Newspaper Summary - 071125

 India's financial sector and banking landscape in November 2025 is characterized by a significant governmental push for institutional expansion and stringent regulatory modernization across capital markets, all geared towards funding the country's rapid economic growth and achieving the "Viksit Bharat" vision by 2047.

Banking Sector Scale and Access: Finance Minister Nirmala Sitharaman asserted that India urgently needs large, world-class banks to support the massive capital needs of its fast-growing economy, signaling government discussions with the Reserve Bank of India (RBI) and commercial lenders regarding consolidation and expansion. To meet the economic targets of $30 trillion GDP by 2047, bank credit must grow annually at a 13% rate. M Nagaraju, Secretary, Department of Financial Services (DFS), suggested achieving scale by extending more bank licenses to Non-Banking Finance Companies (NBFCs) and granting universal bank licenses to Small Finance Banks (SFBs). However, the RBI traditionally restricts corporate groups from owning bank licenses due to the risk of conflicts of interest. On an operational level, the Minister mandated that public sector banks must restore the "human touch" by ensuring employees at a branch speak the local language to understand and serve local customers better. Access to finance remains critical, requiring banks to continue playing a role in widening and deepening the credit flow through a transparent lending process. Furthermore, state-owned banks like the State Bank of India (SBI) are unlocking value by jointly initiating an Initial Public Offering (IPO) of their subsidiaries, such as SBI Funds Management Ltd., the country's largest mutual fund manager.

Regulatory and Capital Market Reforms: Regulatory focus extends beyond banking to capital markets and high-risk lending segments:

1. Capital Markets (SEBI): The Securities and Exchange Board of India (SEBI) is streamlining disclosures and easing fundraising, proposing a new framework to automatically enforce lock-in requirements for pledged shares of IPO-bound companies to prevent listing delays. SEBI aims to strengthen retail participation in the corporate bond market by lowering the corporate bond face value to ₹10,000 and introducing online bond platforms. SEBI and the RBI are also collaborating on introducing bond derivatives to improve market liquidity and working on a regulatory framework for institutional participation in commodity derivatives. SEBI’s reforms aim to deepen equity, debt, and alternative investment markets to complement the existing banking system.
2. Mutual Fund Regulation: SEBI is undertaking a comprehensive review of Mutual Fund Regulations, shifting the focus from product protection to investor empowerment. Key proposals include radically redefining the Total Expense Ratio (TER) to exclude operational costs like brokerage and taxes, and introducing an optional performance-linked expense ratio where fund managers earn more only when they outperform.
3. Lending Regulation (RBI): The RBI is proposing major regulatory adjustments, including revising norms for credit risk weights for home loans and strengthening provisioning standards. It is also considering withdrawing the restriction on overlapping lending activities between a bank and its group entities, deferring the decision to bank boards. Additionally, the Centre and DFS are discussing an incentives scheme to encourage banks and NBFCs to finance electric truck and bus purchases, a segment currently underserved due to high vehicle costs and high associated loan interest rates (5-10 percentage points higher than for conventional vehicles).

The Securities and Exchange Board of India (SEBI) is driving extensive regulatory reforms in capital markets, viewing them as essential tools to finance India’s growth and self-reliance and to complement the existing banking system. SEBI is focused on simplifying disclosures, easing fund-raising, and deepening investor participation across equity, debt, and alternative investment markets. The regulator aims to foster a robust, inclusive market ecosystem.

Key Regulatory Reforms (November 2025 Context):

1. Mutual Fund Overhaul for Investor Empowerment: SEBI has proposed a comprehensive review of the Mutual Fund Regulations, shifting the regulatory focus from product protection to investor empowerment.

   • Expense Ratios and Transparency: The most radical idea is redefining the Total Expense Ratio (TER) for open-ended schemes to exclude operational costs such as brokerage, taxes, and statutory levies, thereby revealing what fund managers truly earn. SEBI seeks to significantly slash brokerage caps (e.g., from 12 basis points to 2 bps in cash markets). This overhaul aims to dismantle the opacity that protected intermediaries and marks a cultural shift toward greater transparency.
   • Performance-Linked Fees: A key proposal is the introduction of an optional performance-linked expense ratio, rewarding fund houses only when they outperform, establishing a "value-for-fee" principle.
   • Simplification: SEBI plans to rewrite the 1996 regulations in plain language, remove redundant clauses, and digitize disclosures, aiming for a rulebook that reads like a guide for citizens.
   • Regulatory Gaps: To prevent intermediaries from pivoting to higher-margin, higher-risk products like Portfolio Management Services (PMS) and Alternative Investment Funds (AIFs) following lower mutual fund commissions, SEBI's next challenge is extending disclosure parity and suitability norms across investment categories.

2. Primary Market Efficiency (IPOs): SEBI is streamlining the process for IPO-bound companies.

   • Pledged Shares: A proposed framework will ensure lock-in requirements are automatically enforced for pledged shares, even if the pledge is invoked or released, thereby preventing listing delays.
   • Timelines: SEBI has already reduced IPO listing timelines to T+3 and rights issue timelines to 23 days to accelerate market access.
   • Market Maturity: The increasing trend of the Offer-for-Sale (OFS) component making up a significant portion (nearly 65% in value terms in 2025) of IPOs suggests a maturing capital market ecosystem.

3. Debt and Derivative Market Deepening:

   • Retail Access: To strengthen retail participation, SEBI lowered the face value of corporate bonds to ₹10,000 and established online bond platforms.
   • New Instruments: SEBI is actively working with the Reserve Bank of India (RBI) on introducing bond derivatives to improve market liquidity and provide risk management tools. Collaboration also includes developing a regulatory framework for prudent institutional participation (including banks and insurance firms) in commodity derivatives.

4. Professional Standards: The regulator is preparing to overhaul its certification program for market professionals to ensure they possess the necessary knowledge and skills. This includes expanding the definition of "associated persons" to be more inclusive and introducing long-term certification courses, while simultaneously tightening criteria for certification exemptions.

India's trade and global economic standing in November 2025 is defined by severe disruption caused by US tariffs, strategic diversification efforts, and persistent global market volatility.

The US imposed duties of up to 50% on several categories of Indian goods, effective August 27, severely impacting labor-intensive sectors such as textiles, ready-made garments, engineering goods, chemicals, and auto components. This action, described as a "US tariff shock," led to an estimated loss of ₹12,000 crore in export orders for Tiruppur textile units and caused the US contribution to India's export growth to plunge by 4.2 percentage points in September. The major impact of these tariffs is still expected in 2026. Furthermore, the legality of President Donald Trump's tariffs, invoked under the International Emergency Economic Powers Act (IEEPA), is currently under intense scrutiny at the US Supreme Court, adding to global trade uncertainty.

In response, India is accelerating its focus on trade diversification by actively negotiating trade pacts with Peru and Chile in Latin America. These agreements are strategically important for securing access to critical minerals (like copper, zinc, and lithium) and expanding market access for Indian pharmaceuticals, textiles, and automobiles. Concurrently, the Commerce Department has prepared an Export Promotion Mission (EPM) package, intended to be announced soon, to specifically support exporters and labor-intensive sectors dealing with the US tariff headwinds.

In the context of the global economy, Finance Minister Nirmala Sitharaman highlighted that while "Volatility and uncertainty are everyday language" due to global headwinds and speculative capital movements, India is the only country offering stability in this turmoil-driven world. India is also strengthening its energy security architecture amid global volatility and sanctions, quietly moving to refill and expand its strategic petroleum reserves while Brent crude is subdued (below $65 per barrel). This urgency stems from anticipated price increases and the likelihood that Indian refiners will reduce purchases of discounted Russian oil due to impending US sanctions on major Russian firms.

India's approach to Technology and AI Governance in November 2025 is defined by a strategic commitment to fostering innovation while simultaneously establishing an adaptive regulatory framework to mitigate risk and leverage technology for economic growth toward the "Viksit Bharat" vision.

The AI Governance Framework and Strategic Goals

The newly released AI Governance Framework signals a welcome pragmatism from the Centre. The governing philosophy is an adaptive regulatory model that seeks a middle path, contrasting with the European Union's rules-heavy approach and the US's hands-off stance.

The framework’s core purpose is to strike a balance between technical progress and mitigating the potential risks of AI to society. It is designed to be firmly grounded in India’s specific needs and aspirations. The framework is structured around seven principles, including building trust, putting people first, prioritizing responsible innovation over restraint, and ensuring fairness and equity.

The primary goal is to leverage AI for economic growth, inclusive development, resilience, and global competitiveness. The widespread adoption of AI across sectors is projected by Niti Aayog's report to add $1–$1.4 trillion to India’s GDP by 2035. India aims to achieve digital inclusion and create positive impact through AI-based applications utilizing multilingual and voice support in sectors such as agriculture, healthcare, education, and finance.

Regulatory Approach: Adapting Existing Law

Instead of rushing to draft a sweeping new law, the government has adopted a techno-legal approach that reviews and updates existing laws. S Krishnan, Secretary, Ministry of Electronics and IT (MeitY), stated that existing statutes cover AI issues and there is no immediate need for a new AI-specific law.

1. IT Act and Deepfakes: The government believes that issues arising from AI misuse can often be addressed under current laws. For example, the use of deepfakes (synthetic or deceptive content) is already deemed misrepresentation and is punishable under the Information Technology (IT) Act, 2000, particularly when done with mala fide intent. Under due diligence rules framed through the IT Act, platforms are now required to label AI-generated content.
2. Regulatory Gaps: Despite the reliance on existing laws, the framework acknowledges critical grey areas that require review.
   • Intermediary Liability: Questions remain unresolved around the definition of "intermediary" in the IT Act, which predates autonomous systems, and who bears liability when AI-generated content causes harm.
   • Data Protection (DPDP Act): The principles of purpose limitation and storage minimization under the Digital Personal Data Protection (DPDP) Act, 2023, sit uneasily with AI’s reliance on large, continuously updated datasets. AI models often continue to store data indefinitely for retraining, creating legal uncertainty for developers without clear guidance or exemptions.
   • Competition and Market Concentration: The framework must address the risk of algorithmic collusion and market concentration resulting from a few large firms controlling the core "AI stack" (cloud, data, and foundational models), which could stifle smaller start-ups.

Institutional Structure and Digital Ecosystem

MeitY is the nodal ministry for AI adoption and regulation. To coordinate policy, a new high-level body called the AI Governance Group (AIGG) will be set up to coordinate policy development across all Ministries. This will be supported by a Technology & Policy Expert Committee (TPEC).

India is already focusing on leveraging foundational technology:

• Digital Public Infrastructure (DPI) is recognized as a key element capable of bringing in great advantages, efficiencies, productivity, and profit.
• The system of UPI (Unified Payments Interface) is cited as a major success, enabling grassroot entrepreneurship and digital payments, accounting for 85% of all digital transactions in India.
• In the financial sector, AI integration with UPI and the Account Aggregator system is expected to drive financial inclusion. However, the focus on digital growth must not eliminate the human element; Finance Minister Nirmala Sitharaman mandated that banks must restore the "human touch" despite the advantages of technology.

Some industry experts criticize the governance framework for being too general, lacking specific hard guardrails found in the EU’s AI Act, such as clear bans on the riskiest surveillance tools, mandatory rights checks, and independent audits. There is a recognized need for cross-regulator co-ordination involving bodies like the RBI, SEBI, TRAI, and CCI to handle the sector's digital interdependencies.

The Kharif Crop Price Distress observed in October 2025 presents a major challenge to India's rural economy, as nearly all major kharif crops were sold below their Minimum Support Prices (MSPs) in agricultural markets (mandis). This distress occurred during the first month of the harvest season, despite macroeconomic declarations emphasizing India's stability.

Details of Kharif Price Distress (October 2025)

The severity of the price drop varied across commodities:

• Oilseeds and Pulses: Major kharif oilseeds, soybean and groundnut, sold at approximately 26 per cent below their MSPs. Pulses like tur (red gram), moong (green gram), and urad (black gram) saw rates 17–25 per cent lower than their benchmark prices.
• Cereals: Average rates for maize were 24 per cent below the MSP (of ₹2,400/quintal), and bajra (millet) was sold at 23 per cent below its MSP (of ₹2,775/quintal).
• Paddy and Jowar: Paddy was the only major crop where the average realization was close to the MSP, sitting just 1.8 per cent below it, likely due to a "robust procurement system". Government procurement of paddy (in terms of rice) was up 46 per cent year-on-year till October 31. Jowar (sorghum) was sold at 9 per cent below its MSP, though its rate was 19 per cent higher than in October 2024.

Causes and Policy Intervention Gaps

Experts attribute the price collapse primarily to ample supply coupled with liberal import policies:

1. Supply Surge: The market saw "good production" largely due to "above normal rainfall", which increased the supply available in the mandis.
2. Import Pressure: Significant imports of pulses over the last two years, driven by "very low duty," resulted in supply exceeding domestic demand. Economist Ashok Gulati specifically argued that market prices "cannot support MSPs unless import duties are hiked".
3. Limited Government Impact: Despite price distress, government intervention was restricted. For maize, while the government calculated the procurement cost based on MSP for ethanol buying, manufacturers face no statutory obligation to pay this benchmark rate to farmers. Hope for prices of oilseeds lies only in market prices firming up by December, but by then, farmers will have "almost exhaust[ed] their produce".

Future prices for pulses like tur and urad are expected to rise due to domestic crop damage caused by heavy rain in major producing states like Karnataka and Maharashtra. However, this relief is contingent upon the government restricting cheaper imports and is currently being buffered by record urad production from Myanmar.

Context within India’s Economic Landscape (November 2025)

The agricultural crisis highlights a persistent disconnect between price support mechanisms and trade policy, occurring while the government focuses on broader stability and long-term reform:

• Macroeconomic Stability vs. Rural Turmoil: Finance Minister Nirmala Sitharaman stated that India is the "only country which... [is] offering stability" amid global turmoil, volatility, and speculative capital movements. This confidence contrasts sharply with the widespread price distress and instability facing the farming sector.
• Focus on Value Chains and Technology: Policy efforts in agriculture are leaning toward value chain improvement and technology adoption. Farm scientists are being directed to improve value chains to increase farmers' income and focus on research for traditional crops to ensure climate resilience. New digital tools like AgriLokal are being launched to connect farmers with agronomists to improve productivity.
• Regulatory Need for Green Transition: Parallel regulatory discussions include tackling health concerns by promoting organic farming in regions like Kashmir, indicating a policy shift towards sustainable inputs, a challenge separate from market price intervention.