Banking Awareness of 1 and 2 August 2025

Topic: Reports and Indices

1. India's Purchasing Managers’ Index (PMI) rose to 59.1, reaching a 16-month high in July 2025.

• The manufacturing activity picked up pace in July 2025. However, job creation slowed. Hiring fell to the weakest level since November 2024.

• The PMI increase was driven by faster growth in new orders, production, and inventory accumulation.
• Despite this, business confidence declined. It dropped to a three-year low.
• This was mainly due to inflation concerns and rising competition. Input and output prices stayed high in July.
• Manufacturing contributes 17% to India’s GDP.
• Firms hired new workers at the slowest pace in eight months. Most companies (93%) felt their existing staff was sufficient.

Topic: Indian Economy/Financial Market

2. The Finance Ministry has announced a reduced government guarantee fee of 0.1% for the National Bank for Financing Infrastructure and Development (NaBFID).

• This discounted rate is applicable to funds borrowed from multilateral agencies, sovereign wealth entities, and other designated foreign institutions.
• A further concession may be granted for loans taken to fulfill objectives assigned by the Central government, provided NaBFID submits a comprehensive proposal.
• To request a lower rate, NaBFID must detail the borrowing arrangement, involved parties, and the planned application of the funds.
• The guarantee charge is due when the guarantee is obtained and must be paid annually on April 1 thereafter.
• This concessional fee is also subject to additional terms set by the Central government.
• NaBFID, launched in April 2021, was created to fill long-term financing gaps in India's infrastructure sector.
• It is positioned to play a pivotal role in advancing India’s infrastructure goals in a sustainable and accountable way.
• The institution also focuses on building a robust market for infrastructure-related bonds, loans, and derivatives.

Topic: Banking System

3. Bank credit growth slowed to 10.2% year-on-year in June 2025.

• This is a decline from 13.8% in June 2024. The slowdown was driven by reduced credit demand across all major sectors.

• Credit to the agriculture and allied sectors fell to 6.8%. It had been much higher at 17.4% in June 2024.
• Industrial credit growth dropped to 5.5% in June 2025. This is down from 7.7% in the previous year.
• However, lending to micro, small, and medium enterprises remained stable.
• Engineering, construction, and textile industries showed increased credit uptake.
• Loan growth in the services sector slowed to 9.6%. It was 15.1% in June 2024.
• The decline was mainly due to lower credit to NBFCs.
• Despite this, credit to professional services and software firms stayed strong.
• Personal loan growth eased to 14.7% in June 2025. It was 16.6% a year earlier.
• The decline was due to weaker demand for vehicle loans, credit cards, and other personal loan categories.

Topic: World Economy

4. India is among the hardest hit South Asian countries under US President Donald Trump’s new retaliatory tariff list.

• India faces a 25 per cent tariff, while Bangladesh, Sri Lanka, and Vietnam face 20 per cent tariff.
• Pakistan, Indonesia, Thailand, Philippines, and Malaysia were each given a 19 per cent tariff.
• Myanmar and Laos received the highest tariffs in the region at 40 per cent, while Brunei matches India at 25 per cent.
• These tariffs include a 10 per cent baseline tariff introduced by the US in April.
• Trump has not yet announced the additional penalty he previously threatened India over its ties with Russia.
• Commerce and Industry Minister Piyush Goyal stated that the government is assessing the impact in consultation with exporters and industry stakeholders.
• India is continuing its engagement with the US on a bilateral trade agreement, with the first phase expected by Fall 2025 (October-November).
• India has decided not to retaliate against the US at the WTO while trade talks are ongoing.
• In FY25, the US was India’s top export destination with goods worth $86.51 billion.
• A tariff is a tax imposed by a government on imported or exported goods.
• It is typically used to protect domestic industries, generate revenue for the government or to retaliate against trade practices of other countries.

Topic: Banking/Financial/Govt Schemes

5. “Saksham Niveshak” – a 100-day drive to facilitate dividend claims and KYC updates – launched by the IEPFA.

• The Investor Education and Protection Fund Authority (IEPFA) has launched a national drive titled “Saksham Niveshak” to help investors reclaim unclaimed dividends.

• The campaign is running from July 28 to November 6, 2025 and aims to promote KYC updates and shareholder awareness.
• Companies have been urged to contact shareholders proactively to facilitate dividend recovery and update nominee details.
• Shareholders are encouraged to act promptly so their unclaimed dividends and shares are not transferred to the IEPFA.
• The initiative includes steps to streamline the resolution of dividend-related cases held by companies for long periods.
• The main objectives of the “Saksham Investor” campaign are as follows:
  • To provide assistance in resolving matters relating to unclaimed dividends lying with companies.
  • To provide assistance in KYC and nomination updates for shareholders.
  • To ensure dividend payment by companies directly to genuine investors.
• Through this initiative, IEPFA continues its mission to safeguard investor interests and promote financial literacy.
• Through initiatives like Investor Didi, Investor Panchayat and Investor Camps, IEPFA strives to create a financially aware and empowered investor base across the country.

Topic: Banking System

6. The Banking Laws (Amendment) Act, 2025 come into effect on August 1.

• The Act focuses on strengthening governance in the banking sector.
• It is also intended to provide better protection for depositors and investors.
• The Finance Ministry notified the Act on April 15, 2025.
• A key aim is to improve audit standards in public sector banks.
• The Act extends the tenure of Directors in cooperative banks.
• This extension does not apply to the Chairperson and whole-time Directors.
• The definition of “substantial interest” has been revised.
• The threshold of substantial interest has increased from ₹5 lakh to ₹2 crore. This limit had not changed since 1968.
• The Act aligns Director terms in cooperative banks with the 97th Constitutional Amendment.
• It increases the maximum term from 8 years to 10 years.
• This change excludes the Chairperson and full-time Directors.
• There are 19 amendments included in the Act. These amendments apply to five key banking laws.
• One of them is the Reserve Bank of India Act, 1934. Another is the Banking Regulation Act, 1949.
• It also amends the State Bank of India Act, 1955.
• The remaining changes affect the Banking Companies (Acquisition and Transfer of Undertakings) Acts of 1970 and 1980.

Topic: Miscellaneous

7. Renowned economist Lord Meghnad Desai passed away at the age of 85.

• Lord Meghnad Desai, an eminent economist and member of the UK’s House of Lords, has passed away on July 29, 2025.
• Prime Minister Narendra Modi called him a distinguished thinker and a bridge between India and the UK.
• Desai was known for his deep connection with Indian culture and frequent contributions to Indian public discourse.
• His academic journey began in Vadodara and took him to the University of Pennsylvania for PhD in 1963.
• He authored over 20 books and 200 academic articles, spanning topics from Marxian economics to global capitalism.
• His teaching career at the London School of Economics was marked by scholarly excellence and influence.
• Notable works include Marx’s Revenge and Who Wrote the Bhagavad Gita?, in which he critically examined foundational ideas.
• Desai was awarded the Padma Bhushan in 2008 for his significant contributions to economics and public service.

Topic: Indian Economy/Financial Market

8. India's foreign exchange reserves rose sharply to $2.7 billion in July.

• India’s foreign exchange reserves saw a rise of $2.7 billion, reaching a total of $698.19 billion as per RBI data released on 1 August.

• The increase was led by foreign currency assets, which rose by $1.31 billion to $588.93 billion.
• Gold reserves also contributed to the rise, rising by $1.2 billion to $85.7 billion.
• Special Drawing Rights (SDRs) with the IMF increased by $126 million to $18.8 billion, while the IMF reserve position rose by $55 million to $4.75 billion.
• These gains were partially driven by positive revaluations of assets denominated in major currencies such as the Euro, Pound, and Yen.
• The RBI continues to intervene in the forex market to manage volatility and maintain liquidity, without targeting a fixed exchange rate.
• Gross FDI inflows into India surged to $8.8 billion in April 2025, compared to $5.9 billion in March and $7.2 billion in April 2024.
• Nearly 50% of these FDI inflows were attracted by India’s manufacturing and business services sectors.
• India ranked 16th globally for FDI inflows and led the Global South with $114 billion in greenfield digital economy investments from 2020 to 2024.
• Foreign portfolio investments also rose, with net investments of $1.7 billion in May 2025, supported by global optimism and strong corporate earnings.