Banks in Karnataka have reported a disbursement of ₹2,47,754 crore towards the agriculture sector in the fourth quarter ended March 31, 2026, as against their target of ₹2,22,203 crore, said Bhavendra Kumar, executive director, Canara Bank, in Bengaluru on Tuesday (May 26).

Speaking at the 175th State Level Bankers’ Committee meeting held at Vidhana Soudha, he said banks have achieved 111% of their allotted target during the fourth quarter. For the MSME sector, they achieved a growth of 106% and the total priority sector grew 108%. Mr. Kumar exhorted the banks to continue the good performance during FY27.

Shalini Rajneesh, State Chief Secretary, who chaired the meeting, reviewed the State’s performance — bank-wise and district-wise — under sub-sectors such as Total Credit, Total Deposits, Priority Sector, and Target Achievements.

She also advised bankers and government departments to work in unison for smooth and seamless integration of development activities for better implementation. Further, she reviewed all development schemes/government-sponsored schemes and advised the banks to clear all pending applications. Ms. Rajneesh also instructed the bankers to on-board the NRLM (National Rural Livelihoods Mission) Self-Help Group Business Correspondent (BC) Sakhis as BC agents in all gram panchayat locations.

Kaya Tripathi, regional director, Reserve Bank of India, emphasised on the preparation of a road map for Financial Inclusion 2025-30. She highlighted the importance of the integrated portal for data updating.

Banks have to work towards the set target and achieve the same well in advance, urged Surendra Babu, chief general manager, NABARD.

Other participants included Uma Mahadevan, additional chief secretary and development commissioner, Government of Karnataka, Shambhu Lal, chief general manager, Canara Bank, Bhaskara Chakravarthy M., general manager, Canara Bank, and Shreenath Joshi, general manager, Canara Bank.

Amidst pressure on the rupee and India’s foreign exchange reserves, the latest data from the Reserve Bank of India (RBI) shows that the total amount of money that left the country in March 2026 exceeded inflows by $11.7 billion. This was the first month after the start of the West Asia crisis.

The overall outflow was driven by the exodus of foreign portfolio investors, which overshadowed the fact that net foreign direct investment (FDI) was positive for the second consecutive month. 

That is, while net FDI was $1.6 billion in March 2026, net foreign portfolio inflows stood at -$13.3 billion. Typically, direct investment involves money flowing into growth-generating assets, while portfolio investment refers to money flowing into short- to medium-term stock holdings.

According to the RBI, the outflow of portfolio investments continued in April and May.

The outflow of dollars from the country has simultaneously eaten into the RBI’s foreign exchange reserves and has led to the depreciation of the rupee.

Positive direct flows

Over the full financial year 2025-26, net FDI stood at $7.6 billion, nearly 700% higher than in 2024-25. This occurred despite six out of the twelve months experiencing more direct investment flowing out than in.

“During 2025-26, both gross and net FDI inflows were higher than the previous year,” the RBI said in its monthly bulletin for April 2026. “In March, net FDI remained positive for the second consecutive month, despite a deceleration in gross FDI, on account of relatively low repatriation and outward FDI.” 

Gross FDI in March 2026, or the total amount of direct investment entering the country that month, stood at $6.2 billion, nearly 31% lower than in February. However, this figure was 6% higher than in March of last year.

On the other hand, total outflows inched up to $4.7 billion in March 2026 from $4.5 billion in the previous month. This figure was 27% lower than in March 2025.

Within the outflows, both repatriation by foreign companies operating in India and outward direct investment by Indian companies decreased as compared to the previous year. 

That is, the quantum of money repatriated and disinvested in March 2026 stood at $2.3 billion, down 40% over March last year, while outward FDI by Indian companies stood at $4.7 billion, down by 27%.

Portfolio investors leave

The data, however, showed that while net FDI was positive in March 2026, net foreign portfolio investments were significantly negative. That is, foreign portfolio investors (FPIs) took out $13.3 billion more from the Indian markets than they invested. 

This situation, the RBI said, continued into April and also in May. 

 “In April and May so far (up to the 20th), FPIs remained net sellers, particularly in the equity segment, amidst persistent geopolitical uncertainty and continued tensions in West Asia,” the RBI said. 

India’s April retail inflation, at a 13-month high of 3.48%, is only marginally higher than its March print of 3.4%, and continues to remain deceptively benign. Wholesale inflation has more than doubled to 8.3% in April from 3.88% in March — a 42-month high — signalling that substantial upstream price pressures are still working their way through the economy. Unsurprisingly, the spike in the Wholesale Price Index (WPI) has been led by soaring fuel and power prices, which rose 24.71%, while petroleum and natural gas prices surged 67.2%. This clearly indicates that the full impact of rising energy costs has not yet been passed on to end-consumers. However, such a pass-through now appears imminent. Union Petroleum Minister Hardeep Singh Puri recently indicated that the Centre may have little choice but to raise retail petrol and diesel prices, with public sector oil marketing companies reportedly absorbing “under-recoveries” of nearly ₹30,000 crore a month since the U.S.-Israeli war with Iran began. Any increase in retail fuel prices will have economy-wide implications.

April retail inflation has already been driven chiefly by food, with the Consumer Food Price Index rising to 4.2% from 3.87% in March. Predictably, restaurants and accommodation services witnessed among the sharper increases, reflecting the cascading effect of rising commercial LPG prices. The price of the widely used 19.2 kg commercial LPG cylinder has risen by roughly ₹850-₹1,000 over revisions since the conflict began, while the 5 kg canister has reportedly seen increases of over ₹200 in several markets. The canister is extensively used by migrant wage labour across the country, directly feeding into food basket costs and potentially dampening consumption demand. This comes even as Prime Minister Narendra Modi has appealed to people to refrain from “extravagant spending on weddings and travel abroad” and to cut back on buying precious metals for a year. Consequently, the Centre doubled import duties on gold and silver in an attempt to discourage safe-haven investments and ease pressure on the rupee, which has depreciated by nearly 8.5% against the U.S. dollar in the past two-and-a-half months since the conflict began. For context, the rupee had depreciated by roughly 2%-3% annually on average over the previous five fiscal years. The current slide is therefore exceptionally sharp. It is increasingly evident that retail inflation is bursting at the seams and will likely find fuller expression in the months ahead. The sharp divergence between the Consumer Price Index and WPI suggests that producers are still absorbing a significant share of rising costs, a situation that is unlikely to remain sustainable. This leaves the Reserve Bank of India with limited room but to eventually tighten monetary policy in order to keep inflation within its tolerance band of 2%-6%. What is unfolding is not merely transient inflation driven by commodity volatility, but also broader systemic inflationary pressure, with limited manoeuvring space for both the government and the central bank.

The Indian economy is giving mixed signals in the wake of the West Asia crisis, with some demand indicators remaining strong, while others weaken, and supply indicators starting to show signs of stress, the Reserve Bank of India noted in its latest analysis on the economy. It added that the possibility of the supply crunch turning into a demand shock in India in the future warrants “careful and continuous assessment”. 

In March, available high-frequency indicators of economic activity displayed divergent trends: demand conditions remained resilient, despite some pockets of slowdown in economic momentum,” the central bank noted in its latest State of the Economy report. “RBI’s forward-looking surveys pointed towards softening consumer confidence on the current situation and moderation in business optimism along with buildup of cost pressures.”

Reserve Bank on Friday (December 5, 2025) raised the GDP growth projection to 7.3% for the current fiscal from its earlier estimate of 6.8% following robust economic performance in the July-September quarter.

The Gross Domestic Product (GDP) registered a six-quarter high growth of 8.2% in Q2 of 2025-26, underpinned by resilient domestic demand amidst global trade and policy uncertainties.

On the supply side, real Gross Value Added (GVA) expanded by 8.1%, aided by buoyant industrial and services sectors.

Unveiling the December monetary policy, Reserve Bank Governor Sanjay Malhotra said economic activity during the first half of 2025-26 benefited from income tax and Goods and Services Tax (GST) rationalisation, softer crude oil prices, front-loading of government capital expenditure, and facilitative monetary and financial conditions supported by benign inflation.

High-frequency indicators suggest that domestic economic activity is holding up in the October-December quarter, although there are some emerging signs of weakness in few leading indicators, he said.

“GST rationalisation and festival-related spending supported domestic demand during October-November,” he said and added rural demand continues to be robust while urban demand is recovering steadily.

Also, investment activity remains healthy with private investment gaining steam on the back of expansion in non-food bank credit, and high capacity utilisation.

The governor also noted that merchandise exports declined sharply in October amid subdued external demand, accompanied by softer services exports.

On the supply side, agricultural growth is supported by healthy kharif crop production, higher reservoir levels and better rabi crop sowing.

Manufacturing activity continues to improve, while the services sector is maintaining a steady pace, Malhotra said.

“Taking all these factors into consideration, real GDP growth for 2025-26 is projected at 7.3%, with Q3 at 7%; and Q4 at 6.5%. Real GDP growth for Q1 of 2026-27 is projected at 6.7% and Q2 at 6.8%. The risks are evenly balanced,” he said.

On the external front, the governor said Foreign Direct Investment (FDI) to India increased at a robust pace during the first half of the year.

Net FDI also increased significantly due to a decline in repatriation despite a rise in outward FDI.

However, Foreign Portfolio Investment (FPI) to India recorded net outflows of $0.7 billion in 2025-26 so far (April-December 3), due to outflows in the equity segment.

Flows under external commercial borrowings and non-resident deposit accounts moderated as compared to last year.

As on November 28, 2025, India’s foreign exchange reserves stood at USD 686.2 billion, providing a robust import cover of more than 11 months, Malhotra said.

“Overall, India’s external sector remains resilient. We are confident of meeting our external financing requirements comfortably,” he said.

India’s current account deficit moderated from 2.2% of GDP in Q2 of 2024-25 to 1.3% in Q2 of 2025-26 on account of robust services exports and strong remittances.

The governor also said that contrary to earlier expectations, global growth has been relatively strong.

Evolving geopolitical and trade environments, however, continue to weigh on the outlook, he added.

Reserve Bank Governor Sanjay Malhotra on Wednesday (October 1, 2025) said there is no proposal to levy any charge on UPI transactions.

RBI MPC meeting LIVE

The Governor also said the central bank is examining a proposal to allow lenders to remotely lock mobile phones bought on credit in case of default in EMI payments.

While responding to a question whether there is a proposal to levy charges on UPI transactions, which have gone up significantly, Mr. Malhotra said there was no proposal.

“Is there going to be charges on UPI? Well, there is no proposal before us,” he said at a post-monetary policy press conference.

On digital locking of phones bought on credit, the Governor said the matter was under consideration.

RBI Deputy Governor M. Rajeshwar Rao added that both pros and cons regarding the digital locking of phones are being examined.

“The issue of digital locking is under examination as the Governor has pointed out. There are pros and cons on both sides in terms of balancing customer rights and requirements, data privacy, and creditors’ requirements. So, we are examining the issue, we will…take a view at a later point in time,” Mr. Rao said.

During the press conference, Mr. Malhotra and other Deputy Governors replied to a host of queries, including on rate cut possibilities in forthcoming polices, and rupee depreciation.

On the rate cut, the Governor said inflation has dropped considerably, providing space for monetary easing.

On the depreciating value of the rupee against the U.S. dollar, he said the central bank does not target any level or band, but only tries to check undue volatility.

Mr. Malhotra also exuded confidence that the very high GDP growth trajectory will continue with price stability, and private capital expenditure will pick up.

He said the RBI raised the GDP growth projection to 6.8% for the current fiscal from its earlier estimate of 6.5% because of good economic activities in the first half of 2025-26.

The Reserve Bank of India (RBI) has allowed banks to grant need-based working capital loans to manufacturers using gold as raw material, extending the provision currently available only to jewellers.

Banks are generally prohibited from lending for the purchase of gold/silver in any form, or lending against the security of primary gold/silver.

However, a carve-out has been allowed by the RBI for scheduled commercial banks (SCBs) for granting working capital loans to jewellers.

The Reserve Bank of India (Lending Against Gold and Silver Collateral) (1st Amendment) Directions, 2025 issued on Monday (September 29, 2025), has extended the carve-out for granting any need-based working capital requirements of a borrower that uses gold as a raw material or input in its manufacturing or industrial processing activities.

“… Scheduled Commercial Bank or a Tier 3 or 4 UCB may extend need-based working capital finance to borrowers who use gold or silver as a raw material, or as an input in their manufacturing or industrial processing activity, for which such gold or silver can also be accepted as security,” the directions said.

A bank extending such finance shall ensure that borrowers do not acquire or hold gold for investment or speculative purposes, it said.

The central bank has also issued Reserve Bank of India (Interest Rate on Advances) (Amendment Directions), 2025 to benefit borrowers while providing greater flexibility to lenders.

As per the extant norms, banks are required to benchmark all floating rate personal or retail loans (housing, auto), and floating rate loans extended to MSMEs, to an external benchmark.

While banks are free to decide the spread over the external benchmark, other than credit risk premium, all components of the spread can be altered only once in three years.

“Banks may reduce the other spread components for the benefit of the borrower earlier than three years,” said the amended directions on interest rate on advances.

It further said banks may, at their discretion, provide the option to switchover to fixed rate at the time of reset at their discretion.

The current norms, in respect of equated monthly instalments (EMI) based personal loans, requires banks to provide a mandatory option to the borrowers at the time of reset of interest rates to switch over to a fixed rate.

The central bank also released directions, which revise the existing eligible limit applicable to perpetual debt instruments (PDI) denominated in foreign currency/rupee denominated bonds overseas, thereby providing greater headroom to banks for augmenting their Tier 1 capital via overseas markets.

All these directions will come into force from October 1, 2025.

The rupee rose 3 paise to 88.72 against the U.S. dollar in early trade on Tuesday (September 30, 2025) on the back of a fall in crude oil prices and positive sentiments in the domestic equity markets.

However, a marginally stronger greenback, coupled with FII outflows, prevented sharper gains in the local unit, according to forex traders. They added that the markets are awaiting the Reserve Bank of India’s (RBI’s) Monetary Policy Committee decision, which will be announced on Wednesday (October 1, 2025).

At the interbank foreign exchange, the rupee opened at 88.73 against the U.S. dollar before inching up to 88.72, higher by 3 paise from its previous close.

Rupee consolidated in a narrow range and settled lower by 3 paise at 88.75 against the greenback on Monday (September 29, 2025).

“FPIs continue to be sellers in equity markets taking rupee down whenever it rises and with no further news on the India-US trade treaty, markets are awaiting the RBI’s policy decision on Wednesday (October 1, 2025),” Anil Kumar Bhansali, Head of Treasury and Executive Director, Finrex Treasury Advisors LLP, said.

The RBI meeting is taking place against the backdrop of ongoing geopolitical tensions and the U.S. imposing 50% tariffs on Indian shipments.

Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, was trading at 97.94, higher by 0.04%.

Brent crude, the global oil benchmark, was trading 0.79% lower at $67.43 per barrel in futures trade.

“Brent fell on increased supply from Kurdistan exports to Turkey, with OPEC+ preparing for another rise in production in November and the possible U.S. shutdown also reducing the consumption,” Mr. Bhansali said.

On the domestic equity market front, markets bounced back in early trade with the Sensex climbing 312.88 points to 80,677.82 and the Nifty rising 96.9 points to 24,731.80.

Foreign Institutional Investors offloaded equities worth ₹2,831.59 crore on Monday (September 29, 2025), according to exchange data.

Meanwhile, the U.S. has announced the imposition of a 100% tariff on branded or patented drugs entering the U.S. from October 1, except for pharmaceutical companies building manufacturing plants in the U.S.

The exemption covers projects where construction has started, including sites that have broken ground or are under construction.