From regulatory action to renewed investor focus, India’s banking and finance industry is undergoing significant shifts. This month’s updates reflect both caution and transformation in the way financial institutions are operating and being governed.
Jane Street Under Scrutiny for Market Irregularities
In a high-profile regulatory case, the Securities and Exchange Board of India (SEBI) has barred Jane Street, a global trading firm, from participating in Indian financial markets. The firm allegedly exploited loopholes in BankNifty options, earning unlawful profits over ₹48,000 crore. SEBI has instructed that these funds be held in escrow while investigations continue. The action reinforces SEBI’s efforts to ensure transparency and fair trading practices.
Surplus Liquidity, But Lending Momentum Missing
Despite a liquidity glut in the system estimated above ₹4 lakh crore Indian banks are struggling to convert funds into active credit. Recent RBI monetary actions, including a ₹1 trillion reverse repo auction, aim to stabilize short-term interest rates. However, loan demand remains subdued, suggesting that liquidity alone isn’t enough to stimulate economic borrowing.
Global Funds Flow Back into Indian Equities
June 2025 marked a strong return of Foreign Portfolio Investors (FPIs), who poured in ₹14,590 crore into Indian markets. Financial and banking sectors were the top beneficiaries, accounting for a majority of the investments. The positive sentiment is fueled by predictable monetary policy, macroeconomic stability, and optimism around India’s trade position globally.
Compliance Rules Revamped Across Key Financial Services
Several regulatory changes took effect on July 1, altering how individuals and businesses interact with financial institutions:
- PAN applications now require mandatory Aadhaar linking
- Post-filing edits blocked on GSTR-3B returns
- Government launches second e-way bill portal
- Aadhaar OTP needed for IRCTC Tatkal bookings
- ICICI and Axis revise ATM withdrawal and banking fees
These updates are designed to boost efficiency, prevent fraud, and strengthen digital identity verification across services.
Minor Rate Cuts Introduced by State-Owned Banks
Punjab National Bank, Indian Bank, and Bank of India have trimmed their benchmark MCLR (Marginal Cost of Lending Rate) by 5 basis points. This adjustment lowers the cost of borrowing slightly for retail and MSME customers, with the revised one-year MCLR now hovering between 8.90% and 9.00%.
HDFC Bank: Deposit Surge Outpaces Loan Book
HDFC Bank, India’s largest private sector lender, saw deposit growth of 1.8% in Q1 FY25, bringing total deposits to ₹27.64 lakh crore. In contrast, loan growth stood at just 0.4%, suggesting that savings behavior is outpacing borrowing in the current financial climate. This trend could signal cautious consumer sentiment and tighter credit filters.
Rural Banking Reinvented with Merged RRBs
As part of the One State, One RRB policy, India has merged various Regional Rural Banks in states like Bihar and Madhya Pradesh into singular, more powerful units. This step is aimed at improving rural credit access, reducing administrative overhead, and providing more consistent services in semi-urban and rural regions.
Summary: A Sector in Reset Mode
India’s financial system in July 2025 is a story of rebuilding trust, rebalancing risk, and restructuring services. Regulatory crackdowns signal no tolerance for manipulation, liquidity controls are becoming more precise, and investor confidence is cautiously rising again. Meanwhile, banking institutions are adapting to a new digital and disciplined regulatory environment.
