Indian Banking & Financial Sector Update: July 2025 Trends & Developments

India’s financial sector witnessed major shifts in early July 2025 from regulatory crackdowns to rate revisions and investor interest. Here’s a comprehensive look at the top developments shaping the country’s financial and banking landscape.

SEBI Targets Market Manipulation: Jane Street Under Fire
India’s capital markets watchdog, SEBI, has taken strong action against global trading firm Jane Street, barring it from operating in Indian markets. The firm is accused of manipulating derivatives, allegedly generating illegal profits of over ₹48,000 crore. SEBI also demanded that these gains be held in escrow. This move triggered a market reaction, with shares of domestic brokerages like BSE and Angel One dipping sharply. Jane Street has 21 days to respond to the allegations.

Surplus Liquidity Fails to Boost Lending
Despite a notable liquidity surplus exceeding ₹4 lakh crore, Indian banks have not witnessed a proportional increase in credit growth. Analysts from J.P. Morgan observed that lending rates have dropped, but demand for loans hasn’t surged accordingly. The RBI recently conducted a reverse repo operation worth ₹1 lakh crore to manage the surplus, aiming to keep interest rates within the targeted corridor.

Foreign Funds Return: FPIs Focus on Financials
June saw a resurgence in foreign investor confidence, with Foreign Portfolio Investors (FPIs) investing nearly ₹14,590 crore into Indian stocks most of it directed toward banking and financial services. This marks the third consecutive month of inflows, supported by macroeconomic stability, interest rate cuts, and positive sentiment around India’s trade outlook with the US.
Lending Rates Marginally Reduced by PSU Banks
To reflect recent monetary easing by the RBI, several public sector banks PNB, Bank of India, and Indian Bank—have revised their MCLR (Marginal Cost of Funds-Based Lending Rate). The 5-basis point cut brings one-year MCLR down to 8.90%–9.00%, slightly easing loan EMIs for borrowers in housing, auto, and personal finance segments.

HDFC Bank: Deposits Outpace Loans in Q1 FY25
Private sector giant HDFC Bank posted a stronger rise in deposits than loan disbursements during the first quarter of FY25. Total deposits grew 1.8% to ₹27.64 lakh crore, while advances increased by just 0.4%, indicating a cautious lending environment and strong savings momentum among customers.

July Financial Rules: Key Regulatory Changes in Effect
A slew of regulatory updates came into force on July 1, affecting both individuals and businesses:

Aadhaar now mandatory for new PAN card applications.

No changes allowed after GSTR-3B returns are filed.

A new e-way bill portal launched to streamline goods movement.

Tatkal railway bookings now require Aadhaar OTP authentication.

Banks revised ATM withdrawal rules and transaction fees.

These measures aim to enhance financial transparency, reduce tax evasion, and tighten identity checks across digital platforms.

Regional Rural Banks Consolidated for Stronger Rural Banking
As part of the “One State – One RRB” initiative, several Regional Rural Banks (RRBs) were merged to form unified entities in states such as Madhya Pradesh and Bihar. The objective is to enhance financial inclusion, improve credit access, and streamline rural banking operations with better infrastructure and management.

Expert View: What It All Means
The SEBI-Jane Street development signals a stricter regulatory stance to protect retail investors.

Excess liquidity may need targeted reforms to stimulate lending.

Investor flows into financial stocks highlight growing global trust in India’s monetary policy.

Rule changes reflect India’s digital-first financial governance direction.