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

🔥 PLATINUM CURRENT-AFFAIRS EDITION

VOL. 172 | 19 SEPTEMBER 2026 | SATURDAY

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

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🔥 TODAY'S BANKING RADAR

RBI EASES DOCUMENT CERTIFICATION FOR FPIs • OMO ABSORBS LIQUIDITY • COOPERATIVES GO DIGITAL

Today's major developments connect three important themes:

🔐 KYC & GLOBAL CAPITAL

FPI

↓

Overseas document certification

↓

Simpler operational compliance

↓

Cross-border financial participation

💧 LIQUIDITY MANAGEMENT

Large capital inflows

↓

System liquidity surplus

↓

OMO sales

↓

Monetary-policy transmission

🌾 COOPERATIVE TRANSFORMATION

Governance

Technology

Diversification

Inclusion

↓

Future-ready cooperatives

IBR VALUE-ADD

NEWS → WHY IT MATTERS → BANKING IMPACT → EXAM FACT → CONCEPT

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🔐 1. RBI EXTENDS OVERSEAS KYC CERTIFICATION FACILITY TO FPIs

The RBI issued the Reserve Bank of India (Commercial Banks – Know Your Customer) Amendment Directions, 2026 on 18 September 2026.

The important change:

FPI has been added to the existing overseas certified-copy facility available for NRIs and PIOs.

For eligible non-resident customers, banks may alternatively obtain an original certified copy certified by specified authorities abroad.

The amendment is effective immediately.

The same policy change has also been notified for relevant categories of cooperative and rural cooperative banks.

🧠 WHY IT MATTERS

This is not a relaxation of KYC itself.

It is a change in the permitted documentation/certification mechanism.

KYC compliance remains mandatory.

EXAM CONNECT

FPI → Foreign Portfolio Investor

KYC → Know Your Customer

AML → Anti-Money Laundering

CFT → Combating Financing of Terrorism

🎯 ONE-LINE EXAM FACT

RBI's September 2026 amendment extended the overseas certified-copy facility to FPIs.

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🌐 2. WHO CAN CERTIFY THE ORIGINAL COPY ABROAD?

For eligible NRIs, PIOs and FPIs, the RBI framework permits certification by:

1. Authorised officials of overseas branches of Scheduled Commercial Banks registered in India

2. Branches of overseas banks having relationships with Indian banks

3. Notary Public abroad

4. Court Magistrate

5. Judge

6. Indian Embassy / Consulate General in the country where the non-resident customer resides

⚠️ EXAM TRAP

The six authorities are certifiers.

They do not replace the bank's responsibility for KYC/AML compliance.

BANKER'S TAKEAWAY

Documentation flexibility ≠ KYC relaxation

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💧 3. RBI'S ₹1 LAKH CRORE OMO SALE PROGRAMME

RBI's first tranche of the ₹1 lakh crore OMO sale programme involved:

• ₹50,000 crore notified

• ₹66,590 crore bids received

• ₹50,000 crore accepted

• Settlement: 18 September 2026

Remaining scheduled tranches:

• ₹25,000 crore — 21 September

• ₹25,000 crore — 28 September

The operation is aimed at absorbing surplus liquidity. Market reporting described it as RBI's first auction-based OMO sale in nine years.

🧠 CONCEPT

OMO Sale → RBI sells Government securities → liquidity absorbed

OMO Purchase → RBI buys Government securities → liquidity injected

⚠️ EXAM TRAP

OMO sale ≠ liquidity injection

WHY BANKERS SHOULD CARE

OMO sales affect:

• System liquidity

• Bond yields

• Government securities markets

• Money-market conditions

• Monetary-policy transmission

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💵 4. FCNR(B) INFLOWS: WHY LIQUIDITY MATTERS

Large FCNR(B) mobilisation has been an important factor in the recent liquidity environment.

The special mobilisation window closed on 31 August 2026, but the resulting deposits and associated foreign-exchange operations continue to have liquidity implications.

TRANSMISSION

FCNR(B) inflows

↓

Foreign currency enters banking system

↓

FX/RBI operations

↓

Rupee-liquidity effects

↓

System liquidity surplus

↓

RBI absorption operations

🧠 IBR CONCEPT

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

EXAM CONNECT

FCNR(B) → Foreign Currency Non-Resident (Bank)

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💳 5. UPI MDR: WHAT CHANGES FROM 15 OCTOBER?

The new MDR framework for specified merchant transactions becomes effective from 15 October 2026.

STANDARD SPECIFIED CATEGORY

P2M transaction above ₹2,000 → 0.4% MDR

For specified transactions of ₹75,000 and above:

MDR cap → ₹300 per transaction

WHAT IS NOT CHANGING?

✅ P2P UPI transactions remain free under the framework

✅ P2M transactions up to ₹2,000 remain outside the new MDR threshold

✅ Specified zero-MDR small-merchant arrangements continue

⚠️ MOST IMPORTANT CLARIFICATION

₹2,000 is NOT a UPI transaction limit.

It is an MDR applicability threshold for specified merchant transactions.

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🧾 6. UPI MDR — THREE RATES TO REMEMBER

🟢 STANDARD SPECIFIED P2M

Above ₹2,000

→ 0.4%

🟡 SPECIFIED ESSENTIAL / THIN-MARGIN CATEGORIES

Examples:

• Railways

• Telecommunications

• Insurance

• Fuel

• Agricultural inputs

→ ₹5 flat MDR for specified eligible transactions.

🔵 SPECIFIED CAPITAL-MARKET TRANSACTIONS

Examples:

• Mutual funds

• Securities

• Stockbrokers

• Dealers

→ 0.02%

→ Maximum ₹300

🧠 EXAM TRAP

0.4% does NOT apply uniformly to every UPI merchant transaction above ₹2,000.

The rate depends on the applicable category.

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👤 7. MDR ≠ TAX: WHO IS THE CHARGE FOR?

MDR means Merchant Discount Rate.

It is a payment-ecosystem charge, not a Government tax.

Therefore:

MDR ≠ GST

MDR ≠ Government tax

MDR ≠ automatic customer UPI charge

The framework is designed so that merchants should not pass the MDR burden to customers.

BANKING CONCEPT

Merchant transaction

↓

Payment ecosystem

↓

MDR distribution

↓

Participating ecosystem entities

EXAM TRAP

Do not describe MDR as a UPI tax.

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🔗 8. DEMAT 2.0: TOKENISED CORPORATE BONDS

The Demat 2.0 pilot demonstrates the use of tokenisation + DLT + digital money settlement for corporate securities.

Reported issuances:

• 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

🧠 WHY IT MATTERS

Tokenisation can change how securities are issued, transferred and settled.

But tokenisation does not eliminate:

❌ Credit risk

❌ Market risk

❌ Liquidity risk

❌ Operational risk

❌ Cyber risk

EXAM FORMULA

Tokenisation → Infrastructure innovation, not risk elimination

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🏦 9. RBI ACTION ON NBFCs

RBI announced regulatory actions involving NBFCs.

5 NBFCs

→ Certificates of Registration cancelled.

8 NBFCs

→ Certificates of Registration surrendered and subsequently cancelled under applicable provisions.

Reasons included circumstances such as:

• Exit from NBFI business

• Meeting criteria for an unregistered CIC

• Meeting criteria for an unregistered Type-I NBFC

• Merger/dissolution/cessation of the legal entity

⚠️ EXAM TRAP

CoR cancellation does not automatically mean regulatory punishment.

The reason for cancellation/surrender matters.

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⚖️ 10. IBBI: DUE DILIGENCE AGAINST IBC MISUSE

IBBI issued a circular on 9 September 2026 on:

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

WHY IMPORTANT?

The insolvency framework is designed for genuine resolution of financial distress.

Safeguards are necessary to prevent misuse of insolvency proceedings.

EXAM CONNECT

IBC → Insolvency resolution

Section 65 → Fraudulent or malicious initiation of insolvency proceedings

IBR FORMULA

Insolvency resolution

+

Due diligence

+

Regulatory safeguards

Credible insolvency ecosystem

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🌾 11. COOPERATIVE SECTOR: SIX STRATEGIC PILLARS

The Ministry of Cooperation's National Cooperation Policy framework groups its objectives under six strategic mission pillars.

1️.STRENGTHENING THE FOUNDATION

Legal reforms

Governance

Finance

Transparency

2️.PROMOTING VIBRANCY

Business ecosystem

Market opportunities

Income enhancement

3️.MAKING COOPERATIVES FUTURE-READY

Technology

Professional management

Digital transformation

4️.PROMOTING INCLUSIVITY AND DEEPENING REACH

Member-centric development

Women and youth

Wider participation

5️.ENTERING NEW & EMERGING SECTORS

Clean energy

Warehousing

Healthcare

Other new economic activities

6️.SHAPING THE YOUNG GENERATION

Training

Skills

Employment opportunities

Youth participation

🧠 IBR MEMORY CODE

F – V – F – I – N – Y

Foundation

Vibrancy

Future-ready

Inclusivity

New sectors

Youth

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🌱 12. PACS: FROM CREDIT SOCIETY TO MULTIPURPOSE RURAL INSTITUTION

PACS remain the grassroots layer of the rural cooperative credit structure.

TRADITIONAL ROLE

Agricultural credit

KCC-related services

Member services

EMERGING ROLE

Digital services

Storage

Procurement

Processing

Other rural economic activities

IBR MODEL

PACS

↓

Credit + Services

↓

Diversification

↓

Rural economic activity

⚠️ EXAM TRAP

PACS ≠ Bank

PACS are cooperative credit societies; DCCBs and StCBs form the banking tiers of the rural cooperative credit structure.

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💻 13. THE NEXT PHASE OF COOPERATIVE BANKING

Computerisation alone is not sufficient.

The modern cooperative banking model requires:

CBS / IT infrastructure

Digital credit

Cybersecurity

IT governance

Customer protection

Professional management

IBR MASTER CONCEPT

Technology + Governance + Supervision = Sustainable Cooperative Banking

This is particularly important for:

🏦 StCBs

🏦 DCCBs

🌾 PACS

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💱 14. RUPEE, CRUDE & INTEREST-RATE TRANSMISSION

The rupee remained under pressure amid global rate developments, capital flows, RBI intervention and crude-oil movements.

CRUDE-OIL TRANSMISSION

Higher crude

↓

Higher import bill

↓

Higher dollar demand

↓

Rupee pressure

↓

Imported inflation risk

BOND MARKET FORMULA

Bond Price ↑ → Yield ↓

Bond Price ↓ → Yield ↑

WHY IT MATTERS

Bankers should connect:

Forex → Inflation → Bond yields → Liquidity → Monetary policy

rather than studying each development separately.

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🎯 CIVIL SERVICES QUICK CONNECT

GS-II

• Financial regulation

• KYC/AML

• Digital governance

• Cooperative institutions

• Financial inclusion

• Consumer protection

GS-III

• Monetary policy

• Liquidity management

• Digital payments

• FinTech

• Capital markets

• Banking regulation

• IBC

• Cybersecurity

• Cooperative banking

MAINS PRACTICE

Q1. How can KYC documentation be simplified without weakening AML/CFT safeguards?

Q2. Why can large capital inflows create a liquidity-management challenge for a central bank?

Q3. How can India maintain UPI's inclusiveness while developing a sustainable digital-payment ecosystem?

Q4. Tokenisation changes financial-market infrastructure but does not eliminate financial risk. Discuss.

Q5. Explain how technology, governance and diversification can strengthen India's cooperative institutions.

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