Fed raises rates despite Trump pressure, signals another hike likely in 2026
The US Federal Reserve has raised its benchmark interest rate by 25 basis points, marking its first hike in over three years, to counter persistent inflation. Policymakers have signaled at least one additional rate increase is probable in the coming months. This decision, aimed at achieving the Fed's 2% inflation target, comes amidst political pressure but underscores the central bank's commitment to price stability. The move has already affected global markets.
Why it matters
A hawkish stance from the US Fed typically strengthens the dollar and can put depreciation pressure on emerging market currencies like the INR. Higher global interest rates also affect capital flows, potentially drawing funds away from Indian debt and equity markets. Indian banks and treasuries must monitor the impact on bond yields and foreign exchange rates.
The Economic Times · Thu, 17 September 2026
Read more →End of free era for UPI: Here's what changes, what doesn't
From October 15, UPI transactions exceeding ₹2,000 will incur a capped merchant fee, marking a significant policy shift. While consumers and most small vendors will continue to enjoy free UPI services, larger merchants will face charges. This move aims to establish a sustainable revenue model for the UPI ecosystem, support digital infrastructure upgrades, and align India's payment standards with global practices. The fee is specifically on the merchant side, ensuring consumer transactions remain free.
Why it matters
This introduces a cost element for larger-value merchant transactions, which was previously non-existent. While intended to fund the UPI infrastructure, it may prompt merchants to reassess payment options and could potentially lead to some shifting towards cash for high-value transactions. Banks that are active acquiring partners in the UPI ecosystem stand to gain from the revenue pool created by these charges.
Livemint · Thu, 17 September 2026
Read more →RBI clarifies principal business rules for NBFCs, CIC definition after Tata Sons CoR rejection
The Reserve Bank of India has issued clarifications regarding the definitions of 'financial activity' and 'Core Investment Companies' (CICs). This directive follows the rejection of Tata Sons' application to surrender its Certificate of Registration as a CIC. The clarification emphasizes that companies must meet specific asset and income thresholds to fall under RBI's regulatory purview. This move is expected to increase regulatory scrutiny on unlisted holding companies, ensuring compliance with NBFC regulations.
Why it matters
This clarification tightens the regulatory net around large unlisted holding companies, ensuring that those meeting specific financial activity criteria comply with NBFC or CIC regulations. It reinforces RBI's supervisory authority and aims to prevent regulatory arbitrage. Banks interacting with such entities need to be aware of their updated regulatory classifications and compliance requirements.
The Economic Times · Thu, 17 September 2026
Read more →RBI absorbs ₹2.90 lakh crore via two VRRR auctions amid huge surplus liquidity
The Reserve Bank of India absorbed a significant ₹2.90 lakh crore from the banking system through two Variable Rate Reverse Repo (VRRR) auctions. The first auction saw robust bids, absorbing ₹2.50 lakh crore, reflecting strong demand from banks to park surplus funds with the RBI. The second, smaller auction was more tepid, collecting ₹40,302 crore. This action underscores RBI's ongoing efforts to manage abundant liquidity in the system and maintain financial stability.
Why it matters
RBI continues to actively manage systemic liquidity, preventing excessive funds from stoking inflationary pressures or creating instability. For banks, participation in VRRR auctions is a key mechanism to deploy surplus funds, albeit at competitive rates. The strong appetite for the first auction indicates significant surplus liquidity still persists within the banking system.
The Hindu BusinessLine · Thu, 17 September 2026
Read more →SC asks RBI to secure compliance of norms on seizure of financed vehicles by NBFCs, banks
The Supreme Court has directed the Reserve Bank of India to ensure that financial institutions, including NBFCs and banks, adhere strictly to lawful vehicle repossession rules. The ruling emphasizes that vehicles financed through loans cannot be seized without due legal process. In a specific case, the court ordered a finance firm to close loan accounts, refund money, and pay compensation for mental agony, reinforcing protection for borrowers against arbitrary dispossession.
Why it matters
This Supreme Court directive places a greater onus on RBI to enforce existing guidelines on vehicle repossession, which are often overlooked. It implies increased scrutiny and potential penalties for banks and NBFCs that fail to follow legal procedures, enhancing consumer protection. Lenders must review and fortify their asset recovery processes to ensure full compliance and avoid legal repercussions.
The Economic Times · Thu, 17 September 2026
Read more →Shriram Finance plans $500 million bond buyback
Shriram Finance is planning a $500 million bond buyback, targeting bonds maturing in April 2027 and April 2028. This strategic move aims to reduce the company's overall borrowing costs. The buyback offer will be presented at a slight premium to current trading prices, as indicated by sources familiar with the transaction. This marks the first such buyback initiative by Shriram Finance since MUFG acquired a stake in the company earlier this year.
Why it matters
A bond buyback indicates proactive debt management, aiming to optimize the company's capital structure and reduce interest expenses, especially for instruments maturing relatively soon. Offering a premium suggests confidence in liquidity and a desire to consolidate liabilities. For banking partners, this reflects Shriram Finance's financial health and strategic intent, potentially influencing future lending or investment decisions related to the company.
The Economic Times · Thu, 17 September 2026
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