Banking Awareness of 24, 25 and 26 July 2025

Topic: RBI

1. RBI carried out surprise two-day variable rate repo (VRR) auction for ₹50,000 cr.

• The aim was to inject ₹50,000 crore into the banking system.
• This move was triggered by liquidity pressure due to GST-related outflows.
• Banks submitted bids worth ₹71,902 crore, exceeding the notified amount.
• The RBI accepted ₹50,001 crore in bids. The weighted average rate stood at 5.58 percent.
• By March-end 2025, banking system liquidity had turned into a surplus.
• RBI’s July 2025 bulletin stated that liquidity remained in surplus during June and up to July 18, 2025.
• This was driven by higher government spending.
• Lower-than-expected GST collections also contributed to the surplus.
• A fall in currency in circulation added to the surplus liquidity.
• Between June 16 and July 18, 2025, average daily absorption under the liquidity adjustment facility (LAF) was ₹3.13 lakh crore.
• This marked a sharp increase from ₹2.39 lakh crore during May 16 to June 15, 2025.
• Variable Reverse Repo Rate (VRRR) auction:
  • A VRRR auction is used by RBI to manage liquidity in the banking system by absorbing excess cash from banks.
  • In this auction, banks bid for the opportunity to deposit their surplus funds with the RBI.
  • And the interest rate at which the RBI borrows is determined through a competitive bidding process.
• Variable Rate Repo (VRR) auction:
  • RBI uses VRR auctions to manage liquidity in the banking system.
  • These auctions allow banks to borrow money from the RBI for short periods by offering government securities as collateral.
  • The interest rate for these loans is not fixed but is determined through an auction process.

Topic: Infrastructure and Energy

2. India's thermal coal production is expected to exceed demand by a large margin in 2025, according to the International Energy Agency (IEA).

• Thermal coal output is projected to reach 1.11 billion tonnes in 2025.
• In 2026, production is forecast to rise further to 1.15 billion tonnes.
• The annual production growth rate is estimated at 3 percent.
• This supply growth will likely reduce India's need for imported thermal coal.
• Imports are expected to drop to just over 150 million tonnes.
• Total coal imports may fall to around 219 million tonnes.
• Rising domestic production is replacing foreign coal supplies.
• India remains the second-largest coal producer and consumer globally.
• The IEA expects global coal trade to decline in 2025. This would reverse the growth seen in 2024.
• Global coal prices fell in early 2025 due to oversupply. Demand weakened in major markets like China, India, and Europe.
• Global coal production is projected to rise to 9.2 billion tonnes in 2025. This would mark a new all-time high.
• China and India are the main drivers of this production growth.
• Electricity demand was lower in the first half of 2025. As a result, coal-based power generation declined.
• Coal use for power fell 2.1 percent year-on-year. In contrast, industrial coal demand grew in 2025.
• India’s total coal demand is expected to rise 1.3 percent in 2025.

Topic: Banking System

3. Federal Bank has rolled out a new biometric authentication system for e-commerce card transactions.

• This is the first solution of its kind in the Indian banking sector.
• The system was developed in collaboration with fintech partners M2P and MinkasuPay.
• Customers can now complete transactions using their fingerprint or face ID.
• This eliminates the need to enter one-time passwords (OTPs).
• Biometric verification makes the process faster and more secure.
• Transaction times have dropped to just 3 to 4 seconds.
• The new system improves both safety and ease of use during online shopping.
• It fully complies with the Reserve Bank of India’s two-factor authentication rules.
• If biometric data is not available, the system falls back to OTP-based authentication.
• Customers can activate the feature with a one-time consent during checkout.
• The solution works on Android and iOS smartphones that support biometrics.
• The feature is now available for Federal Bank debit and credit cardholders.
• It is currently live with selected partner merchants.
• The bank plans to expand the service gradually across more platforms.
• Federal Bank is an Indian private sector bank with headquarters in Aluva, Kochi. KVS Manian is MD and CEO of Federal Bank.

Topic: Banking System

4. RBI has approved Warburg Pincus to acquire up to a 9.99% stake in IDFC First Bank.

• Warburg Pincus will make this investment through its affiliate, Currant Sea Investments B.V.
• The deal had already received approval from the Competition Commission of India on June 3.
• Warburg Pincus plans to invest ₹4,876 crore, or about $587 million.
• This investment involves purchasing approximately 81.27 crore Compulsorily Convertible Preference Shares at ₹60 per share.
• Once converted into equity, Warburg Pincus will hold around 9.48% of the bank.
• The Abu Dhabi Investment Authority is also investing ₹2,624 crore for a 5.10% stake.
• The total capital raised will be ₹7,500 crore, or roughly $877 million.
• This investment will represent a 15% stake in the bank after full conversion.
• In May 2025, shareholders rejected a proposal to appoint a nominee director from Currant Sea.
• The bank is also pursuing other regulatory approvals simultaneously.
• After the capital infusion and share conversion, the capital adequacy ratio is expected to rise from 16.1% to 18.9%.
• The Common Equity Tier-1 ratio is projected to increase to about 16.5%.
• Common Equity Tier-1 ratio is a measure of a bank's financial strength.
• It is calculated by dividing its CET1 capital by its risk-weighted assets.
• Tier I capital consists mainly of share capital and disclosed reserves.
• It is a bank’s highest quality capital because it is fully available to cover losses.
• IDFC First Bank is an Indian private-sector bank. It was founded in 2015.
• It is headquartered in Mumbai. V. Vaidyanathan is its MD & CEO.

Topic: Indian Economy/Financial Market

5. India will emerge as the world's third largest economy by 2028.

• According to a Morgan Stanley report released on July 23, India is projected to become the third-largest economy in the world by 2028.
• The country’s GDP is expected to more than double and reach $10.6 trillion by 2035, driven by strong state-level performances.
• The report estimates that three to five Indian states – including Maharashtra, Tamil Nadu, Gujarat, Uttar Pradesh and Karnataka – could each reach the $1 trillion mark, putting them among the top 20 global economies by 2035.
• Based on the latest data, the top three states are Maharashtra, Gujarat and Telangana.
• Chhattisgarh, Uttar Pradesh, and Madhya Pradesh have shown the most progress in state-level economic rankings over the past five years.
• According to the report, India will contribute 20% to global growth in the next decade and will emerge as a major driver of revenue for multinational companies.
• As India moves towards becoming a $10.6 trillion economy, the role of states is also becoming important.
• Central capital expenditure has doubled from 1.6% of GDP in FY15 to 3.2% in FY25, leading to major infrastructure improvements.
• Highway networks have expanded by 60%, while the number of airports and metro rail systems has also seen significant growth.
• Key national infrastructure schemes like PM Gati Shakti, Bharatmala, and Sagarmala are being executed in coordination with states.

Topic: MoUs/Agreements

6. A Comprehensive Economic and Trade Agreement (CETA) signed between India and the UK.

• On 24 July, a major trade agreement titled the Comprehensive Economic and Trade Agreement (CETA) has been signed between India and the United Kingdom under the leadership of Prime Minister Narendra Modi.
• The agreement was signed by India’s Commerce Minister Piyush Goyal and the UK’s Secretary of State for Business and Trade Jonathan Reynolds in the presence of both prime ministers.
• This Free Trade Agreement marks India's significant economic engagement with a major developed economy.
• Bilateral trade between the two countries stands at around US$56 billion, with a joint goal to double it by 2030.
• Nearly 99% of India’s exports to the UK have been granted duty-free access, boosting sectors like textiles, leather, toys, marine products, and gems and jewelry.
• Simplified visa procedures and liberalized entry categories have been provided for Indian professionals like engineers, chefs, musicians, and architects.
• The services sector, including IT, financial, legal, educational, and digital services, has been given broader market access under this agreement.
• An innovative Double Contribution Convention has been agreed upon, exempting Indian professionals from paying UK social security contributions for up to three years.
• The agreement has been designed to benefit MSMEs, startups, farmers, women entrepreneurs, and youth by expanding global value chain access.
• The CETA is expected to generate employment, drive innovation, and strengthen India’s global economic standing while ensuring inclusive and sustainable trade growth.

Topic: Appointments

7. Ajay Seth appointed as the new Chairman of IRDAI for a three-year term.

• On 24 July, former Finance Secretary Ajay Seth has been appointed as the Chairman of the Insurance Regulatory and Development Authority of India (IRDAI).
• The appointment was approved by the Appointments Committee of the Cabinet.
• Ajay Seth, a 1987-batch IAS officer of the Karnataka cadre, retired as Secretary of Finance and Economic Affairs in June 2025.
• His term as IRDAI Chairman will last for three years or until he turns 65, or until further government orders — whichever occurs first.
• He will succeed Debasish Panda, another retired IAS officer, whose term ended in March 2025.
• The IRDAI chairman's post had remained vacant since March until this new appointment was confirmed.
• Insurance Regulatory and Development Authority of India:
• IRDAI was constituted as the Insurance Regulatory and Development Authority (IRDA) in 1999 after the recommendations of the Malhotra Committee report. IRDA was later renamed IRDAI.
• It was constituted as an autonomous body to regulate and develop the insurance industry.
• It was incorporated as a statutory body on April 19, 2000. It is headquartered in Hyderabad.
• It is an autonomous and statutory body under the jurisdiction of the Ministry of Finance.

Topic: Appointments

8. Shri Nitin Gupta has taken over as Chairperson of the National Financial Reporting Authority (NFRA).

• He assumed charge on 23rd July 2025. Earlier, he served as Chairman of the Central Board of Direct Taxes (CBDT) from June 2022 to June 2024.
• As CBDT Chairman, he introduced artificial intelligence and big data into the tax system.
• Under his leadership, the direct tax-to-GDP ratio reached an all-time high.Tax revenues also grew steadily year after year.
• Ms. Smita Jhingran, a retired IRS officer from the 1986 batch, has taken charge as Full-Time Member of NFRA.
• She previously held the same position at NFRA.
• Shri P. Daniel, a retired Indian Defence Estates Service officer from the 1989 batch, has also joined as Full-Time Member of NFRA.
• He earlier served as Secretary of the Central Vigilance Commission (CVC).
• Shri Sushil Kumar Jaiswal, a retired officer from the Indian Audit and Accounts Service (1993 batch), has also become a Full-Time Member of NFRA.
• He previously served as Director General of Audit (Central Receipts).
• On 23rd July 2025, the Secretary of the Ministry of Corporate Affairs administered the Oaths of Office and Secrecy to NFRA Chairperson and Full-Time Members.
• Established on 1st October 2018, NFRA supervises the work of auditors, establishes and enforces standards of accounting and auditing.