RBI Monetary Policy Committee holds repo rate at 5.25% for fourth consecutive meeting
The MPC met from 3 to 5 August 2026 and unanimously held the policy repo rate at 5.25% with a neutral stance, marking its fourth consecutive hold. Governor Sanjay Malhotra cited the continuing West Asia conflict, disrupted trade routes, and supply-chain volatility as the primary constraints on easing. June CPI at 4.38%, up from 3.93% in May, with food inflation at 5.32%, provides no basis for a cut. Governor Malhotra also confirmed that polymer banknotes will be introduced in FY 2027-28 following successful technical trials.
Key Takeaways:
- Repo rate held at 5.25%; SDF at 5.00%; MSF rate and Bank Rate at 5.50%. The cumulative 125 basis points of cuts delivered through 2025 remain in place. The easing cycle that began in February 2025 is effectively suspended; further cuts require a material improvement in both global conditions and domestic inflation.
- FCNR(B) scheme inflows are running significantly ahead of expectations, with FPI participation in the debt segment also turning positive, partly reflecting the June 2026 FAR expansion and removal of FPI concentration limits. The RBI expressed optimism that inflows may exceed market forecasts before the scheme closes, providing a useful external account buffer.
- Polymer banknotes, made from biaxially oriented polypropylene, will be introduced in FY 2027-28. They offer materially longer circulation life, greater soiling and tear resistance, and enhanced security features. India joins over 30 countries, including the UK, Canada, and Australia, in adopting polymer note technology.
- The next MPC meeting is scheduled for October 5 to 7, 2026. CFOs managing floating-rate debt or planning capital market issuances should maintain conservative rate assumptions through at least Q3 FY 2026-27.
JPC submits report on Corporate Laws (Amendment) Bill, 2026 to Lok Sabha
The Joint Parliamentary Committee (JPC) examining the Corporate Laws (Amendment) Bill, 2026 presented its report to the Lok Sabha on 3 August 2026 during the Monsoon Session (20 July to 13 August 2026). Chairperson Shri Sudhir Gupta MP presented the report after a clause-by-clause examination involving oral evidence from the MCA, RBI, IRDAI, CBDT, CBIC, MeitY, NITI Aayog, IBBI, and a wide range of industry bodies, including CII, FICCI, and the Bharat Web3 Association. The tabling clears the way for the Bill to proceed to its Report Stage and ultimately move toward passage, with amendments, in a subsequent session.
Key Takeaways:
- The JPC accepted the decriminalisation framework in full, with minor drafting refinements. The committee’s examination focused on five areas: decriminalisation of minor procedural defaults; Specified IFSC LLPs; NFRA’s reconstitution as a statutory body corporate; reforms to NCLT-sanctioned schemes and the fast-track merger process; and codification of virtual general meetings.
- On NFRA, the JPC recommended retaining the body’s expanded rule-making, fee-levying, and quasi-judicial functions while proposing additional governance safeguards on Board composition and the independence of investigation and disciplinary proceedings. This represents a calibrated response to representations from the ICAI.
- Web3-related submissions from the Bharat Web3 Association and India Blockchain Forum are reflected in JPC recommendations on digital asset disclosures for companies. However, the committee stopped short of comprehensive crypto-specific corporate governance provisions, deferring instead to the anticipated standalone VDA legislation.
- Legal practitioners, company secretaries, and compliance teams should treat the JPC report as the best available preview of the final legislation and begin gap-analysis work against current governance frameworks, constitutional documents, and compliance programmes.
SEBI introduces Closing Auction Session in the equity cash segment, effective 3 August 2026
SEBI introduced the Closing Auction Session (CAS) in the equity cash segment of Indian stock exchanges from 3 August 2026, pursuant to a circular issued on 16 January 2026. The CAS replaces the prior weighted average price mechanism for determining the official closing price with a short, structured auction window at the end of each trading day. This aligns India’s price-discovery mechanism at market close with practices at leading international exchanges, including the LSE, Euronext, and the Hong Kong Stock Exchange.
Key Takeaways:
- During the CAS window, orders are collected and a single equilibrium clearing price, the official closing price, is determined by matching all buy and sell orders at the price that maximises traded volume. This price becomes the benchmark for ETF NAV calculations, index rebalancing, corporate action pricing, and derivatives settlement.
- The CAS applies to the equity cash segment only. The equity derivatives segment continues to use the weighted average price methodology. Mutual fund schemes, particularly equity-oriented index funds and ETFs, must ensure NAV calculation methodologies are updated to reflect the CAS-derived closing price from 3 August 2026.
- The CAS significantly reduces the scope for end-of-day price manipulation, where low-volume trades in the final minutes of continuous trading can distort the closing price used for index calculations and fund NAVs. Concentrating closing price discovery into a single auction makes manipulation more difficult and more detectable.
- Stock brokers, institutional investors, and fund managers should review order management systems, algorithmic trading strategies, and NAV workflows against the CAS framework. Exchange operational circulars provide detailed guidance on CAS order entry rules, the matching algorithm, and treatment of unmatched orders.
RBI proposes one-time standing approval for mutual funds and insurers to acquire higher bank stakes, comment deadline 4 August 2026
The RBI published a consultation paper on 14 July 2026 proposing that mutual funds, insurance companies, and pension funds be permitted to obtain a one-time standing approval to acquire up to 10% of a bank’s paid-up share capital or voting rights without requiring fresh regulatory clearance each time holdings temporarily fall below the 5% significant shareholder threshold. Public comments were invited until 4 August 2026.
Key Takeaways:
- Under the current framework, institutional investors must obtain RBI approval for each subsequent bank share acquisition, even where routine portfolio management momentarily takes holdings below 5% before being rebuilt. The proposed standing approval, renewable on satisfying original conditions, removes this repeated clearance requirement for eligible regulated institutions.
- Eligibility is limited to mutual funds, insurance companies, and pension funds, entities themselves regulated by SEBI, IRDAI, or PFRDA respectively. The restriction to regulated institutions reflects the RBI’s comfort with the governance standards and investment mandates applicable to these investors.
- The proposal complements the June 2026 FPI liberalisation measures, including FAR expansion and removal of concentration limits, as part of a coordinated strategy to attract long-term, regulated institutional capital into India’s banking sector.
- AMCs, insurance companies, and pension fund managers with existing significant bank shareholdings should review the consultation paper, assess implications for portfolio management processes, and engage with the RBI consultation. Final rules will be implemented through amendments to the RBI’s Ownership in Private Sector Banks Directions.
