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📰RBI Names New Governor | Daily India Briefing

Three stories on Indian markets that you can't miss.

The RBI names a new governor in charge of regulation. Air India gets a six-year loan. European banks are closer to market making in India.

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1. The RBI Names a New Governor for Regulation

The government has named Shirish Chandra Murmu, a career central banker, as one of the RBI’s deputy governors for a three-year term beginning October 9. He succeeds M. Rajeshwar Rao, whose tenure ends October 8. Rao has overseen regulation, enforcement, and risk monitoring, and briefly represented the RBI on the MPC earlier this year before Poonam Gupta assumed that role. Murmu is likely to oversee further regulation as India’s financial industry expands.

Murmu currently serves as an executive director in the Department of Supervision, where he has been closely involved in regulatory oversight. While his exact portfolio will be finalized after he assumes office, his appointment is expected to maintain continuity in supervision and regulatory functions at a time when the central bank faces challenges ranging from financial stability risks to oversight of fast-growing fintechs.

The appointment, announced by a federal selection panel, ensures a smooth leadership transition at the RBI without altering the MPC’s composition since Gupta remains the sole deputy governor on the policy-setting body. Murmu will join a four-member deputy governor bench alongside Gupta, T. Rabi Sankar, and Swaminathan Janakiraman.

Strategically, the move underscores the government’s preference for continuity and experience in regulatory leadership at a time when Indian banking is navigating global interest rate volatility, the rise of digital lending, and heightened scrutiny of non-bank financial intermediaries. Murmu’s supervisory background suggests the RBI will maintain its strong focus on enforcement and systemic risk monitoring as it balances stability with financial innovation.

2. Air India Refinances in a Landmark Deal

Air India has secured a six-year, $215 million (₹18.5 billion) loan from Bank of India and Standard Chartered to refinance short-term debt tied to the acquisition of six Boeing 777 aircraft. The facility, priced at about 168 basis points over SOFR, was raised through GIFT City, underscoring both the airline’s balance sheet strategy and the growing relevance of India’s international financial hub.

The transaction reflects Air India’s push to strengthen its capital structure under Tata Group ownership by rolling near-term liabilities into longer-dated, competitively priced funding. While fundraising talks initially slowed after a major crash in June, the successful close of this loan highlights recovering lender appetite and continued support for Air India’s expansion strategy.

The deal also carries broader significance for India’s financial ecosystem. It marks the first time Bank of India has acted as a mandated lead arranger in a GIFT City loan, signaling that Indian lenders are beginning to take on more prominent roles in cross-border structured financing. Alongside Standard Chartered’s participation, the arrangement points to sustained international interest in Indian aviation exposure despite operational and safety challenges.

For GIFT City, the transaction is another step toward establishing itself as a competitive alternative to offshore hubs like Singapore and Dubai. For Air India, it secures more predictable financing for its widebody fleet, ensuring stability as the carrier ramps up operations and repositions itself in the global aviation market.

3. European Banks Are Closer to Market Making in India

The European Central Bank is in talks with major lenders on easing capital charges tied to trading through India’s Clearing Corp. of India (CCIL), as regulators seek to defuse a standoff that has complicated billions of dollars in bond and derivatives trades. The discussions follow the European Securities and Markets Authority’s (ESMA) 2022 decision to strip CCIL and other Indian clearing houses of recognition for failing to comply with stricter EU oversight requirements.

The loss of recognition triggered costly capital penalties for European banks active in India’s debt and swaps markets (mostly Deutsche Bank, BNP Paribas, Credit Agricole, and Societe Generale) since using non-recognized clearing houses makes exposures riskier in regulatory terms. Banks have warned that the added charges undermine their role as market-makers in Indian government bonds and derivatives.

To mitigate the impact, some institutions have floated routing trades through Indian banks to sidestep direct exposure to CCIL, though this workaround risks fragmenting liquidity and increasing operational complexity. Regulators in France and Germany have already extended temporary allowances for their domestic lenders while urging them to explore alternatives with Indian counterparts.

At the core of the dispute is a clash of regulatory philosophies. EU rules require ESMA to establish cooperation agreements granting it access to foreign clearing house data and the ability to shape risk frameworks. The RBI, however, has resisted what it views as interference in its supervisory autonomy.

For now, the ECB is exploring whether a temporary fix can ease pressures on European banks without undermining EU standards, but officials caution that no resolution is guaranteed. A joint approach between European and Indian regulators remains the ultimate goal, though political sensitivities over regulatory sovereignty make a swift breakthrough unlikely.

The outcome carries broader implications: India’s ambition to deepen its bond market and attract more global participation depends on clearing infrastructure remaining accessible, while European banks’ ability to intermediate that flow rests on regulatory compromises yet to be struck.

See you tomorrow.

Written by Eshaan Chanda & Yash Tibrewal. Edited by Shreyas Sinha.

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