Banking Monthly Current Affairs: February 2026

Table of Contents
1. Union Budget 2026-27 - Key fiscal and banking-related highlights
2. Reserve Bank of India - Monetary Policy, February 2026 (MPC)
3. Banking & finance regulatory updates (RBI, SEBI, IRDAI, others)
4. Digital payments, fintech & payments infrastructure
5. Key banking sector initiatives, partnerships and products (February period)
6. Important schemes and financial-support measures impacting banking
7. 16th Finance Commission: implications for banking & fiscal federalism
8. Banking sector appointments, acquisitions and governance events
9. Macro indicators and banking implications (selected)
10. International financial cooperation and cross-border developments
11. Fintech, digital governance and AI: banking relevance
12. Key takeaways for banking professionals and competitive-exam aspirants
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Union Budget 2026-27 - Key fiscal and banking-related highlights

Major budget measures relevant to banking, finance and markets

New Income Tax Act, 2025 to come into effect from April 2026; simplified forms and compliance procedures for citizens.

Tax compliance & collections:

• Interest awarded by Motor Accident Claims Tribunal exempt from income tax.
• TCS on overseas tour packages reduced to 2% (from 2-20%).
• TCS for remittances under LRS for education and medical reduced to 2% (from 5%).
• Tax return filing timeline extended from 31 December to 31 March with nominal fees; staggered filing system introduced.
• 6-month foreign asset disclosure scheme for small taxpayers.

Penalty and prosecution rationalisation:

• Integration of IT assessment and penalty proceedings; taxpayers allowed to update returns even after reassessment by paying 10% additional tax; immunity for certain non-disclosures with payment of additional tax.
• Decriminalisation of select offences (non-production of books, certain TDS defaults) and immunity for non-disclosure of foreign assets below ₹20 lakh (retrospective from 1 Oct 2024).

Measures to attract global investment and digital data businesses:

• Tax holiday till 2047 for foreign cloud service companies using Indian data centres; 15% safe harbour for related-entity data centre services.
• Safe harbour threshold for transfer-pricing increased from ₹300 crore to ₹2,000 crore; 5-year continuation of safe harbour through automated processes; fast-tracked unilateral APA within 2 years.

Support for startups, manufacturing & infrastructure:

• Startup India Fund of Funds 2.0 (FoF 2.0) with a corpus of ₹10,000 crore to mobilise long-term domestic capital, prioritising deep-tech, innovative manufacturing and nationwide inclusion.
• Urban Challenge Fund (UCF) with ₹1 lakh crore central assistance to catalyse urban infrastructure investments; a Credit Repayment Guarantee Scheme of ₹5,000 crore for smaller and northeastern cities.
• Public capital expenditure increased to strengthen infrastructure finance and credit demand.

Financial-sector governance:

• High Level Committee on Banking for Viksit Bharat constituted to review the banking sector.
• Restructuring plans for Power Finance Corporation (PFC) and Rural Electrification Corporation (REC) announced.
• Municipal bond incentives: ₹100 crore for single issuances exceeding ₹1,000 crore.

Indirect tax changes (customs & duties) affecting trade finance and import-dependent sectors:

• Tariff simplifications across marine, leather and textile inputs; exemption extensions for critical electronics and battery manufacturing inputs; customs facilitation for drug imports and baggage clearance.

Reserve Bank of India - Monetary Policy, February 2026 (MPC)

Policy decision (59th MPC meeting, 4-6 February 2026 ; Chair: Governor Sanjay Malhotra)

• Repo rate: 5.25% (unchanged)
• Standing Deposit Facility (SDF): 5.00%
• Marginal Standing Facility (MSF): 5.50%
• Bank Rate: 5.50%
• Policy stance: Neutral - not committed to either rate hikes or cuts; will respond to incoming data on inflation, growth and global risks.

Rationale, projections and immediate impacts

• Growth projections:
  • GDP growth for 2025-26: 7.4%.
  • Q1 2026-27 projection: 6.9%; Q2 2026-27 projection: 7.0%.
• Inflation projections:
  • 2025-26 CPI inflation: 2.1%.
  • Q4 2025-26: 3.2%; Q1 2026-27: 4.0%; Q2 2026-27: 4.2%.
• Near-term impact for borrowers and depositors:
  • With the repo rate unchanged, home loan EMIs and most lending rates are unlikely to rise immediately.
  • Fixed deposit rates expected to remain broadly stable in the short term.
• Minutes publication and next meeting:
  • MPC minutes scheduled for release: 20 February 2026.
  • Next MPC meeting: 6-8 April 2026.

Banking & finance regulatory updates (RBI, SEBI, IRDAI, others)

RBI regulatory and supervisory actions

NBFCs and classification:

• Introduction of an "Unregistered Type I NBFC" category for entities with assets below ₹1,000 crore (applicable from 1 April 2026 in the new NBFC directions).
• Restoration of Default Loss Guarantees (DLGs) for NBFCs (capped at 5%).

External Commercial Borrowing (ECB) guidelines revised:

• ECB limit increased from $750 million to $1 billion with a minimum average maturity of 3 years for the permissible category.

Derivative and transaction reporting:

• Mandatory reporting of OTC forex derivatives to CCIL: phase-in targets (70% in 12 months, 80% in 18 months, 90% in 24 months).
• Unique Transaction Identifier (UTI) required for OTC derivatives from 1 January 2027 (up to 52 characters including LEI).

Supervisory and conduct measures:

• RBI proposed stricter norms for loan recovery agents - IIBF certification requirement, identification, permitted contact hours (8:00-19:00) - effective 1 July 2026.
• Responsible Business Conduct rules tightened for direct selling agents/distributors, with enhanced consumer protection and refund/compensation norms effective 1 July 2026.

Other banking sector measures:

• Banks permitted to finance SEBI-registered REITs (minimum 3 years operational history) with aggregate exposure cap of 49%.
• Aggregate acquisition financing exposure limit raised (from 10% to 20% of Tier-1 capital) and banks can finance up to 75% of acquisition value, subject to prudential safeguards.
• Kisan Credit Card (KCC) guidelines expanded: loan tenures and flexibility increased; loan tenure up to 6 years for crop and allied activities and provision for technology-driven agriculture credit.

Enforcement actions and penalties:

• RBI imposed monetary penalties totalling ₹1.35 crore across five institutions (CSB Bank, Bank of Maharashtra, DCB Bank, IIFL Finance, Navi Finserv) for supervisory contraventions.

Digital infrastructure:

• Launch of a Tier-IV secure data centre in Bhubaneswar; primary secure data centre already in Kharghar, Navi Mumbai.
• Airtel Money granted Certificate of Registration as Type II NBFC-ND (ICC) with restrictions on public deposits.

SEBI and capital markets

• Inclusion of deep-technology startups under the Startup India framework for 20 years, with regulatory facilitation for capital formation.

Approvals and market infrastructure:

• NSE authorised to launch Indian Natural Gas Futures with monthly contracts.
• NSE IX launched a Global Access platform enabling retail investors to trade US-listed securities directly from India.
• ASK Asset & Wealth Management approved as the 52nd mutual fund house; mutual fund AUM ~₹81 lakh crore (Jan 2026).

GIFT City and IFSC developments:

• GIFT City operational expansion: 35 IFSC banking units managing substantial international banking assets.

Post & financial inclusion:

• NSE and Department of Posts MoU to distribute mutual fund products through post offices to deepen financial inclusion.

Digital payments, fintech & payments infrastructure

• UPI internationalisation: UPI operational in eight countries (UAE, Singapore, Bhutan, Nepal, Sri Lanka, France, Mauritius, Qatar), expanding cross-border retail digital payments.
• Digital Payments Index (RBI-DPI) increased to 516.76 (September 2025) from 493.22 (March 2025), reflecting robust digital payments growth and higher UPI penetration (~80% share).
• RuPay-UPI incentive scheme: total outlay ₹8,276 crore (FY22-FY25) to support ecosystem growth and merchant onboarding; UPI QR codes increased dramatically across the country.
• Payment aggregator licensing and product innovations:
  • RBI has granted full three-category payment aggregator authorisations (PA-O, PAP, PA-CB) to eligible entities.
  • DBS piloted Visa Intelligent Commerce (VIC) for agentic AI-driven payments; Mastercard and other players piloted agentic commerce/AI-enabled payment experiences.
• Cross-border QR and NPCI International initiatives:
  • NPCI International signed an agreement with PayNet Malaysia enabling QR-based merchant payments interoperability between UPI and DuitNow QR.
• Central Bank Digital Currency (CBDC) experiments:
  • Pilot launch of a CBDC-based Public Distribution System (e₹ based PDS) in selected districts of Gujarat, indicating early use-cases for digital currency in welfare distribution.

Key banking sector initiatives, partnerships and products (February period)

• Axis Bank launched rooftop solar finance offering collateral-free loans up to ₹2 crore for MSMEs to adopt rooftop solar systems.
• IOCL and Akasa Air signed a Letter of Intent to explore Sustainable Aviation Fuel (SAF) supply partnerships.
• NSE and Department of Posts MoU enables mutual fund distribution through post offices; expands retail access to market-linked savings.
• IDFC First Bank, Axis Bank and other banks rolled out co-branded and innovative retail card products (including FD-backed credit cards, airline co-branded cards).

Important schemes and financial-support measures impacting banking

• Startup India FoF 2.0 - Corpus ₹10,000 crore to mobilise domestic long-term capital for deep-tech and early-stage startups; will channel funds via AIFs, improving venture financing and bankable projects.
• Urban Challenge Fund (UCF) - ₹1 lakh crore central assistance to catalyse urban infrastructure investment through market financing (municipal bonds, PPPs), with a ₹5,000 crore credit-repayment guarantee facility for smaller cities.
• PM-SETU - Upgradation of 1,000 ITIs with industry linkages and allocation of ₹60,000 crore to improve skilling and employability, indirectly supporting credit demand in skill-intensive sectors.
• White Revolution 2.0 - Aimed at increasing milk procurement by 50% over five years; implications for agri-credit, cooperative finance and rural banking flows.
• Bharat-VISTAAR - An AI-driven agri tool integrating AgriStack and ICAR practices to support agricultural advisory and market linkages, with potential to reduce credit risk through better agronomic information.

16th Finance Commission: implications for banking & fiscal federalism

• States' share of the divisible tax pool retained at 41% for 2026-27 to 2030-31.
• Introduction of State GDP contribution as a new allocation parameter (10% weight) in horizontal devolution - rewards states contributing more to national growth.
• Removal of Revenue Deficit Grants (RDGs) for the first time - emphasis on incentivising fiscal reform and self-reliance; this may influence state borrowing strategy and marketable borrowings.
• Earmarked transfers: ₹7.91 trillion for rural and urban local bodies over five years (60:40 rural-urban split) and specific allocations for disaster risk management (State Disaster Response Funds and national disaster funds), shifting emphasis to functional/purpose-linked grants.

Banking sector appointments, acquisitions and governance events

• Vinay Muralidhar Tonse appointed MD & CEO of YES Bank (RBI approval).
• R. Vijay Anandh appointed MD & CEO of City Union Bank (RBI approval).
• Rohit Rishi appointed Managing Director of IIFCL.
• Sanjay Agarwal reappointed MD & CEO of AU Small Finance Bank for three years from April 2026; AU SFB progressed towards universal bank transition.
• Bain Capital approved to acquire up to 41.66% stake in Manappuram Finance (subject to regulatory approvals).
• New India Co-operative Bank removed from Second Schedule of RBI Act following voluntary amalgamation with Saraswat Co-operative Bank.

Macro indicators and banking implications (selected)

• GDP performance: robust growth momentum with 2025-26 estimated at 7.4% - supports credit demand and asset quality if growth continues.
• Inflation: low CPI readings in late 2025 (0.7% in November; 1.3% in December) and RBI projections indicate inflationary headroom, informing neutral monetary stance.
• WPI inflation picked up to 1.81% in January 2026; monitor input-cost pressures for corporate borrowers.
• Unemployment (PLFS): 5% in January 2026 (urban 7%, rural 4.2%) - labour market dynamics remain mixed for consumption-led credit growth.
• Power and renewable capacity additions recorded a record 52,537 MW in 10 months of FY26, with non-fossil capacity surpassing fossil - important for project finance and renewable lending opportunities.

International financial cooperation and cross-border developments

• World Bank - annual financing framework for India of USD 8-10 billion over five years announced to support development priorities; opportunities for co-financing with banks and DFIs.
• India-USA Interim Trade Agreement - tariff reductions on select agricultural products and projected trade purchases of USD 500 billion over five years; trade growth affects export financing and trade-credit flows.
• ADB approved USD 182 million loan for Assam flood and erosion resilience - infrastructure financing opportunity for banks and NBFCs.
• NPCI International MoUs with multiple countries to export Digital Public Infrastructure models (UPI, Aadhaar-based services) - potential for cross-border fintech partnerships and correspondent banking arrangements.

Fintech, digital governance and AI: banking relevance

• India AI Impact Summit 2026 and the M.A.N.A.V AI governance framework emphasised ethical, accountable and inclusive AI - banks will need to align AI use-cases (credit scoring, fraud detection, customer-facing models) with governance norms (accountability, transparency, data sovereignty).
• Guinness record for responsible AI pledges (2,50,946 pledges) and a national push for responsible AI may accelerate regulated adoption of AI in regulated financial services.
• UIDAI, DigiLocker and other DPI expansions (including cross-border MoUs) support digital KYC, e-sign and transaction authentication, lowering onboarding costs and compliance friction for banks.
• Rise of AI-enabled products (agentic commerce pilots with Visa/Mastercard, bank pilots for AI-driven commerce) points to new fee and transaction streams for banks and payment service providers.

Key takeaways for banking professionals and competitive-exam aspirants

• Union Budget 2026-27 and the RBI MPC in February 2026 shaped the near-term policy and macro environment: fiscal support through higher public capital expenditure and a neutral monetary stance to balance inflation and growth.
• Regulatory reforms (NBFC directions, derivative reporting, UTI for transactions, enhanced safe harbours) are important for banks, NBFCs and corporates - exam questions may target limits, effective dates, and prudential thresholds.
• Digital payments and UPI internationalisation remain central to India's finance strategy; NPCI international tie-ups and RuPay-UPI incentives are systemic priorities.
• Startups, deep-tech funding (FoF 2.0) and urban infrastructure financing (UCF) create credit and investment opportunities for banks, non-bank financiers and capital markets.
• 16th Finance Commission changes (41% devolution retained; GDP contribution as allocation criterion; zero revenue deficit grants) have significant fiscal federalism implications that affect state borrowings and bank financing of municipal/urban projects.

Prepared notes - quick reference (figures & dates)

• Budget highlights: Public capital expenditure ₹12.2 lakh crore; fiscal deficit 4.3% of GDP; gross market borrowings ₹17.2 lakh crore.
• RBI policy rates (Feb 2026): Repo 5.25%; SDF 5.00%; MSF & Bank rate 5.50%; stance neutral.
• Startup India FoF 2.0 corpus: ₹10,000 crore. Urban Challenge Fund central assistance: ₹1 lakh crore.
• SEBI/market: NSE natural gas futures approved; NSE IX global platform launched; ASK approved as 52nd mutual fund house.
• UPI: operational in 8 countries; RBI-DPI: 516.76 (Sep 2025).