Volume XXI | Issue 2  | May 2025 MONETARY & CREDIT INFORMATION REVIEW

Annual Report 2024-25

The Reserve Bank on May 29, 2025 under section 53 (2) of the Reserve Bank of India Act, 1934 released its Annual Report of the year 2024-25. The report is a statutory report of its Central Board of Directors. It covers the working and functions of Reserve Bank for the period April 2024 - March 2025. The Reserve Bank of India's (RBI) Annual Report for 2024–25 outlines key developments in India's monetary, financial and digital landscapes.

Here are the major highlights:

Economic Growth & Inflation Outlook

• GDP Growth: The Indian economy is projected to grow at 7% in FY25, driven by strong domestic consumption and capital spending. This follows a 7.6% growth in FY24, marking the third consecutive year of 7%+ growth.

• Inflation: Headline inflation moderated to 5.4% in FY24 from 6.7% in FY23, with core inflation falling to 4.3%. The RBI aims to maintain inflation below its 4% medium-term target in FY26.

Financial Performance

• Balance Sheet Growth: The RBI’s balance sheet expanded by 8.2% to ₹76.25 lakh crore in FY25.

• Surplus Transfer: A record ₹2.69 lakh crore was transferred to the central government, supporting fiscal consolidation.

• Income Growth: Net income increased by 27%, driven by higher global interest rates and profits from dollar sales.

Currency Management & Digital Initiatives

• Currency Notes: The RBI will cease printing ₹2, ₹5 and ₹2,000 notes. By March 2025, 98.2% of ₹2,000 notes had been returned to banks.

• Digital Rupee (e₹): The RBI plans to expand Central Bank Digital Currency (CBDC) pilots, incorporating offline functionality, programmability and cross-border applications.

Financial Sector Reforms

• Regulatory Overhaul: The RBI will adopt a principle-based approach to regulations, focusing on Expected Credit Loss (ECL) models, asset classification and provisioning norms.

• Digital Lending: Efforts are underway to enhance digital lending interfaces, ensuring secure and transparent borrowing experiences.

Broader Economic Outlook

• Global Challenges: The RBI highlights challenges such as AI adoption and climate shocks, which could impact economic stability.

• Fiscal Policy: The government aims to reduce gross market borrowings from 5.3% of GDP in FY24 to 4.3% in FY25, enhancing funds for private investment. To read more, please click here.

I. Regulation

Economic Capital Framework of the Reserve Bank of India

The Reserve Bank on May 23, 2025 issued a revised Economic Capital Framework (ECF), approved by the Central Board in its meeting on May 15, 2025, following an internal review aligned with the recommendation of the Expert Committee chaired by Dr. Bimal Jalan to review the framework every five years. The revised ECF, effective from FY 2024–25, retains the core principles of the extant framework while introducing refinements to strengthen resilience against emerging risks. Key changes include adopting an integrated approach for computing market risk buffers-factoring in both on and off-balance sheet items and minor currency assets-widening the range for Monetary and Financial Stability risk buffers to 5.0% ± 1.5% of the balance sheet and adjusting the Contingent Risk Buffer range to 4.5%–7.5%. To read more, please click here.

Policy Statement - Framework for Formulation of Regulations

The Reserve Bank on May 7, 2025 issued Framework for Formulation of Regulations which outlines the broad principles for formulation of Regulations issued in exercise of the powers conferred on the Reserve Bank of India by or under the provisions of various Acts and Rules. It covers aspects regarding stakeholder consultation, impact analysis and review of Regulations. The Framework reinforces and demonstrates the Reserve Bank’s commitment to enhanced transparency and consultative approach for issuance of Regulations. To read more, please click here.

Reserve Bank of India (Digital Lending) Directions, 2025

The Reserve Bank on May 8, 2025 issued the consolidated Reserve Bank of India (Digital Lending) Directions, 2025, streamlining various regulatory instructions for Regulated Entities (REs) involved in digital lending. For the first time, the Directions include final instructions on ensuring transparency in the aggregation of loan products from multiple lenders-based on feedback from a draft circular issued on April 26, 2024 and the operationalisation of a Public Directory of Digital Lending Apps (DLAs). As per these directions, REs must submit details of their DLAs via the Centralised Information Management System (CIMS) portal by June 15, 2025, with the portal opening by May 13, 2025. The public directory, available on the RBI website by July 1, 2025, aims to help customers verify a DLA's association with a RE, based solely on RE-submitted data without RBI validation and will update automatically as REs revise their entries. To read more, please click here.

Alteration in the name of “North East Small Finance Bank Limited”

The Reserve Bank of India, by Notification DoR.LIC.No.S1134/16.13.216/2025-26 dated May 14, 2025, advised that the name of "North East Small Finance Bank Limited" has been changed to "slice Small Finance Bank Limited" in the Second Schedule to the Reserve Bank of India Act, 1934. This change has been published in the Gazette of India (Part III - Section 4) dated May 16, 2025. To read more, please click here.

Approval to Emirates NBD Bank PJSC, UAE for setting up a Wholly Owned Subsidiary (WOS)

The Reserve Bank on May 19, 2025 granted “in-principle” approval to Emirates NBD Bank PJSC for setting up a Wholly Owned Subsidiary (WOS) in India, under the “Scheme for Setting up of WOS by foreign banks in India”. Emirates NBD Bank PJSC is currently carrying on banking business in India in branch mode through its branches located in Chennai, Gurugram and Mumbai. The in-principle approval has been granted to the bank for setting up a WOS through conversion of its existing branches in India. To read more, please click here.

Revised Directions on Investment by REs in Alternate Investment Funds

The Reserve Bank on May 19, 2025 issued the revised draft Directions concerning investments by Regulated Entities (REs) in Alternative Investment Funds (AIFs), following its earlier guidelines dated December 19, 2023 and clarifications on March 27, 2024, aimed at curbing potential evergreening. Noting improved financial discipline and in light of SEBI’s new due diligence norms, the draft proposes capping a single RE’s investment in an AIF scheme at 10% of its corpus, with a collective ceiling of 15% for all REs. Investments up to 5% are exempt from restrictions, but if this threshold is exceeded and the AIF has downstream debt exposure to the RE’s debtor company, a 100% provisioning requirement will apply. Strategic AIFs may be exempted in consultation with the government. To read more, please click here.

Draft circular on ‘Updation/ Periodic Updation of KYC- Revised Instructions’

The Reserve Bank on May 23, 2025 released the draft circular on Updation/ Periodic Updation of KYC – Revised Instructions which encloses the draft Reserve Bank of India (Know Your Customer (KYC)) (Amendment) Directions, 2025 modifying the aforementioned instructions. To read more, please click here.

Draft circular on ‘Inoperative Accounts/ Unclaimed Deposits in Banks

The Reserve Bank on May 23, 2025 released the draft circular on Inoperative Accounts/ Unclaimed Deposits in Banks – Revised Instructions (Amendment) 2025 which modifies the aforementioned instructions. The comments on the draft circular are invited from the public/ stakeholders till June 6, 2025. The comments/ feedback may be submitted through the link under the ‘Connect 2 Regulate’ Section available on the Reserve Bank’s website or may alternatively be forwarded to Reserve Bank of India. To read more, please click here.

II. Financial Market

Recognition of Self-Regulatory Organisation in Financial Markets regulated by the Reserve Bank

The Reserve Bank on May 7, 2025 decided to recognise the Fixed Income Money Market and Derivatives Association of India (FIMMDA) as a Self-Regulatory Organisation (SRO) in financial markets regulated by it, following an assessment of FIMMDA's application against the applicable requirements under the regulatory framework. To read more, please click here.

III. Issuer of Currency

Issue of ₹20 Denomination Banknotes in Mahatma Gandhi (New) Series

The Reserve Bank will shortly issue ₹20 denomination Banknotes in Mahatma Gandhi (New) Series bearing the signature of Shri Sanjay Malhotra, Governor. The design of these notes is similar in all respects to ₹20 banknotes in Mahatma Gandhi (New) Series. All banknotes in the denomination of ₹20 issued by the Reserve Bank in the past will continue to be legal tender.

Withdrawal of ₹2000 denomination Banknotes

The Reserve Bank on June 2, 2025 released the status of withdrawal of ₹2000 denomination banknotes. As per the data, the total value of ₹2000 banknotes in circulation declined to ₹6181 crore at the close of business on May 31, 2025. Thus, 98.26 percent of the ₹2000 banknotes in circulation as on May 19, 2023 has since been returned. The ₹2000 banknotes continue to be legal tender.

IV. Supervision

Monetary Penalty

The Reserve Bank imposed monetary penalty (above ₹1 lakh) during the month of May 2025 on the following entities under various sections of Banking Regulation Act, 1949 and Reserve Bank of India Act, 1934.

V. Publication

Working Group on ‘Comprehensive review of trading and settlement timings of markets

The Reserve Bank on May 2, 2025 released the report of the Working Group on the comprehensive review of trading and settlement timings of markets regulated by the Reserve Bank has been published today on the RBI website. Constituted as announced in the Statement on Developmental and Regulatory Policies dated February 7, 2025, the Group was chaired by Shri Radha Shyam Ratho, Executive Director, RBI and was tasked with reviewing existing market timings, identifying operational challenges, studying global practices and recommending the way forward. To read more, please click here.

Report on Management of Foreign Exchange Reserves

The Reserve Bank on May 5, 2025 released 44th half-yearly report on management of foreign exchange reserves with reference to end-March 2025. The report is divided into two parts: Part I contains the developments regarding movement of foreign exchange reserves, information on the external liabilities vis-à-vis the reserves, adequacy of reserves, etc., during the half-year under review. Objectives of reserve management, statutory provisions, risk management practices, information on transparency and disclosure practices followed by the RBI with regard to reserve management are covered in Part II. To read more, please click here.

RBI Bulletin

The Reserve Bank on May 21, 2025 released the March 2025 issue of its monthly Bulletin. The Bulletin includes two speeches, four articles and current statistics.. The four articles are:

I. State of the Economy: Persistent trade frictions, heightened policy uncertainty and weak consumer sentiment continue to create headwinds for global growth. Amidst these challenges, the Indian economy exhibited resilience. Various high frequency indicators of industrial and services sectors sustained their momentum in April. A bumper rabi harvest and higher acreage for summer crops, coupled with favourable southwest monsoon forecasts for 2025, augur well for the agriculture sector. Headline CPI inflation fell for the sixth consecutive month to its lowest since July 2019, primarily driven by the sustained easing in food prices. Domestic financial market sentiments, which remained on edge in April, witnessed a turnaround since the third week of May.

II. Economic Activity and Banknotes: New Approaches: This article investigates the impact of economic activity on banknotes in circulation, with a particular focus on the role of the formal sector. Leveraging high-frequency monthly nightlights data as a proxy for total economic activity and tax collection data as a measure of formal economic activity, the analysis isolates the effect of formalisation on Notes in Circulation (NiC), controlling for aggregate economic output.

III. Digital Footprints: Decoding India’s Inbound Tourism through Internet Searches: This article explores Destination Insights with Google (DIG), a non-traditional high-frequency data source, to track inbound tourism in India. DIG monitors global tourism trends through travel-related searches. The study examines the linkage between foreign tourist arrivals (FTA) and Google searches made for travel to India from the rest of the world.

IV. Impact of Weather Anomalies on Vegetable Prices in India: Vegetable prices exhibit high volatility and play a major role in driving India’s food and headline inflation. The volatility in vegetable prices is often exacerbated by supply-side disturbances, predominantly driven by weather shocks warranting regular monitoring of evolving weather conditions. This study investigates how weather anomalies, particularly in rainfall and temperature, affect vegetable prices in India.

Two Speeches are:

I. India: A Partner in Progress and Prosperity by Shri Sanjay Malhotra, Governor

II. Building a Robust Ecosystem for Green and Sustainable Finance in India by Shri M. Rajeshwar Rao, Deputy Governor

To read more, please click here.

Discussion Paper on Capital Raising Avenues for Primary UCBs

The Reserve Bank on May 22, 2025 released a Discussion Paper proposing new capital-raising avenues for Urban Co-operative Banks (UCBs), including the issuance of Special Share Certificates (SSCs) and shares at a premium. These measures aim to enhance the capital base and financial resilience of UCBs, particularly larger ones. The paper also suggests allowing UCBs to offer loans to investors in Perpetual Non-cumulative Preference Shares (PNCPS) within certain limits. Stakeholders are invited to submit feedback on the proposals through the 'Connect 2 Regulate' portal on the RBI's website by July 15, 2025. To read more, please click here.

VI. Data Releases and Surveys

Important data released by the Reserve Bank during the month of May 2025 are as follows:

Edited and published by Puneet Pancholy for Reserve Bank of India, Department of Communication, Central Office, Shahid Bhagat Singh Marg, Mumbai - 400 001. MCIR can be also accessed at https://mcir.rbi.org.in.