INDIAN BANKING RADAR (IBR) - BANKING & ECONOMY INTELLIGENCE BULLETIN

🔥 PLATINUM CURRENT-AFFAIRS EDITION

VOL. 171 | 18 SEPTEMBER 2026 | FRIDAY

🏦 RBI • Banking • Liquidity • UPI • FinTech • NBFCs • Cooperative Banking • DCCB • PACS • Economy • IBC

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🔥 TODAY'S CORE THEME

RBI ABSORBS LIQUIDITY AS DIGITAL FINANCE AND COOPERATIVE BANKING EVOLVE

Yesterday's developments reveal four interconnected banking themes:

💧 EXTERNAL INFLOWS

FCNR(B)

↓

Liquidity surplus

↓

VRRR + OMO

💳 DIGITAL PAYMENTS

UPI scale

↓

MDR framework

↓

Sustainable payment ecosystem

🔗 DIGITAL SECURITIES

Tokenisation

↓

DLT

↓

Wholesale CBDC

↓

Simultaneous settlement

🌾 COOPERATIVE BANKING

NABARD supervision

↓

DCCB/PACS modernisation

↓

Digital + governance + cyber resilience

IBR MASTER APPROACH

NEWS → FACT → CONCEPT → CAUSE → IMPACT → EXAM APPLICATION

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💧 1. RBI ABSORBS ₹50,000 CRORE THROUGH FIRST OMO

The RBI conducted the first tranche of its ₹1 lakh crore OMO sale programme on 17 September 2026.

AUCTION AT A GLANCE

• Notified amount: ₹50,000 crore

• Bids received: ₹66,590 crore

• Amount accepted: ₹50,000 crore

• Settlement: 18 September

Remaining tranches:

• ₹25,000 crore — 21 September

• ₹25,000 crore — 28 September

The operation is aimed at absorbing surplus liquidity from the banking system. Reuters described it as the RBI's first auction-based OMO sale in nine years.

🧠 EXAM FORMULA

OMO SALE → LIQUIDITY ABSORPTION

OMO PURCHASE → LIQUIDITY INJECTION

⚠️ EXAM TRAP

OMO sale is not a liquidity-injection operation.

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🔄 2. RBI ABSORBS ₹2.40 LAKH CRORE THROUGH VRRR

On 17 September, RBI absorbed approximately ₹2.40 lakh crore through a Variable Rate Reverse Repo auction.

• Bids received: ₹2,39,959 crore

• Amount accepted: ₹2,39,959 crore

• Cut-off rate: 5.24%

• Weighted-average rate: 5.24%

Banking-system liquidity surplus was estimated at approximately ₹7.38 lakh crore as on 16 September.

VRRR

Short-term liquidity absorption

OMO SALE

Outright G-sec sale → more durable liquidity absorption

IBR CONCEPT

VRRR manages liquidity conditions.

OMO can alter the stock of securities held by the banking/financial system and has a more durable liquidity effect.

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💵 3. FCNR(B) INFLOWS: A MAJOR LIQUIDITY DRIVER

Reported FCNR(B) mobilisation had reached approximately US$132.9 billion by 10 September 2026.

The special mobilisation window closed on 31 August 2026, but its impact on banking-system liquidity continues.

TRANSMISSION

FCNR(B) inflows

↓

Foreign currency enters banking system

↓

RBI/FX operations create rupee-liquidity effects

↓

Surplus liquidity

↓

RBI absorption

BANKING LESSON

External-sector strength can create a domestic liquidity-management challenge.

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📊 4. WHY IS RBI ABSORBING SO MUCH LIQUIDITY?

The surplus is linked partly to the large FCNR(B) mobilisation and subsequent RBI operations.

The liquidity surplus had earlier reached around ₹11.6 lakh crore before falling to roughly ₹7.4 lakh crore by mid-September.

RBI TOOLKIT

VRRR → Short-term absorption

OMO Sale → More durable absorption

FX Operations → Foreign-exchange/liquidity management

POLICY OBJECTIVE

Surplus liquidity → Money-market rates → Monetary-policy transmission

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💳 5. UPI MDR: THE NEW FRAMEWORK

From 15 October 2026, MDR will apply to specified eligible merchant transactions above ₹2,000.

STANDARD CATEGORY

P2M > ₹2,000 → 0.4% MDR

For transactions of ₹75,000 and above, MDR is capped at ₹300 per transaction.

WHAT REMAINS FREE?

✅ All P2P UPI transactions

✅ P2M transactions up to ₹2,000

✅ Eligible zero-MDR small-merchant transactions

The Government estimates approximately 96% of P2M transactions will remain unaffected.

⚠️ IMPORTANT

₹2,000 is NOT a UPI transaction limit.

It is an MDR threshold for specified merchant transactions.

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🧾 6. UPI MDR: SPECIAL CATEGORIES

ESSENTIAL / THIN-MARGIN SECTORS

For specified sectors including:

• Railways

• Telecommunications

• Insurance

• Fuel

• Agricultural inputs

Above ₹2,000 → ₹5 flat MDR

CAPITAL-MARKET TRANSACTIONS

Specified payments relating to:

• Mutual funds

• Securities

• Stockbrokers

• Dealers

→ 0.02% MDR

→ ₹300 maximum per transaction.

SMALL MERCHANTS

Small merchants receiving up to ₹1 lakh per month through UPI QR under the P2PM category continue under the zero-MDR framework.

🧠 EXAM TRAP

0.4% ≠ every UPI transaction above ₹2,000.

The rate depends on the transaction category.

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🏦 7. WHO PAYS UPI MDR?

MDR is a merchant-payment ecosystem charge.

It is not a Government tax and is not collected by the Government or NPCI as a tax.

The framework distributes MDR among ecosystem participants including banks, payment service providers and UPI application providers.

CUSTOMER PROTECTION

Banks have been advised to ensure merchants do not pass MDR on to customers.

UPI application providers are prohibited from imposing platform fees or hidden charges under the framework.

MASTER CONCEPT

MDR ≠ Tax

MDR ≠ Customer UPI charge

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🔗 8. DEMAT 2.0: TOKENISED CORPORATE BONDS

SEBI and RBI's Demat 2.0 pilot brings tokenised corporate bonds into a DLT-based settlement environment.

THREE ISSUERS

• REC — ₹500 crore

• L&T — ₹500 crore

• IIFL Finance — ₹25 crore

TOTAL

₹1,025 crore

ARCHITECTURE

Tokenised security

↓

Distributed Ledger Technology

↓

Wholesale CBDC/e₹ money leg

↓

Simultaneous settlement

KEY IDEA

Tokenisation changes infrastructure—not the underlying financial risk.

It does not eliminate:

• Credit risk

• Market risk

• Liquidity risk

• Operational risk

• Cyber risk

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🏦 9. IIFL FINANCE: ₹25 CRORE TOKENISED BOND

IIFL Finance's ₹25 crore tokenised bond is part of the Demat 2.0 pilot.

QUICK CALCULATION

REC ₹500 crore

L&T ₹500 crore

IIFL Finance ₹25 crore

= ₹1,025 crore

EXAM CONNECT

Tokenisation → DLT → CBDC → Simultaneous settlement

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🏛️ 10. RBI ACTION ON 13 NBFCs: 5 CANCELLED + 8 SURRENDERED

On 17 September, RBI announced two related regulatory actions:

5 NBFCs

RBI cancelled their Certificates of Registration.

8 NBFCs

They surrendered their Certificates of Registration, following which RBI cancelled them under the applicable provisions.

Reasons for the eight included:

• Exit from NBFI business

• Meeting unregistered CIC criteria

• Meeting unregistered Type-I NBFC criteria

• Merger/dissolution/cessation of legal entity

🧠 EXAM POINT

CoR cancellation does not automatically mean regulatory punishment.

The reason for cancellation must be examined.

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⚖️ 11. IBBI: DUE DILIGENCE AGAINST IBC MISUSE

IBBI issued a circular on 9 September 2026 titled:

“Due diligence by Insolvency Professionals regarding misuse of IBC framework.”

The objective is to strengthen due diligence where insolvency proceedings may be misused.

EXAM CONNECT

IBC → Insolvency resolution

Section 65 → Fraudulent or malicious initiation

IBR INSIGHT

Insolvency process → Genuine resolution + regulatory safeguards

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🌾 COOPERATIVE BANKING SPECIAL

🏦 12. NABARD: 34 StCBs + 353 DCCBs

As of 31 March 2026, the rural cooperative credit structure comprised:

• 34 StCBs

• 353 DCCBs

• ~1.06 lakh PACS

• 12 SCARDBs

• 609 PCARDBs

During FY2025-26:

• 34 StCB inspections

• 268 DCCB inspections

• 8 SCARDB inspections

• 43 RRB inspections before amalgamation

NABARD's Department of Supervision conducts statutory inspection of StCBs, DCCBs and RRBs under Section 35(6) of the Banking Regulation Act, 1949.

🧠 THREE-TIER MODEL

PACS → DCCB → StCB

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🛡️ 13. 96 WEAK RURAL COOPERATIVE BANKS UNDER TAP

NABARD's Turn Around Plan initiative covered 96 banks.

Implementation is monitored through periodic reviews.

TAP FOCUS

Governance

↓

Capital

↓

Asset Quality

↓

Risk Management

↓

Digitalisation

↓

Cybersecurity

IBR FORMULA

Supervision → Corrective Action → Turnaround → Institutional Strengthening

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💻 14. SAHAKAR SARATHI: SHARED TECHNOLOGY

Sahakar Sarathi Private Limited had mobilised ₹803.18 crore equity by 31 March 2026.

Equal participation:

• NABARD

• NCDC

• Participating RCBs

Services include:

• Digital banking

• Cybersecurity

• IT governance

• Loan processing

• Reconciliation

• Bank.in migration

• Digital credit infrastructure

• Training

DIGITAL COOPERATIVE MODEL

Shared infrastructure

↓

Economies of scale

↓

Lower technology constraints

↓

Digital capability

↓

Cyber resilience

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🌱 15. PACS: GRASSROOTS OF RURAL COOPERATIVE CREDIT

STRUCTURE

PACS

↓

DCCB

↓

StCB

PACS ROLE

• Agricultural credit

• KCC-related services

• Member services

• Financial inclusion

• Digital transactions

• Diversification into multiple rural economic activities

⚠️ EXAM TRAP

PACS ≠ Bank

PACS are grassroots cooperative credit institutions; DCCBs and StCBs constitute the banking tiers.

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📱 16. DCCB + PACS DIGITAL TRANSFORMATION

The next stage of cooperative-bank modernisation is not merely computerisation.

It requires:

CBS/IT infrastructure

+

Digital credit

+

Cybersecurity

+

IT governance

+

Customer protection

IBR MODEL

Technology + Governance + Supervision = Sustainable Cooperative Banking

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🌐 17. BANK.IN: DIGITAL TRUST

The migration of cooperative banks to the bank.in domain supports the broader objective of helping customers distinguish genuine banking websites from fraudulent look-alike domains.

DIGITAL TRUST

Bank.in

Cybersecurity

IT governance

Customer awareness

= Digital trust

KEY MESSAGE

Digitalisation without digital trust is incomplete.

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🌾 COOPERATIVE BANKING

PACS

↓

DCCB

↓

StCB

↓

NABARD supervision

↓

Technology + governance + resilience

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🎯 CIVIL SERVICES QUICK CONNECT

GS-II

• Financial regulation

• Digital governance

• Cooperative institutions

• Consumer protection

• Financial inclusion

GS-III

• Balance of Payments

• Monetary policy

• Liquidity management

• Banking regulation

• Digital payments

• FinTech

• Capital markets

• IBC

• Cybersecurity

• Cooperative banking

MAINS THEMES

1. Surplus liquidity presents both a monetary-policy transmission challenge and a banking-sector opportunity. Discuss.

2. How can India maintain UPI's inclusiveness while creating a sustainable payment ecosystem?

3. Tokenisation can transform financial-market infrastructure without eliminating financial risk. Explain.

4. Explain how DCCBs and PACS can use shared digital infrastructure to overcome scale-related constraints.

5. Why is due diligence essential to prevent misuse of insolvency proceedings?

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34 → StCBs

353 → DCCBs

~1.06 lakh → PACS

268 → DCCB inspections

96 → Banks under TAP

₹803.18 crore → Sahakar Sarathi equity

PACS → DCCB → StCB

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🏦 BANKER'S TAKEAWAY

COMMERCIAL BANKERS

Liquidity • Treasury • G-Secs • Forex • UPI • NBFCs • Cybersecurity

DCCB BANKERS

NABARD Supervision • Asset Quality • Governance • Digital Banking • Cybersecurity

PACS

Computerisation • KCC • Digital Credit • Financial Inclusion • Diversification

BANKING ASPIRANTS

RBI Instruments • BoP • UPI • FinTech • NBFCs • Cooperative Banking

CIVIL SERVICES ASPIRANTS

FACT → CONCEPT → CAUSE → IMPACT → POLICY → MAINS

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