Legal & Finance Weekly
RBI raises the repo rate to 5.50% and rules out cuts
The Reserve Bank of India raised the policy repo rate by 25 basis points to 5.50% on Wednesday, ending a pause that had held since the December 2025 cut. The standing deposit facility rate moves to 5.25% and the marginal standing facility rate and Bank Rate to 5.75%.
The larger signal is the stance. The committee replaced “neutral” with “calibrated tightening”, which it says takes rate cuts off the table in the near term: the next move can only be a further increase or a pause. Dr Nagesh Kumar and Prof Ram Singh voted for the hike but would have kept the neutral stance.
| Policy rates | Before | Now |
|---|---|---|
| Repo | 5.25% | 5.50% |
| Standing deposit facility | 5.00% | 5.25% |
| MSF and Bank Rate | 5.50% | 5.75% |
| Stance | Neutral | Calibrated tightening |
Why now. The resolution calls the inflation outlook “not benign”. The Indian crude basket averaged US$116.1 a barrel in September against US$82.0 in July after the West Asia conflict re-escalated; the south-west monsoon closed 13% below its long-period average; and core inflation rose to 4.2% in August. Bank credit was growing 18.1% year on year in mid-September. The US Federal Reserve also raised rates in September.
The forecasts. The RBI now projects consumer price inflation of 5.2% for 2026-27, peaking at 6.0% in the December quarter, and core inflation of 4.4%. Its growth forecast rises to 7.1%, after 7.8% in the first quarter.
What it means for borrowers. Loans priced off the repo rate or other external benchmarks reprice at their next reset under the loan terms; the RBI gave no pass-through timetable. On a ₹50 crore floating facility, 25 basis points is about ₹12.5 lakh a year before any change in spread.
Also announced. Interoperability among NBFC-Account Aggregators, with bank deposit balances to appear in depositories’ consolidated account statements, both expected by 31 December 2026; and a new Technical Consultative Committee for Financial Markets, whose composition is yet to be notified.
Markets. The Sensex fell about 419 points (0.57%) to roughly 72,648 and the Nifty about 0.7% to roughly 22,615 on provisional closing figures. Minutes follow on 21 October; the committee next meets on 2–4 December.
Funds and insurers get a re-entry pass for bank stakes
Four RBI Amendment Directions dated 1 October let the regulator grant a one-time approval to SEBI-registered mutual funds, IRDAI-registered insurers and PFRDA-registered pension funds to rebuild a “major shareholding” of up to 10% in a bank after their holding has dropped below 5%. Until now each re-acquisition needed fresh prior approval.
Approval is discretionary, sought through PRAVAAH with a Form A declaration, and revocable on fit-and-proper grounds. Promoter-group entities are excluded. Every crossing of 5%, either way, must be reported to the RBI and the bank within three working days. First-time acquisitions still need prior approval.
Cabinet clears ₹10,000 crore SME Growth Fund
The Union Cabinet on 6 October approved a ₹10,000 crore commitment to set up the SME Growth Fund, announced in the 2026-27 Budget, to make direct growth-equity investments in small and medium enterprises with “demonstrated business viability and scalability”.
The stated rationale is that existing equity funds mostly serve early-stage and micro enterprises, leaving a gap for companies that want to scale, expand overseas or make acquisitions. Nothing has been published yet on the fund vehicle, manager, eligibility thresholds, ticket sizes or how to apply, and it is not clear whether ₹10,000 crore is the whole corpus or only the government’s share.
Three more weeks for audit-case filings
The CBDT has extended the due date for income-tax returns for assessment year 2026-27 in audit cases from 31 October to 21 November 2026. The “specified date” for furnishing the tax audit report moves correspondingly from 30 September to 21 October 2026.
The extension covers the category at serial number 2 of the table below Explanation 2 to section 139(1), so taxpayers should confirm which due-date category applies to them before relying on it. The extension was announced by press release on 28 September, with a formal order to follow.
GST Council meets on 8 October with process, not rates, on the table
The 57th GST Council meeting, rescheduled twice, is now set for Thursday. Finance Ministry sources say rates will be left alone and the agenda is a package of procedural reforms on registration, refunds, input tax credit and enforcement, to be phased in through 2027.
Proposals reported ahead of the meeting include considering rate changes once a year with effect from 1 April; treating testing, repair, certification and research services for foreign clients as exports even where the goods stay in India; and moving delay, error and short-payment cases out of the criminal provisions. Nasscom has asked the Council to settle the treatment of exports routed through overseas branches. All of this is pre-meeting reporting; we will cover the outcome next week.
Fraud can undo a CIRP admission, and a late settlement cannot
Supreme Court. The NCLT may recall an order admitting insolvency proceedings if the jurisdictional facts on which it rested are later found to be tainted by fraud or collusion.
NCLAT, New Delhi. A settlement reached after the corporate insolvency resolution process has begun is not, by itself, a ground to set aside the admission order. In a separate ruling, the tribunal held that once the resolution period expires without a plan or a valid extension, liquidation is mandatory.
NCLAT on tax set-off. In Devarajan Raman, Liquidator of Kotak Urja Pvt Ltd v PCIT, the tribunal held that the Income Tax Department cannot adjust a refund due to the company against its outstanding tax demand during the moratorium, applying the Supreme Court’s ruling in Bharti Airtel v Vijaykumar Iyer that the CIRP provisions do not recognise insolvency set-off.
Supreme Court on SARFAESI. Measures taken in good faith under the Act cannot be challenged in the civil courts; the borrower’s remedy lies before the Debts Recovery Tribunal.
NCLT clears two listed-group restructurings
The Mumbai bench sanctioned the demerger involving GE Power India and JSW Energy, expressly preserving the Income Tax Department’s rights, and approved the merger of Tata group company Rujuvalika Investments into Tata Steel.
In brief
The price of money has turned. Re-read your documents.
A quarter-point is small. The change of stance is not. For most of the past two years, transactions have been priced on the assumption that money would get cheaper or stay where it was. The RBI has now said in terms that the next move is up or flat, and its own forecast has inflation at 6.0% by December, the top of its tolerance band.
Three practical consequences follow. First, floating-rate debt. Check reset dates, spread-reset rights and any interest-cover covenants tested on forward-looking numbers; a second hike in December would arrive before many facilities have absorbed the first. Second, valuations in live deals. A higher risk-free rate feeds directly into discount rates, and for lenders and NBFCs into funding costs and net interest margins. Buyers should revisit price and the scope of material-adverse-change and locked-box protections; sellers should expect the conversation. Third, timing of capital raises. Issuers planning debt or equity over the next two quarters should weigh the cost of waiting against a market that may reprice further.
Against that, the week also widened two sources of capital: institutional money can now move back into bank shareholdings with less friction, and growth-stage SMEs have a government-backed equity fund in prospect. Neither is usable today without further detail, but both are worth planning around.
Important. This bulletin is a summary of public developments for general information. It is not legal, tax or investment advice and should not be relied on without reference to the primary source and advice on the specific facts. ANSV Associates · Serena C, Building 7, Eternis MIDC, Andheri (East), Mumbai – 400093 · support@ansvassociates.com