electronic trading platforms for forex transactions was issued. 2022-23 • FAQs on foreign exchange transactions were updated to provide information regarding the ‘Alert List’. February 10, 2023 The ‘Alert List’ of entities which are neither authorised to deal in forex under the FEMA, 1999 nor authorised to operate electronic trading platforms for forex transactions was issued. June 7, 2023 The ‘Alert List’ of entities which are neither authorised to deal in forex under the FEMA, 1999 nor authorised to operate electronic trading platforms for forex transactions was updated. November 24, 2023 The ‘Alert List’ of entities which are neither authorised to deal in forex under the FEMA, 1999 2023-24 nor authorised to operate electronic trading platforms for forex transactions was updated. January 3, 2024 The regulatory framework for hedging foreign exchange risks was reviewed and revised Directions were issued, consolidating the previous rules and notifications in respect of all types of transactions. April 24, 2024 Authorised Dealers (AD) Category-I banks were advised to be more vigilant and exercise greater caution to prevent the misuse of banking channels in facilitating unauthorised forex trading and to bring to their customers’ notice, the advisories and the ‘Alert List’ issued by the 2024-25 Reserve Bank. October 22, 2024 The ‘Alert List’ of entities which are neither authorised to deal in forex under the FEMA, 1999 nor authorised to operate electronic trading platforms for forex transactions was updated. 1 Include new measures as well as revisions/modifications in the existing guidelines. 270CUSTOMER CENTRIC MEASURES Year Date Topic February 7, 2025 As a further measure of facilitating retail participation in government securities (G-secs), a new facility, viz., ‘stock broker connect’ was introduced in the negotiated dealing systems - order matching (NDS-OM) platform - an electronic trading for secondary market transactions 2024-25 in G-secs. Under the facility, Securities and Exchange Board of India (SEBI)-registered stock brokers have been permitted to directly access NDS-OM on behalf of their individual constituents/clients. Foreign Exchange Department May 19, 2022 In view of the difficulties being experienced by exporters in receipt of export proceeds from Sri Lanka, it was decided that trade transactions with Sri Lanka may be settled in Indian Rupee (INR) outside the Asian Clearing Union (ACU) mechanism. May 25, 2022 Qualified jewellers [as notified by International Financial Services Centres Authority (IFSCA)] were permitted to import gold through India International Bullion Exchange (IIBX) and allowed to remit advance payment through Authorised Dealer (AD) banks for the same. July 6, 2022 Under the measures to liberalise forex flows to India, the borrowing limit under the external commercial borrowings (ECB) automatic route was raised from US$ 750 million per financial year to US$ 1.5 billion. Further, the all-in-cost ceiling under the ECB framework was also raised by 100 bps, provided the borrower was of investment grade rating. These measures were effective till December 31, 2022. July 8, 2022 AD Category-I banks were advised that all eligible current account transactions including trade transactions with Sri Lanka shall be settled in any permitted currency outside the ACU mechanism until further notice. July 11, 2022 To facilitate global trade with emphasis on promoting exports from India and to encourage the 2022-23 use of INR for cross-border transactions, an additional arrangement for invoicing, payment, and settlement of exports/imports in INR was provided through the use of Special Rupee Vostro Accounts of overseas correspondent bank/s maintained with AD banks. August 22, 2022 In order to foster ease of doing business and reduce turnaround time (TAT), concept of Late Submission Fee (LSF) was introduced for regularisation of reporting delays of overseas investment transactions. September 15, 2022 Foreign inward remittances received by the AD Category-I bank having Rupee Drawing Agreement (RDA) with Non-Resident Exchange Houses were allowed to be directly credited to any bank account of the beneficiary through the BharatBill Payment System (BBPS). September 30, 2022 For ease of doing business, it was decided to have a simple and uniform computation matrix for determining LSF for reporting delays involving all transactions. January 5, 2023 Foreign Investment Reporting and Management System (FIRMS), the application for reporting foreign investment in India, was revamped. The new version of FIRMS enabled seamless reporting of foreign investment by allowing simultaneous filing of transactions by multiple stakeholders, reduced TAT for approval process and automated calculation of LSF. April 6, 2023 A software application called ‘APConnect’ was developed and rolled out for processing of application for licensing of full-fledged money changers (FFMCs), non-bank AD Category-II, 2023-24 authorisation as Money Transfer Service Scheme (MTSS) agent, renewal of existing licence/ authorisation, for seeking approval as per the extant instructions; and for submission of various statements/returns by FFMCs and non-bank AD Category-II. 271ANNUAL REPORT 2024-25 Year Date Topic April 12, 2023 The facility of online submission of ‘Form A2’ was extended to AD Category-II entities to accept online submission of ‘Form A2’ for transactions with an upper limit of US$ 25,000 (or its equivalent) for individuals and US$ 100,000 (or its equivalent) for corporates. April 26, 2023 The condition of repatriating any funds lying idle in the Foreign Currency Account (FCA) of resident individuals in IFSCs for Liberalised Remittance Scheme (LRS) for a period up to 15 days from the date of its receipt was changed and made in line with the provisions of the scheme as contained in the Master Direction on LRS for all jurisdictions in general. May 9, 2023 Instructions were issued by advising Authorised Persons (APs) that fees/changes payable in India on forex prepaid cards, store value cards, etc., must be denominated and settled in INR only, as these transaction between AP and the residents were essentially domestic transactions between two residents. May 12, 2023 In order to foster ease of doing business, payment of LSF, for reporting delays related to foreign investments, was enabled through online payment modes such as National Electronic Funds Transfer (NEFT)/Real Time Gross Settlement (RTGS) in addition to demand draft mode. Similarly for overseas investment transactions the online payment modes such as NEFT/RTGS for payments of LSF was enabled with effect from June 19, 2023. June 22, 2023 LRS remittances to IFSCs were permitted only for making investments in securities. Government of India vide gazette notification dated May 23, 2022 had notified courses in 2023-24 financial management, FinTech, science, technology, engineering and mathematics offered by foreign universities/institutions in IFSC, as financial services. Accordingly, with effect from June 22, 2023, remittances by resident individuals for payment of course fees to foreign universities/institutions in IFSCs was enabled under LRS for the defined purpose ‘studies abroad’. November 10, 2023 Based on a Directorate General of Foreign Trade (DGFT) notification, it was decided that AD Category-I banks may allow qualified jewellers to remit advance payment for 11 days for import of silver through IIBX. November 17, 2023 In terms of the Para 4.1 of circular DOR.CRE.REC.23/21.08.008/2022-23 dated April 19, 2022 on opening of current accounts and cash credit (CC)/overdraft (OD) accounts by banks and in order to provide greater operational flexibility to the exporters, AD Category-I banks maintaining Special Rupee Vostro Account were permitted to open an additional special current account for its exporter constituent exclusively for settlement of their export transactions. January 31, 2024 Guidelines including for allowing advance payment for 11 days were issued for import of gold by Tariff Rate Quota (TRQ) holders under the India-UAE Comprehensive Economic Partnership Agreement (CEPA) as notified by the International Financial Services Centres Authority (IFSCA). April 24, 2024 To avoid instances of unauthorised entities offering foreign exchange (forex) trading facilities to Indian residents with promises of disproportionate/exorbitant returns, AD Category-I banks were advised to be more vigilant and exercise greater caution in this regard and bring such transactions to the notice of Directorate of Enforcement, Government of India (GoI), for further action, as deemed fit. 2024-25 May 6, 2024 The Foreign Exchange Management (Deposit) Regulations, 2016 were amended by allowing a person resident outside India (PROI) to open, hold and maintain an interest-bearing account in Indian Rupees and/or foreign currency for the purpose of posting and collecting margin in India, for a permitted derivative contract entered into by such person in terms of extant regulations. 272CUSTOMER CENTRIC MEASURES Year Date Topic May 27, 2024 To ensure the reach and prevent potential misuse of permitted money changing activities, it was advised that from July 1, 2024, value of foreign currency notes sold by FFMCs/non-bank ADs Category-II to the public for permitted purposes should not be less than 75 per cent of the value of foreign currency notes purchased from other FFMCs/ADs, on a quarterly basis. June 11, 2024 To provide operational flexibility, the facility of opening an additional special current account by the AD Category-I banks (for its constituents) has been extended for settlement of their export as well as import transactions. July 3, 2024 To improve ease of doing business, ADs were permitted to facilitate remittances on the basis of online/physical submission of Form A2 and other related documents, subject to Section 10(5) of FEMA, 1999. Accordingly, the limit on the amount being remitted on the basis of ‘online’ Form A2 was removed. Further, ADs were permitted to obtain Form A2 in physical or digital form for all cross-border remittances irrespective of the value of transaction. July 10, 2024 Authorised Persons (APs) were permitted to facilitate remittances for all permissible purposes under LRS to IFSCs for availing financial services or financial products as per the IFSCA Act, 2019 within IFSCs. Additionally, they were allowed to facilitate all permissible current or capital account transactions under LRS in any other foreign jurisdiction through a foreign currency account (FCA) held in IFSCs. October 1, 2024 The Foreign Exchange (Compounding Proceedings) Rules, 2024 (‘new Rules’) was notified by the GoI, in consultation with the Reserve Bank, on September 12, 2024. Accordingly, the Directions issued under earlier circulars were reviewed and new guidelines for compounding were issued for the APs. 2024-25 November 11, 2024 The Reserve Bank (in consultation with the GoI and SEBI) finalised an operational framework for reclassification of foreign portfolio investment (FPI) as foreign direct investment (FDI) under Foreign Exchange Management (Non-Debt Instruments) Rules, 2019. As per the framework, in case of any breach of the investment limit (10 per cent of the total paid-up capital on a fully diluted basis) by any FPI concerned, would be having the option of reclassifying such holdings as FDI in addition to the earlier option of divesting their holdings. January 14, 2025 • The Foreign Exchange Management (Deposit) Regulations, 2016 was amended to allow PROIs (other than banks) to open Indian Rupee (INR) accounts with the overseas branches of AD banks. As per the amendment, all permissible current and capital account transactions with persons resident in India (PRIs) and all transactions with other PROIs were allowed to be settled through special non-resident rupee (SNRR) accounts. Further, transfers between repatriable INR accounts [SNRR/special rupee vostro account (SRVA)/non-resident external (NRE) Account /vostro account] were also allowed. • The Foreign Exchange Management (Mode of Payment and Reporting of Non-Debt Instruments) Regulations, 2019, were amended to enable balances in SRVA and SNRR accounts to be used for making foreign investment in India. • Foreign Exchange Management (Foreign Currency Accounts by a person resident in India) Regulations, 2015, were amended to permit all resident exporters to open foreign currency accounts overseas for settling trade transactions subject to ensuring the applicable realisation and repatriation provisions. It was clarified that exporters receiving payments in local currencies can use these currencies to pay for imports from that territory. 273ANNUAL REPORT 2024-25 Year Date Topic February 10, 2025 To facilitate alignment of the external trade and payment/receipt regulations with the ACU agreement, the Foreign Exchange Management (Manner of Receipt and Payment) Regulations, 2023 were amended so that the trade related payments/receipts are routed through the ACU mechanism only if they were between two residents in the territory of ACU member countries. 2024-25 March 17, 2025 In the wake of signing of Memorandum of Understanding (MoU) between the Reserve Bank and Maldives Monetary Authority in November 2024 for establishing a framework to promote the use of local currencies, i.e., INR and Maldivian Rufiyaa (MVR) for bilateral transactions, the settlement of bilateral trade transactions with the Maldives was allowed in local currencies, in addition to the ACU mechanism, as hitherto. Department of Regulation April 7, 2022 As a part of continued efforts to improve availability of digital infrastructure for banking services and deepen digital financial inclusion and education, the concept of ‘Digital Banking Units’ (DBUs) was introduced by the Reserve Bank. April 21, 2022 Master Direction on ‘Credit Card and Debit Card - Issuance and Conduct’ was released (effective July 1, 2022). June 8, 2022 The Reserve Bank permitted eligible urban cooperative banks (UCBs) to offer ‘Doorstep Banking’ services to their customers by issuing circular on ‘Section 23 of the Banking Regulation Act, 1949 - Doorstep Banking’. 2022-23 August 12, 2022 In view of concerns arising from the activities of agents employed by Regulated Entities (REs), the Reserve Bank advised that the REs shall strictly ensure that they or their agents do not resort to intimidation or harassment of any kind including calling the borrower before 8:00 a.m. and after 7:00 p.m. for recovery of overdue loans. September 2, 2022 The Reserve Bank issued the guidelines on digital lending to ensure that the benefits of technology are effectively leveraged in a sustainable and orderly manner. January 5, 2023 A press release was issued to sensitise the public about the different options available with them regarding periodic updation of know your customer (KYC) [re-KYC]. April 28, 2023 • Updation/periodic updation - AadhaarOTP based e-KYC in non-face to face mode has been permitted to be used for periodic updation of KYC by customer. • Customer due diligence (CDD) procedure of sole proprietorship firm - Udyam registration certificate (URC) has been included in the list of documents for proof of activity in case of sole proprietorship firm for CDD process vide an amendment to Master Direction on KYC. 2023-24 August 17, 2023 To facilitate the depositors to search the unclaimed deposits across multiple banks easily and at one place and in pursuance of the Directions of the Depositor Education and Awareness (DEA) Fund Committee, the Reserve Bank developed a centralised web portal UDGAM - Unclaimed Deposits Gateway to Access inforMation. August 18, 2023 • Circular on ‘Reset of Floating Interest Rate on Equated Monthly Instalments (EMI) based Personal Loans’ was issued with the objective to ensure a proper conduct framework and implementation across REs. 274CUSTOMER CENTRIC MEASURES Year Date Topic August 18, 2023 • Circular on ‘Fair Lending Practice - Penal Charges in Loan Accounts’ was issued which mandates a clear conduct framework with regard to levy of penal charges in a reasonable and transparent manner. September 13, 2023 Circular on ‘Responsible Lending Conduct - Release of Movable/Immovable Property Documents on Repayment/ Settlement of Personal Loans’ was issued to promote responsible lending conduct among the REs. October 26, 2023 • Framework for compensation to customers for delayed updation/rectification of credit information was introduced wherein complainants shall be entitled to a compensation of ₹100 per calendar day in case their complaint is not resolved within a period of 30 calendar days from the date of the initial filing of the complaint. • To improve the efficacy of grievance redress mechanism and strengthen the customer service provided by credit information companies (CICs) and credit institutions (CIs), various measures were introduced, which, inter alia, include compensation mechanism for delayed updation/rectification of credit information and notifying customers via SMS/ email regarding access of their credit information reports (CIRs) or reporting of default 2023-24 information by CIs to CICs. January 1, 2024 Revised instructions on the circular ‘Inoperative Accounts/Unclaimed Deposits in Banks’ were issued. February 2, 2024 A press release was issued to sensitise the public about the frauds committed in the name of KYC updation. March 7, 2024 Master Direction on ‘Credit Card and Debit Card - Issuance and Conduct Directions, 2022’, was amended, further strengthening the consumer protection measures. FAQs on the subject were also issued based on feedback received from all stakeholders. With an objective to create awareness about account aggregator (AA) to general public, - public awareness campaigns for AA facility were organised through a media mix. Public awareness campaigns through television mode were launched to educate the public about: (i) the use of the KYC identifier issued by the central know your customer record - registry (CKYCR) for paperless onboarding process; (ii) different options available for re- KYC; and (iii) preventing customers’ accounts from being misused as mule account. April 15, 2024 Key Facts Statement (KFS) for Loans and Advances: In order to enhance transparency and reduce information asymmetry on financial products being offered by REs and empower borrowers in making an informed financial decision, a harmonised circular has been issued on April 15, 2024, advising REs to provide a KFS to prospective borrowers in respect of all retail and micro, small and medium enterprise (MSME) term loans. August 8, 2024 In order to enable credit information reports provided by Credit Information Companies (CICs) to reflect the more current information, the frequency of reporting of credit information 2024-25 by Credit Institutions (CIs) to CICs has been increased from monthly to fortnightly or shorter intervals with effect from January 1, 2025. October 10, 2024 As per Credit Information Companies (Regulation) Act, 2005 (CICRA) only CIs can submit credit information to CICs. When a regulated entity’s license or certificate of registration (CoR) is cancelled by the Reserve Bank, it is no longer deemed as CI and thus unable to submit credit information of its borrowers to CICs, leading to gaps in borrowers’ repayment history. To address the hardship faced by borrowers of such entities, a credit information reporting mechanism subsequent to the cancellation of the license/CoR has been prescribed. 275ANNUAL REPORT 2024-25 Year Date Topic November 6, 2024 The know your customer (KYC) identifier issued by central KYC records registry (CKYCR) 2024-25 has been made the first resort for KYC and re-KYC purposes, thus, making the KYC process simpler, convenient and paperless. FinTech Department June 6, 2022 Opening of application window for fourth cohort under the Regulatory Sandbox (RS) with the theme ‘Prevention and Mitigation of Financial Frauds’ was announced. September 2, 2022 Digitalisation of rural finance in India - pilot for kisan credit card (KCC) lending developed in association with the Reserve Bank Innovation Hub commenced. 2022-23 October 7, 2022 ‘Concept Note on Central Bank Digital Currency (CBDC)’ was issued. November 29, 2022 Operationalisation of CBDC - Pilot for CBDC - retail (e₹-R) was launched on December 1, 2022. February 14, 2023 Second global hackathon - HaRBInger 2023 - with the theme ‘Inclusive Digital Services’ was launched. August 14, 2023 Pilot project for Public Tech Platform for Frictionless Credit was launched on August 17, 2023. October 27, 2023 Opening of application window for Fifth cohort under RS which was theme neutral was 2023-24 announced. February 28, 2024 Revision in enabling framework for RS was undertaken. May 28, 2024 The ‘FinTech Repository’ and ‘EmTech Repository’ were launched. The repositories would enable availability of aggregate sectoral level data, trends, analytics, etc., that would be useful for both policymakers and participating industry members. May 30, 2024 The Reserve Bank published the ‘Framework for Recognising Self-Regulatory Organisation(s) for FinTech Sector’ (SRO-FT framework). 2024-25 June 7, 2024 Third global hackathon - HaRBInger 2024 - with the themes ‘Zero Financial Frauds’ and ‘Being Divyang Friendly’ was launched. August 28, 2024 Fintech Association for Consumer Empowerment (FACE) was recognised as SRO in the FinTech sector. December 26, 2024 Announced setting up of a committee to develop a ‘Framework for Responsible and Ethical Enablement of Artificial Intelligence (FREE-AI)’ in the financial sector. Department of Supervision April 10, 2023 Master Direction on ‘Outsourcing of Information Technology Services’ was issued to ensure that outsourcing arrangements shall not diminish RE’s ability to fulfil its obligations towards customers while ensuring security of customer data. 2023-24 November 7, 2023 Master Direction on ‘Information Technology Governance, Risk, Controls and Assurance Practices’ was released. The Master Direction requires adequate oversight across an organisation in order to ensure availability of digital services to the customers in a safe and secure manner. April 29, 2024 To improve fairness and transparency in charging of interest by the lenders, while providing 2024-25 adequate freedom to REs as regards their loan pricing policy, the Reserve Bank issued guidelines on ‘Fair Practices Code for Lenders – Charging of Interest’. 276CUSTOMER CENTRIC MEASURES Year Date Topic October 24, 2024 Seminars for principal officers of banks were held to sensitise on the need for effective measures to thwart cyber-enabled frauds and money mules and also protect customer interests through ongoing awareness campaigns educating them on the fraud typologies, cyber safety and cyber hygiene practices. December 2, 2024 A circular was issued to the commercial banks (excluding RRBs) advising, inter alia, to take necessary steps urgently to bring down the number of inoperative/frozen accounts, make the process of activation of such accounts smoother and hassle free and organise special 2024-25 campaigns for facilitating activation of inoperative/frozen accounts. January 17, 2025 A circular was issued to the deposit taking supervised entities reiterating the need to obtain nomination in case of all existing and new customers having deposit accounts, safe custody articles and safety lockers, as the case may be. Apart from directly notifying the customers, they were also advised to publicise the benefits of using the nomination facility through various media, including launching of periodical drives towards achieving a full coverage of all eligible customer accounts. Consumer Education and Protection Department Satisfaction survey was conducted to assess the satisfaction levels of complainants who - approached the Office of RBI Ombudsman (ORBIOs). October 6, 2022 To strengthen and improve the efficiency of the internal grievance redress (IGR) mechanism of CICs, the Internal Ombudsman (IO) mechanism was extended to CICs. The information provided on the interactive voice response system (IVRS) of the contact centre was improved, with 24x7 support. Expanded language support was provided at the - contact centre by adding call support in Punjabi (with effect from January 6, 2022) and Assamese (with effect from June 21, 2022), thereby increasing availability of call support to 10 regional languages in addition to Hindi and English. A pan-India awareness campaign was launched to ensure deeper percolation of the financial 2022-23 consumer awareness on safe banking practices, the Reserve Bank’s alternate grievance redress (AGR) mechanism and extant regulations for protection of consumer interests. The - campaign was run as a multi- phased, multi-pronged financial awareness campaign in the wake of the ‘AzadikaAmritMahotsav’ and covered three phases, viz., Ombudsman speak events; talkathon by Top Management; and a month long nationwide intensive awareness programme (NIAP). A booklet, namely, ‘Raju and the Forty Thieves’ in Hindi and English was released to provide glimpses of the modus operandi on financial frauds and simple tips about do’s and don’ts - as safeguards against such incidents. The booklet is also available in multiple regional languages. March 15, 2023 The second edition of the ‘Ombudsman Speak’ programme was conducted. April 1, 2023 A new office of RBI Ombudsman was set up in Shimla to expand the presence of the offices of RBI Ombudsman in more states of the country. April 24, 2023 Committee to review the customer service standards in regulated entities, chaired by Shri B. 2023-24 P. Kanungo, former Deputy Governor, RBI, submitted its report. Considering the volume of complaints received from Tamil Nadu and West Bengal, two new - offices of RBI Ombudsman were set up in Chennai (with effect from April 17, 2023) and Kolkata (with effect from June 1, 2023). 277ANNUAL REPORT 2024-25 Year Date Topic December 29, 2023 Master Direction - Reserve Bank of India (Internal Ombudsman for Regulated Entities) Directions, 2023 was issued to harmonise the instructions applicable to the various REs on the IO mechanism. February 5, 2024 State-of-the-art contact centres at two more locations, viz., Bhubaneswar and Kochi to address queries from the customers of the REs on alternate grievance redressal (AGR) of the Reserve Bank were operationalised. The new centres also facilitate business continuity and disaster recovery. The existing contact centre at Chandigarh was upgraded. 2023-24 March 15, 2024 The third awareness booklet ‘The Alert Family’ was launched in March 2024. The booklet provides guidance to the members of the public on financial frauds and dispels common misconceptions regarding various banking services and facilities. CMS platform was enhanced with additional audio captcha functionality specifically designed - for visually impaired consumers. The readability of the communication templates residing in CMS was significantly improved - leading to better comprehension and a more positive user experience. January 17, 2025 A circular on ‘Prevention of Financial Frauds Perpetrated Using Voice Calls and SMS – Regulatory Prescriptions and Institutional Safeguards’ was issued to all regulated entities 2024-25 of the Reserve Bank to put in place a mechanism to mitigate the potential misuse of mobile numbers by fraudsters. Internal Debt Management Department May 28, 2024 The ‘RBI Retail Direct’ mobile application was launched with an objective to improve the ease of access and convenience of investing in G-secs for the retail investors. The mobile application offers a single sign-on facility for seamless navigation between primary market and secondary market modules of the application. 2024-25 February 28, 2025 Unified payments interface (UPI) single-block-and-single-debit payment mode (UPI mandate) was launched to enable the investors to pre-authorise transactions and block the funds in their accounts for debits to be initiated as per the scheduled timeline for placement of bids in primary auctions. Department of Currency Management September 21, 2022 The accessibility of the Mobile Aided Note Identifier (MANI) app, launched on January 1, 2020, was enhanced for identification of banknote denominations through audio notification by inclusion of 11 more languages, in addition to Hindi and English that were available earlier. The app was also enabled for use by partially-sighted persons. 2022-23 To create awareness on customer services, a campaign was undertaken on ‘Exchange of - Banknotes’ through SMS, FM radio and digital media (website). A campaign was undertaken for dispelling misconceptions and allaying fears on coins of - different designs of the same denomination in circulation through a media mix of print and radio. April 1, 2023 To facilitate ease of transaction for public, the Reserve Bank introduced value-based, viz., 2023-24 ₹50, ₹100, ₹150, etc., packets of coins in various denominations. 278CUSTOMER CENTRIC MEASURES Year Date Topic February 1, 2024 Mobile coin vans (MCVs) scheme, launched on October 1, 2022, has been extended across the country since February 2024. Additionally, the scope of services has been broadened to facilitate the exchange of lower denomination notes, which are unfit for circulation. Pan-India radio campaign through Akashwani/VividhBharti/private FM radio channels was 2023-24 - conducted to promote awareness about the MANI app, which facilitates visually impaired persons to identify denomination of Indian banknotes. Surveys were conducted with a view to understand the perception among the members of - public on quality of notes in circulation. The first one conducted during 2022-23 covered select states of the country, followed by another pan-India survey during 2023-24. With a view to seek ground-level feedback for aligned policy making, workshops were held for nodal officers and vertical heads of currency chest (CC) holding banks which facilitated - two-way exchange of perspectives with the stakeholders that benefitted the currency management domain and customer service provided by banks. Monitoring meetings with major CC holding banks were conducted to discuss issues/ - concerns, adherence to the Reserve Bank guidelines and to address operational and 2024-25 compliance issues. Awareness campaigns were conducted through digital media, social media and All India Radio (AIR) to dispel misinformation about coins among members of the public. The Reserve - Bank also conducted awareness campaign on MANI App through AIR. Further, print, digital and social media campaigns were organised for creating awareness on exchange facility for soiled notes. Department of Payment and Settlement Systems April 2, 2022 Acceptance of RuPay cards was launched in Nepal. May 19, 2022 Interoperable card-less cash withdrawal (ICCW) at ATMs was enabled. June 16, 2022 On a review of implementation of the e-mandate framework and the protection available to customers, the limit for relaxation of additional factor of authentication (AFA) was increased from ₹5,000 to ₹15,000 per transaction. 2022-23 February 10, 2023 Issuance of Prepaid Payment Instruments (PPIs) to access UPI was allowed to foreign nationals from G20 countries visiting India. February 21, 2023 The Reserve Bank and the Monetary Authority of Singapore (MAS) operationalised linkage of their respective fast payment system (FPS), UPI and PayNow, enabling users of the two systems to make instant and low-cost cross-border peer-to-peer (P2P) payments on a reciprocal basis. March 6, 2023 Mission ‘HarPayment Digital’ was launched. June 7, 2023 The scope of trade receivables discounting system was expanded. 2023-24 August 24, 2023 Transaction limits for small value digital payments in offline mode were enhanced. October 31, 2023 Circular on ‘Regulation of Payment Aggregator - Cross Border’ was issued. 279ANNUAL REPORT 2024-25 Year Date Topic December 12, 2023 Limits for subsequent recurring transactions undertaken without additional factor of authentication under the e-mandate framework were enhanced for specified categories. December 20, 2023 Card-on-File Tokenisation (CoFT) through card issuing banks was enabled. February 1, 2024 Acceptance of UPI through QR codes for merchant payments in France (e-commerce) was launched. February 12, 2024 RuPay cards and UPI connectivity between India and Mauritius, and UPI connectivity 2023-24 between India and Sri Lanka was launched. February 23, 2024 Master Direction on PPIs was amended. February 29, 2024 Master Direction on BharatBill Payment System was issued. March 6, 2024 Guidelines on ‘Arrangements with Card Networks for issue of Credit Cards’ were issued. March 8, 2024 Acceptance of UPI through QR codes for merchant payments in Nepal went live. August 22, 2024 Processing of e-mandates for recurring transactions - introduced auto-replenishment of FASTag and national common mobility card (NCMC) and dispensed the pre-debit notification for such auto-replenishments through e-mandates. October 11, 2024 Guidelines for facilitating accessibility to digital payment systems for persons with disabilities were issued. 2024-25 December 4, 2024 Amendment was made to ‘Framework for Facilitating Small Value Digital Payments in Offline Mode’ to provide enhanced limits for UPI Lite transactions. December 27, 2024 UPI access for PPIs through third-party applications was enabled. December 30, 2024 Beneficiary bank account name look-up facility for real time gross settlement (RTGS) and national electronic funds transfer (NEFT) systems was introduced. -: Not applicable (ongoing in nature). 280APPENDIX TABLES APPENDIX TABLE 1: MACROECONOMIC AND FINANCIAL INDICATORS Item Average Average Average 2022-23 2023-24 2024-25 2003-04 2009-10 2014-15 to to to 2007-08 2013-14 2018-19 (5 years) (5 years) (5 years) 1 2 3 4 5 6 7 I. Real Economy I.1 Real GDP at Market Prices (% change)* 7.9 6.7 7.4 7.6 9.2 6.5 I.2 Real GVA at Basic Prices (% change)* 7.7 6.3 7.0 7.2 8.6 6.4 I.3 Foodgrains Production (Million Tonnes)** 213.6 248.8 269.8 329.7 332.3 330.9 I.4 a) Food Stocks (Million Tonnes)*** 18.6 50.1 44.6 51.7 60.7 74.9 b) Procurement (Million Tonnes) 39.3 61.3 66.5 73.1 78.7 77.9 c) Off-take (Million Tonnes) 41.5 57.0 61.5 93.1 67.7 64.9 I.5 Index of Industrial Production (% change) 11.2 4.6 4.0 5.2 5.9 4.0 I.6 Index of Eight Core Industries (% change) 5.9 4.9 4.3 7.8 7.6 4.5 I.7 Gross Domestic Saving Rate (% of GNDI at Current Prices)* 33.6 33.9 31.2 30.2 30.3 - I.8 Gross Domestic Investment Rate (% of GDP at Current Prices)* 35.2 38.0 33.1 32.6 31.4 - II. Prices II.1 Consumer Price Index (CPI) Combined (average % change) - - 4.5 6.7 5.4 4.6 II.2 CPI-Industrial Workers (IW) [average % change] 5.0 10.3 4.9 6.1 5.2 3.4 II.3 Wholesale Price Index (WPI) [average % change]# 5.5 7.1 1.3 9.4 -0.7 2.3 III. Money and Credit## III.1 Reserve Money (% change) 20.4 12.1 10.7 7.8 5.6 3.3 III.2 Broad Money (M) [% change] 18.6 14.7 9.5 9.0 11.1 9.6 3 III.3 a) Aggregate Deposits of Scheduled Commercial Banks 20.2 15.0 9.5 9.6 12.9 10.6 (% change) b) Bank Credit of Scheduled Commercial Banks (% change) 26.7 16.7 9.6 15.0 16.3 12.1 IV. Financial Markets IV.1 Interest rates (%) a) Call/Notice Money rate 5.6 7.2 6.7 5.4 6.6 6.5 b) 10-year G-sec yield 7.0 8.0 7.6 7.3 7.2 6.9 c) 91-Days T-bill yield 5.8 7.1 7.0 5.6 6.8 6.6 d) Weighted Average cost of Central Government Borrowings 7.2 8.1 7.7 7.3 7.2 7.0 e) Commercial Paper 7.7 8.4 7.8 6.3 7.4 7.4 f) Certificates of Deposit 8.9† 8.2 7.5 6.4 7.2 7.2 IV.2 Liquidity (₹ lakh crore) a) LAF Outstanding~ - - - 1.3 0.6 1.3 b) MSS Outstanding~~ - - - - - - c) Average Daily Call Money Market Turnover 0.2 0.3 0.3 0.2 0.2 0.2 d) Average Daily G-sec Market Turnover 0.1 0.4 0.8 0.7 0.9 1.1 e) Variable Rate Repo~ - - - 0.0 1.0 2.7 f) Variable Rate Reverse Repo~ - - - 0.0 0.0 0.0 g) MSF~ - - - 0.3 0.9 0.1 h) SDF~ - - - 2.3 2.5 4.1 V. Government Finances V.1 Central Government Finances (% of GDP)$ a) Revenue Receipts 10.0 9.2 8.6 8.9 9.1 9.3 b) Capital Outlay 1.6 1.6 1.5 2.3 2.6 2.6 c) Total Expenditure 14.9 15.0 12.8 15.6 14.8 14.2 d) Gross Fiscal Deficit 3.7 5.4 3.7 6.5 5.5 4.7 V.2 State Government Finances$$ a) Revenue Deficit (% of GDP) 0.3 -0.1 0.1 0.2 0.3 0.6 b) Gross Fiscal Deficit (% of GDP) 2.7 2.3 2.8 2.7 3.0 3.6 c) Primary Deficit (% of GDP) 0.3 0.6 1.2 1.0 1.3 1.8 281ANNUAL REPORT 2024-25 APPENDIX TABLE 1: MACROECONOMIC AND FINANCIAL INDICATORS (Concld.) Item Average Average Average 2022-23 2023-24 2024-25 2003-04 2009-10 2014-15 to to to 2007-08 2013-14 2018-19 (5 years) (5 years) (5 years) 1 2 3 4 5 6 7 VI. External Sector VI.1 Balance of Payments@ a) Merchandise Exports (% change) 25.3 12.2 1.6 6.3 -3.2 1.8 b) Merchandise Imports (% change) 32.3 9.7 2.7 16.6 -4.9 7.8 c) Trade Balance/GDP (%) -5.5 -9.1 -6.2 -7.9 -6.7 -7.9 d) Invisible Balance/GDP (%) 5.2 5.8 4.8 5.9 6.0 6.6 e) Current Account Balance/GDP (%) -0.3 -3.3 -1.4 -2.0 -0.7 -1.3 f) Net Capital Flows/GDP (%) 4.7 3.8 2.7 1.8 2.5 0.8 g) Reserve Changes (BoP basis) [US $ billion] -40.3 -6.6 -28.2 9.1 -63.7 13.8 [Increase (-)/Decrease (+)] VI.2 External Debt Indicators@@ a) External Debt Stock (US$ billion) 156.5 359.0 500.6 623.9 668.8 717.9 b) Debt-GDP Ratio (%) 17.8 20.9 21.4 19.1 18.5 19.1 c) Import Cover of Reserves (in Months) 14.0 8.5 10.3 9.6 11.3 10.5 d) Short-term Debt to Total Debt (%) 13.6 21.3 18.6 20.6 19.1 19.4 e) Debt Service Ratio (%) 8.3 5.6 7.7 5.3 6.7 6.6 f) Reserves to Debt (%) 113.7 84.8 76.2 92.7 96.7 88.6 VI.3 Openness Indicators (%)@ a) Export plus Imports of Goods/GDP 30.7 41.0 32.0 35.2 31.0 30.4 b) Export plus Imports of Goods & Services/GDP 41.3 53.2 43.7 50.4 45.3 45.5 c) Current Receipts plus Current Payments/GDP 47.1 59.4 49.4 57.1 52.5 53.5 d) Gross Capital Inflows plus Outflows/GDP 37.3 50.4 45.2 38.4 44.4 58.9 e) Current Receipts & Payments plus Capital Receipts & 84.4 109.8 94.6 95.5 96.9 112.3 Payments/GDP VI.4 Exchange Rate Indicators a) Exchange Rate (Rupee/US Dollar) End of Period 43.1 51.1 65.6 82.2 83.4 85.6 Average 44.1 51.2 65.6 80.4 82.8 84.6 b) 40-Currency REER (% change) 3.1^ 0.8 1.8 -1.8 0.9 1.5 c) 40-Currency NEER (% change) 1.7^ -4.9 0.2 -2.1 -0.5 0.3 d) 6-Currency REER (% change) 5.7^ 2.3 2.0 -0.4 -0.1 1.1 e) 6-Currency NEER (% change) 2.6^ -5.1 -1.1 -1.3 -2.7 -1.5 - : Not Available/Not Applicable. * : Data are at 2011-12 base year series. ** : Data for 2024-25 are for kharif and rabi crops only (excluding summer crops) as per second advance estimates for agriculture production. *** : Data pertain to stocks of rice and wheat as on March 31 for all years. # : Data for 2024-25 are provisional. ## : Data for 2024-25 for Reserve Money pertain to March 28, 2025, while that of Money Supply relate to March 21, 2025. † : Data in column 2 pertains to April 13, 2007 to March 28, 2008. ~ : Outstanding as on March 31. ~~ : Outstanding as on last Friday of the financial year. $ : Data for 2024-25 are revised estimates. Ratios may vary from those published in the Union Budget due to revision in GDP numbers. $$ : Data pertains to 28 states and 3 union territories (UTs). Data for 2023-24 and 2024-25 are accounts data and revised estimates, respectively. @ : Data for 2024-25 are provisional and pertain to April-December 2024. @@ : Data for 2024-25 are provisional and pertain to end-December 2024. ^ : Data in column 2 is average of period 2005-06 to 2007-08. Note : 1. For Index of Industrial Production and Index of Eight Core Industries, data in columns 2, 3 and 4 are at 2011-12 base year. 2. Base year for CPI (All India) is 2012=100; base year for WPI is 2011-12=100 for annual data and 2004-05=100 for average of 5 years inflation; base for CPI-IW is 2001=100 till August 2020 and 2016=100 from September 2020 onwards. 3. For Average Daily G-sec Market Turnover, outright trading turnover is in central government dated securities (based on trading days). 4. LAF positive value means absorption. 5. Base year for 6- and 40-currency NEER/REER indices is 2015-16=100. REER figures are based on CPI. Source : RBI, National Statistical Office (NSO), Ministry of Agriculture & Farmers Welfare, Ministry of Commerce and Industry, Food Corporation of India (FCI), Labour Bureau and Budget documents of the central and state governments. 282APPENDIX TABLES APPENDIX TABLE 2: GROWTH RATES AND COMPOSITION OF REAL GROSS DOMESTIC PRODUCT (At 2011-12 Prices) (Per cent) Sector Growth Rate Share Average 2022-23 2023-24 2024-25* 2022-23 2023-24 2024-25* 2017-18 to 2024-25 1 2 3 4 5 6 7 8 GDP at Market Prices (Expenditure Side) 1. Private Final Consumption Expenditure 5.7 7.5 5.6 7.6 58.1 56.1 56.7 2. Government Final Consumption Expenditure 4.8 4.3 8.1 3.8 9.6 9.5 9.2 3. Gross Fixed Capital Formation 6.7 8.4 8.8 6.1 33.6 33.5 33.4 4. Change in Stocks 71.0 24.3 53.4 4.3 1.2 1.7 1.7 5. Valuables 9.6 -16.9 14.4 1.0 1.5 1.5 1.4 6. Net Exports -60.0 22.6 -384.8 56.9 -0.7 -3.2 -1.3 a) Exports 6.9 10.3 2.2 7.1 23.2 21.7 21.8 b) Less Imports 7.1 8.9 13.8 -1.1 23.9 24.9 23.1 7. Discrepancies 13.5 -4.3 128.7 250.5 -3.2 0.8 -1.2 8. GDP 5.5 7.6 9.2 6.5 100.0 100.0 100.0 GVA at Basic Prices (Supply Side) 1. Agriculture, Forestry and Fishing 4.6 6.3 2.7 4.6 15.5 14.7 14.4 2. Industry 4.3 0.0 11.0 4.3 21.4 21.9 21.5 of which: a) Mining and Quarrying -0.3 3.4 3.2 2.8 2.1 2.0 2.0 b) Manufacturing 4.7 -1.7 12.3 4.3 16.9 17.5 17.2 c) Electricity, Gas, Water Supply and Other Utility 6.5 10.8 8.6 6.0 2.4 2.4 2.4 Services 3. Services 6.1 10.2 9.2 7.5 63.1 63.4 64.1 of which: a) Construction 7.1 9.1 10.4 8.6 8.8 8.9 9.1 b) Trade, Hotels, Transport, Communication and 5.6 12.3 7.5 6.4 18.7 18.5 18.5 Services Related to Broadcasting c) Financial, Real Estate and Professional Services 6.4 10.8 10.3 7.2 23.3 23.6 23.8 d) Public Administration, Defence and Other Services 5.8 6.7 8.8 8.8 12.3 12.4 12.7 4. GVA at Basic Prices 5.4 7.2 8.6 6.4 100.0 100.0 100.0 *: Second advance estimates of national income for 2024-25. Source: NSO and RBI staff estimates. 283ANNUAL REPORT 2024-25 APPENDIX TABLE 3: GROSS SAVINGS (Per cent of GNDI) Item 2020-21 2021-22 2022-23 2023-24 1 2 3 4 5 I. Gross Savings 28.7 30.8 30.2 30.3 I.1 Non-financial Corporations 10.4 11.4 10.9 10.9 I.1.1 Public Non-financial Corporations 1.2 1.3 1.2 1.5 I.1.2 Private Non-financial Corporations 9.2 10.1 9.7 9.4 I.2 Financial Corporations 2.6 2.5 2.8 2.5 I.2.1 Public Financial Corporations 1.4 1.5 1.7 1.4 I.2.2 Private Financial Corporations 1.2 1.0 1.1 1.1 I.3 General Government -6.6 -2.9 -1.9 -0.9 I.4 Household Sector 22.4 19.8 18.3 17.9 I.4.1 Net Financial Saving 11.6 7.2 4.9 5.1 Memo: Gross Financial Saving 15.2 10.9 10.7 11.2 I.4.2 Saving in Physical Assets 10.6 12.4 13.2 12.6 I.4.3 Saving in the Form of Valuables 0.2 0.3 0.2 0.2 GNDI: Gross national disposable income. Note: Net financial saving of the household sector is obtained as the difference between gross financial savings and financial liabilities during the year. Source: NSO. 284APPENDIX TABLES APPENDIX TABLE 4: INFLATION, MONEY AND CREDIT (Per cent) Inflation Consumer Price Index (CPI) [All India] Rural Urban Combined 2022-23 2023-24 2024-25 2022-23 2023-24 2024-25 2022-23 2023-24 2024-25 1 2 3 4 5 6 7 8 9 10 General Index (All Groups) 6.8 5.6 5.0 6.4 5.1 4.1 6.7 5.4 4.6 Food and Beverages 6.8 6.9 6.9 6.5 7.3 6.5 6.7 7.0 6.7 Housing … … … 4.3 3.9 2.8 4.3 3.9 2.8 Fuel and Light 9.6 1.8 -0.9 11.6 0.3 -5.1 10.3 1.2 -2.5 Miscellaneous 5.9 4.6 4.2 6.6 4.4 4.0 6.3 4.5 4.1 Excluding Food and Fuel 6.3 4.5 3.7 5.9 4.2 3.4 6.1 4.3 3.5 Other Price Indices 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 2024-25 1. Wholesale Price Index (2011-12=100)# All Commodities 1.7 2.9 4.3 1.7 1.3 13.0 9.4 -0.7 2.3 Primary Articles 3.4 1.4 2.7 6.8 1.7 10.2 10.0 3.5 5.1 of which : Food Articles 4.0 2.1 0.3 8.4 3.2 4.1 7.3 6.6 7.3 Fuel and Power -0.3 8.2 11.5 -1.8 -8.0 32.5 28.1 -4.7 -1.3 Manufactured Products 1.3 2.7 3.7 0.3 2.8 11.1 5.6 -1.7 1.7 Non-food Manufactured Products -0.1 3.0 4.2 -0.4 2.2 11.0 5.8 -1.4 0.7 2. CPI- Industrial Workers (IW) [2001=100] 4.1 3.1 5.4 7.5 5.0 5.1 6.1 5.2 3.4 of which : CPI- IW Food 4.4 1.5 0.6 7.4 5.8 4.7 6.1 7.3 6.0 3. CPI- Agricultural Labourers 4.2 2.2 2.1 8.0 5.5 4.0 6.8 7.1 5.7 (1986-87=100) 4. CPI- Rural Labourers (1986-87=100) 4.2 2.3 2.2 7.7 5.5 4.2 7.0 6.9 5.7 Money and Credit 2016-17^ 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 2024-25^^ Reserve Money (RM) -12.9 27.3 14.5 9.4 18.8 13.0 7.8 5.6 3.3 Currency in Circulation -19.7 37.0 16.8 14.5 16.6 9.8 7.8 3.9 5.8 Bankers’ Deposits with RBI 8.4 3.9 6.4 -9.6 28.5 25.4 6.1 10.2 -6.5 Currency-GDP Ratio$ 8.7 10.7 11.3 12.2 14.4 13.3 12.6 11.7 11.2 Narrow Money (M) -3.9 21.8 13.6 11.2 16.2 10.7 6.9 7.3 7.9 1 Broad Money (M) 6.9 9.2 10.5 8.9 12.2 8.8 9.0 11.1 9.6 3 Currency-Deposit Ratio 11.0 14.4 15.4 16.3 17.2 17.4 17.3 16.0 15.4 Money Multiplier* 6.7 5.8 5.6 5.5 5.2 5.0 5.1 5.4 5.7 GDP-M Ratio$* 1.2 1.2 1.2 1.2 1.1 1.2 1.2 1.2 1.2 3 Scheduled Commercial Banks Aggregate Deposits 11.3 6.2 10.0 7.9 11.4 8.9 9.6 12.9 10.6 Bank Credit 4.5 10.0 13.3 6.1 5.6 9.6 15.0 16.3 12.1 Non-food Credit 5.2 10.2 13.4 6.1 5.5 9.7 15.4 16.3 12.0 Credit-Deposit Ratio 72.9 75.5 77.7 76.4 72.4 72.2 75.8 78.1 79.1 Credit-GDP Ratio$ 50.9 50.5 51.7 51.6 55.1 50.4 50.9 52.8 53.8 # : Data for 2024-25 are provisional. … : CPI Rural for Housing is not compiled. ^ : March 31, 2017, over April 1, 2016, barring RM and its components. ^^ : Data for Reserve Money pertain to March 28, 2025, while that of Money Supply relate to March 21, 2025. $ : GDP data from 2011-12 onwards are based on new series i.e., base: 2011-12. GDP refers to GDP at Current Market Prices. * : Not expressed in per cent. Note: 1. Data refers to y-o-y change in per cent unless specified otherwise. 2. Base for CPI (All India) is 2012=100 whereas base for CPI-IW is 2001=100 till August 2020 and 2016=100 from September 2020 onwards. Source: RBI, NSO, Labour Bureau and Ministry of Commerce and Industry. 285ANNUAL REPORT 2024-25 APPENDIX TABLE 5: CAPITAL MARKET - PRIMARY AND SECONDARY (Amount in ₹ crore) Item 2023-24 2024-25 (P) Number Amount Number Amount 1 2 3 4 5 I. PRIMARY MARKET A. Public and Rights Issues 1. Private Sector (a+b) 383 97,284.2 505 218,120.1 a) Financial 61 29,133.1 81 27,351.3 b) Non-financial 322 68,151.1 424 190,768.8 2. Public Sector (a+b) 2 4,974.7 … … a) Financial 2 4,974.7 … … b) Non-financial … … … … 3. Total (1+2, i+ii) 385 102,258.8 505 218,120.1 Instrument Type (i) Equity 340 83,092.5 464 210,189.8 of which: a) Initial Public Offers 272 67,955.3 320 172,328.1 b) Follow-on Public Offers 1 27.0 2 18,150.0 c) Rights 67 15,110.2 142 19,711.7 (ii) Debt 45 19,166.3 41 7,930.3 B. Euro Issues (ADRs and GDRs) … … … … C. Private Placement 1. Private Sector (a+b) 7,300 771,393.0 7,865 936,710.6 a) Financial 3,952 367,052.9 3,547 348,354.1 b) Non-financial 3,348 404,340.0 4,318 588,356.5 2. Public Sector (a+b) 500 393,035.6 573 529,155.7 a) Financial 131 237,997.9 149 303,326.0 b) Non-financial 369 155,037.7 424 225,829.7 3. Total (1+2, i+ii) 7,800 1,164,428.6 8,438 1,465,866.3 (i) Equity 750 114,126.6 1079 219,681.1 of which: a) Qualified Institutional Placement 61 68,971.5 91 135,597.2 b) Preferential Allotment 689 45,155.2 988 84,083.9 (ii) Debt 7,050 1,050,301.9 7,359 1,246,185.2 D. Mutual Funds Mobilisation (Net)# 1. Private Sector 308,898.0 719,126.8 2. Public Sector 45,803.3 95,988.6 II SECONDARY MARKET BSE Sensex: End-Period 73,651.4 77,414.9 Period Average 66,822.7 78,211.9 Price Earnings Ratio@ 25.2 21.6 Market Capitalisation to GDP ratio (%)$ 128.5 124.7 Turnover Cash Segment 1,629,038.4 1,933,907.4 Turnover Equity Derivatives Segment 802,835,384.3 2,755,653,330.0 NSE Nifty 50: End-Period 22,326.9 23,519.4 Period Average 19,978.3 23,776.7 Price Earnings Ratio@ 22.9 21.4 Market Capitalisation to GDP ratio (%)$ 127.5 124.1 Turnover Cash Segment 20,103,439.4 28,127,848.2 Turnover Equity Derivatives Segment 7,992,767,152.4 7,835,961,740.0 … : Nil. P: Provisional. #: Net of redemptions. @: As at the end of the period. $ : GDP for 2024-25 is as per second advance estimates. Note: Figures in the columns might not add up to the total due to rounding off of numbers. Source: SEBI, NSE, BSE, NSDL,CDSL and RBI staff estimates. 286APPENDIX TABLES APPENDIX TABLE 6: KEY FISCAL INDICATORS (As per cent of GDP) Year Primary Revenue Primary Revenue Gross Fiscal Outstanding Outstanding Deficit Deficit Deficit Deficit Liabilities@ Liabilities$ 1 2 3 4 5 6 7 Centre 1990-91 4.0 3.2 -0.5 7.6 54.6 60.6 1995-96 0.8 2.4 -1.7 4.9 50.3 58.3 2000-01 0.9 3.9 -0.7 5.5 54.6 60.4 2009-10 3.2 5.2 1.9 6.5 55.4 57.3 2010-11 1.8 3.2 0.2 4.8 51.6 53.2 2011-12 2.8 4.5 1.4 5.9 51.7 53.5 2012-13 1.8 3.7 0.5 4.9 51.0 52.5 2013-14 1.1 3.2 -0.2 4.5 50.5 52.2 2014-15 0.9 2.9 -0.3 4.1 50.1 51.4 2015-16 0.7 2.5 -0.7 3.9 50.1 51.5 2016-17 0.4 2.1 -1.1 3.5 48.4 49.5 2017-18 0.4 2.6 -0.5 3.5 48.3 49.5 2018-19 0.4 2.4 -0.7 3.4 48.5 49.6 2019-20 1.6 3.3 0.3 4.6 51.3 52.5 2020-21 5.7 7.3 3.9 9.2 61.4 62.6 2021-22 3.3 4.4 1.0 6.7 58.0 58.9 2022-23 3.0 4.0 0.5 6.5 57.1 58.1 2023-24 2.0 2.5 -1.0 5.5 56.8 57.6 2024-25 (RE)# 1.3 1.8 -1.6 4.7 55.3 56.0 2025-26 (BE) 0.8 1.5 -2.1 4.4 55.5 56.0 States* 1990-91 1.8 0.9 -0.6 3.3 22.2 22.2 1995-96 0.8 0.7 -1.1 2.6 20.8 20.8 2000-01 1.8 2.5 0.1 4.2 28.1 28.1 2009-10 1.2 0.4 -1.4 3.0 26.4 26.4 2010-11 0.4 -0.2 -1.8 2.1 24.4 24.4 2011-12 0.4 -0.3 -1.9 2.0 23.2 23.2 2012-13 0.4 -0.3 -1.8 2.0 22.6 22.6 2013-14 0.7 0.0 -1.5 2.2 22.3 22.3 2014-15 1.1 0.3 -1.2 2.6 22.0 22.0 2015-16 1.5 0.0 -1.6 3.0 23.7 23.7 2016-17 1.8 0.2 -1.4 3.5 25.1 25.1 2017-18 0.7 0.1 -1.6 2.4 25.1 25.1 2018-19 0.8 0.1 -1.6 2.4 25.3 25.3 2019-20 0.9 0.6 -1.1 2.6 26.6 26.6 2020-21 2.1 1.9 -0.1 4.1 31.0 31.0 2021-22 1.0 0.4 -1.4 2.8 29.1 29.1 2022-23 1.0 0.2 -1.5 2.7 28.2 28.2 2023-24 1.3 0.3 -1.4 3.0 … … 2024-25 (RE) 1.8 0.6 -1.2 3.6 … … 2025-26 (BE) 1.5 0.2 -1.5 3.3 ... : Not Available. RE: Revised Estimates. BE: Budget Estimates. @ : Includes external liabilities of the centre calculated at historical exchange rates. $ : Includes external liabilities of the centre calculated at current exchange rates. # : Going by the principle of using latest GDP data for any year, GDP used for 2024-25 (RE) is the latest available which is the second advance estimates. In view of this, the fiscal indicators as per cent of GDP given in this table may at times marginally vary from those reported in the Union Budget documents. * : Data for 2023-24, 2024-25 and 2025-26 are accounts, revised estimates and budget estimates, respectively for 28 states and 3 UTs which have presented their budgets. Note: 1. Negative sign (-) indicates surplus in deficit indicators. 2. GDP figures used in this table are on 2011-12 base, which are the latest available estimates. 3. Columns 6 and 7 are outstanding figures as at end-March of respective years. Source: Budget documents of central and state governments, Status paper on government debt and Quarterly report on public debt management. 287ANNUAL REPORT 2024-25 APPENDIX TABLE 7: COMBINED RECEIPTS AND DISBURSEMENTS OF THE CENTRAL AND STATE GOVERNMENTS (Amount in ₹ thousand crore) Item 2019-20 2020-21 2021-22 2022-23 2023-24 2024-25 RE BE 1 2 3 4 5 6 7 1 Total Disbursements 5,411 6,353 7,098 7,881 9,111 9,801 1.1 Developmental 3,074 3,823 4,189 4,702 5,515 5,863 1.1.1 Revenue 2,447 3,150 3,255 3,575 3,965 4,195 1.1.2 Capital 588 550 862 1,042 1,454 1,527 1.1.3 Loans 40 123 72 85 95 141 1.2 Non-Developmental 2,253 2,443 2,810 3,070 3,467 3,800 1.2.1 Revenue 2,110 2,272 2,603 2,896 3,267 3,537 1.2.1.1 Interest Payments 956 1,061 1,227 1,378 1,563 1,712 1.2.2 Capital 141 169 176 171 196 259 1.2.3 Loans 2 2 32 3 5 4 1.3 Others 83 87 99 109 129 137 2 Total Receipts 5,734 6,397 7,156 7,855 9,055 9,650 2.1 Revenue Receipts 3,852 3,688 4,824 5,448 6,379 7,210 2.1.1 Tax Receipts 3,232 3,193 4,160 4,809 5,457 6,142 2.1.1.1 Taxes on Commodities and Services 2,013 2,076 2,627 2,866 3,248 3,632 2.1.1.2 Taxes on Income and Property 1,216 1,115 1,531 1,940 2,204 2,506 2.1.1.3 Taxes of Union Territories (Without Legislature) 3 3 3 4 4 5 2.1.2 Non-tax Receipts 620 495 663 639 922 1,067 2.1.2.1 Interest Receipts 31 33 35 43 50 57 2.2 Non-debt Capital Receipts 110 65 44 63 87 118 2.2.1 Recovery of Loans & Advances 60 17 28 16 56 45 2.2.2 Disinvestment Proceeds 51 48 16 47 31 73 3 Gross Fiscal Deficit [1 - (2.1 + 2.2)] 1,449 2,600 2,231 2,370 2,645 2,473 3A Sources of Financing: Institution-wise 3A.1 Domestic Financing 1,441 2,530 2,194 2,333 2,620 2,457 3A.1.1 Net Bank Credit to Government 572 890 627 688 346 … 3A.1.1.1 Net RBI Credit to Government 190 107 351 1 -258 … 3A.1.2 Non-Bank Credit to Government 869 1,640 1,567 1,645 2,273 … 3A.2 External Financing 9 70 36 37 25 16 3B Sources of Financing: Instrument-wise 3B.1 Domestic Financing 1,441 2,530 2,194 2,333 2,620 2,457 3B.1.1 Market Borrowings (net) 971 1,696 1,213 1,651 1,963 1,984 3B.1.2 Small Savings (net) 209 459 527 359 434 448 3B.1.3 State Provident Funds (net) 38 41 28 14 21 20 3B.1.4 Reserve Funds 10 5 42 69 52 -34 3B.1.5 Deposits and Advances -14 26 42 52 36 -10 3B.1.6 Cash Balances -323 -44 -58 25 56 150 3B.1.7 Others 549 348 400 163 57 -101 3B.2 External Financing 9 70 36 37 25 16 4 Total Disbursements as per cent of GDP 26.9 32.0 30.1 29.3 30.2 30.0 5 Total Receipts as per cent of GDP 28.5 32.2 30.3 29.2 30.1 29.6 6 Revenue Receipts as per cent of GDP 19.2 18.6 20.4 20.3 21.2 22.1 7 Tax Receipts as per cent of GDP 16.1 16.1 17.6 17.9 18.1 18.8 8 Gross Fiscal Deficit as per cent of GDP 7.2 13.1 9.5 8.8 8.8 7.6 …: Not Available. RE: Revised Estimates. BE: Budget Estimates. Note: 1. GDP data are as per 2011-12 base. GDP for 2024-25 (BE) is from Union Budget 2024-25. 2. The revision of general government fiscal data will be undertaken after all states present their final budget and they are tabulated, consolidated and disseminated by the Reserve Bank through its annual publication - ‘State Finances: A Study of Budgets’. 3. Figures in the columns might not add up to the total due to rounding of numbers. Source: Budget Documents of the central and state governments. 288APPENDIX TABLES APPENDIX TABLE 8: INDIA’S OVERALL BALANCE OF PAYMENTS (US$ million) 2020-21 2021-22 2022-23 2023-24 2024-25 (P) 1 2 3 4 5 6 A. CURRENT ACCOUNT 1 Exports, f.o.b. 296,300 429,164 456,073 4,41,443 3,25,540 2 Imports, c.i.f. 398,452 618,623 721,364 6,86,338 5,52,767 3 Trade Balance -102,152 -189,459 -265,291 -2,44,896 -2,27,227 4 Invisibles, Net 126,065 150,694 198,236 2,18,780 1,90,127 a) ‘Non-factor’ Services of which : 88,565 107,516 143,283 1,62,752 1,35,518 Software Services 89,741 109,540 131,284 1,42,074 1,18,129 b) Income -35,960 -37,269 -45,923 -49,757 -37,278 c) Private Transfers 74,439 81,230 101,776 1,06,631 92,708 5 Current Account Balance 23,912 -38,766 -67,055 -26,116 -37,100 B. CAPITAL ACCOUNT 1 Foreign Investment, Net (a+b) 80,092 21,809 22,834 54,210 10,980 a) Direct Investment 43,955 38,587 27,986 10,129 1,557 b) Portfolio Investment 36,137 -16,777 -5,152 44,081 9,423 2 External Assistance, Net 11,167 5,366 5,521 7,460 4,187 3 Commercial Borrowings, Net -134 8,135 -3,790 -12 7,922 4 Short Term Credit, Net -4,130 20,105 6,539 -833 11,086 5 Banking Capital of which : -21,067 6,669 20,980 40,543 -817 NRI Deposits, Net 7,364 3,234 8,989 14,702 13,333 6 Rupee Debt Service -64 -71 -68 -72 -63 7 Other Capital, Net& -2,143 23,794 6,928 -11,786 -10,595 8 Total Capital Account 63,721 85,807 58,943 89,509 22,701 C. Errors & Omissions -347 459 -1,024 308 578 D. Overall Balance [A(5)+B(8)+C] 87,286 47,501 -9,135 63,702 -13,821 E. Monetary Movements (F+G) -87,286 -47,501 9,135 -63,702 13,821 F. IMF, Net 0 0 0 0 0 G. Reserves and Monetary Gold (Increase -, Decrease +) -87,286 -47,501 9,135 -63,702 13,821 of which : SDR Allocation 0 -17,862 0 0 0 Memo: As a ratio to GDP 1 Trade Balance -3.8 -6.0 -7.9 -6.7 -7.9 2 Net Services 3.3 3.4 4.3 4.5 4.7 3 Net Income -1.3 -1.2 -1.4 -1.4 -1.3 4 Current Account Balance 0.9 -1.2 -2.0 -0.7 -1.3 5 Capital Account, Net 2.4 2.7 1.8 2.5 0.8 6 Foreign Investment, Net 3.0 0.7 0.7 1.5 0.4 P : Data are provisional and pertain to April-December 2024. & : Includes delayed export receipts, advance payments against imports, net funds held abroad, and advances received pending issue of shares under FDI. Note: 1. Gold and silver brought by returning Indians have been included under imports, with a contra entry in private transfer receipts. 2. Data on exports and imports differ from those given by DGCI&S on account of differences in coverage, valuation, and timing. Source: RBI. 289ANNUAL REPORT 2024-25 APPENDIX TABLE 9: FOREIGN DIRECT INVESTMENT FLOWS TO INDIA: COUNTRY-WISE AND INDUSTRY-WISE (US$ billion) Source/Industry 2020-21 2021-22 2022-23 2023-24 2024-25 (P) 1 2 3 4 5 6 Total FDI 59.6 58.8 46.0 44.4 50.0 Country-wise Inflows Singapore 17.4 15.9 17.2 11.8 15.0 Mauritius 5.6 9.4 6.1 8.0 8.3 US 13.8 10.5 6.0 5.0 5.5 Netherlands 2.8 4.6 2.5 4.9 4.6 UAE 4.2 1.0 3.4 2.9 4.4 Japan 1.9 1.5 1.8 3.2 2.5 Cyprus 0.4 0.2 1.3 0.8 1.2 Belgium 0.4 0.2 0.2 0.1 1.1 Switzerland 0.2 4.3 0.4 0.2 0.9 South Korea 0.4 0.3 0.3 0.4 0.8 France 1.3 0.3 0.4 0.4 0.8 UK 2.0 1.6 1.7 1.2 0.8 Germany 0.7 0.7 0.5 0.5 0.5 Cayman Islands 2.8 3.8 0.8 0.3 0.4 Luxembourg 0.3 0.5 0.5 0.4 0.4 Others 5.4 3.7 2.9 4.3 3.0 Sector-wise Inflows Manufacturing 9.3 16.3 11.3 9.3 12.1 Financial Services 3.5 4.7 6.8 4.4 7.8 Electricity and Other Energy Generation, Distribution & Transmission 1.3 2.2 3.3 5.5 5.5 Communication Services 2.9 6.4 4.5 3.7 5.0 Retail & Wholesale Trade 3.9 5.1 5.3 4.1 4.4 Computer Services 23.8 9.0 5.6 4.9 4.0 Business Services 1.8 2.5 2.0 2.6 2.5 Transport 7.9 3.3 1.7 3.8 2.2 Construction 1.8 3.2 1.4 2.2 2.2 Miscellaneous Services 0.9 1.0 1.2 1.9 1.8 Restaurants and Hotels 0.3 0.7 0.2 0.4 1.3 Education, Research & Development 1.3 3.6 1.9 0.6 0.7 Real Estate Activities 0.4 0.1 0.1 0.3 0.5 Mining 0.2 0.4 0.2 0.1 0.0 Trading 0.0 0.0 0.0 0.0 0.0 Others 0.2 0.4 0.5 0.7 0.1 P: Data are provisional. Note: Includes FDI through approval, automatic and acquisition of existing shares routes. Source: RBI. 290