Tag: Reserve Bank of India

General Insurance refers to all types of insurance other than life insurance. It provides financial protection against unforeseen risks and damages to assets such as vehicles, homes, health, travel, and businesses. Unlike life insurance, which covers human life, general insurance policies offer compensation for losses due to accidents, theft, fire, natural disasters, illnesses, and liabilities. These are usually short-term contracts that need to be renewed annually or as specified. Common types of general insurance include health insurance, motor insurance, property insurance, marine insurance, and liability insurance. The primary purpose is to protect individuals and businesses from financial losses arising from unexpected events. In India, general insurance is regulated by the Insurance Regulatory and Development Authority of India (IRDAI), ensuring transparency and policyholder rights. General insurance plays a crucial role in promoting risk management and financial stability in the economy.

History of General Insurance in India:

The history of general insurance in India traces back to the 19th century during British rule. The first general insurance company was the Triton Insurance Company Ltd., established in 1850 in Kolkata by British nationals. It primarily catered to European interests in India. Over the years, several foreign insurance companies set up operations, including Oriental Fire & General Insurance and Northern Insurance. Indian promoters also began entering the market in the early 20th century.

After independence, the sector saw considerable growth, but concerns about unethical practices and lack of regulation led to the nationalization of the general insurance industry in 1972. The General Insurance Business (Nationalisation) Act, 1972 came into effect, consolidating 107 insurers into four subsidiaries under the newly formed General Insurance Corporation of India (GIC): National Insurance, New India Assurance, Oriental Insurance, and United India Insurance.

With economic liberalization in 1991, reforms in the insurance sector were proposed. In 1999, the IRDAI (Insurance Regulatory and Development Authority of India) was established, allowing private and foreign players into the general insurance space. Since then, the sector has witnessed rapid innovation, technology adoption, and competitive growth, making insurance more accessible and efficient for the Indian population.

Reforms of General Insurance in India:

• Nationalisation of General Insurance (1972)

The General Insurance Business (Nationalisation) Act, 1972 was a landmark reform that unified 107 private insurers into four public sector companies under the General Insurance Corporation of India (GIC). This move aimed to bring order, transparency, and customer protection to the fragmented and often unregulated insurance market. The reform enabled centralized governance, standardised policy terms, and increased public confidence. By focusing on social welfare and expanding insurance to underserved areas, it laid the groundwork for future developments. However, lack of competition hindered innovation and efficiency in the long term, ultimately necessitating further liberalisation.

• Establishment of IRDAI (1999)

The creation of the Insurance Regulatory and Development Authority of India (IRDAI) under the IRDA Act of 1999 marked the beginning of liberalisation in the insurance sector. It was established to protect policyholders’ interests and promote a healthy insurance market. IRDAI opened up the sector to private and foreign players, ending the monopoly of public sector insurers. It introduced transparent licensing, solvency norms, grievance redressal mechanisms, and standardised product guidelines. As a result, the general insurance market became more competitive, customer-centric, and innovative. The regulatory oversight of IRDAI also enhanced consumer trust and market credibility.

• Entry of Private and Foreign Insurers (Post-2000)

Post-liberalisation, private and foreign insurers were allowed to enter the Indian general insurance market, initially with a 26% FDI cap. This marked a major shift from state monopoly to a mixed-market structure. Joint ventures like ICICI Lombard and Bajaj Allianz entered the fray, bringing international best practices, improved technology, and customer service innovations. Product diversity increased, and digital platforms emerged to enhance user convenience. The competition also compelled public sector insurers to improve efficiency. In 2015, the FDI cap was raised to 49%, further boosting foreign interest and capital inflow into the Indian general insurance space.

• Detariffication of General Insurance (2007)

Until 2007, the Tariff Advisory Committee (TAC) regulated premiums for several general insurance products, especially fire, engineering, and motor insurance. In January 2007, detariffication was introduced, allowing insurers to price products based on their own risk assessment and underwriting standards. This reform encouraged competition and product innovation, as insurers began using data analytics to offer customised pricing. It also empowered customers with varied options and better pricing. However, detariffication also brought pricing pressure and required insurers to enhance risk management frameworks and maintain profitability through strategic underwriting and operational efficiency.

• Merger of Public Sector Insurers (Proposed in 2018)

To improve operational efficiency and reduce financial strain, the Government of India proposed merging three public sector general insurers: National Insurance, United India Insurance, and Oriental Insurance. The objective was to create a stronger, more capitalised entity that could compete effectively with private players. Though the merger has been delayed due to operational and fiscal challenges, it remains a significant reform initiative. The move is aimed at reducing redundancies, improving claim settlement capacity, and increasing the global competitiveness of Indian public insurers. If executed properly, it could bring substantial improvements in service delivery and fiscal health.

Companies of General Insurance in India:

Public Sector General Insurance Companies:

Private Sector General Insurance Companies:

Standalone Health Insurance Companies:

Challenges of General Insurance in India:

• Low Insurance Penetration

General insurance penetration in India remains low due to lack of awareness, cultural factors, and financial constraints. Many individuals do not see insurance as a priority unless mandated (like vehicle insurance). The rural and semi-urban population, which constitutes a large portion of India’s demographic, remains underserved. Efforts to promote financial literacy and distribute insurance through digital or grassroots channels have been slow, limiting the spread. Insurers face difficulty in convincing people of the value of general insurance, especially in health and property segments.

• Fraudulent Claims

The general insurance sector in India struggles with a significant volume of fraudulent claims. Fake documents, exaggerated losses, and collusion between claimants and intermediaries result in financial losses for companies. This increases claim ratios, forcing insurers to increase premiums or limit coverage, affecting genuine policyholders. Fraud is more prevalent in motor and health insurance sectors, where verifying claims is challenging. The lack of advanced fraud detection tools, slow legal redressal, and weak data sharing between insurers worsen the situation.

• Lack of Skilled Workforce

There is a shortage of trained professionals in actuarial science, underwriting, risk assessment, and claims management in the Indian general insurance industry. This hampers product innovation, pricing accuracy, and efficient servicing. While technology adoption is growing, it cannot fully replace the need for skilled human resources. Public sector insurers particularly suffer from outdated HR policies and limited talent retention strategies. The industry’s talent gap leads to slower response times, customer dissatisfaction, and overall inefficiency in policy delivery and claim settlement.

• Poor Distribution and Reach

Despite advancements, the insurance industry’s distribution network is still weak, especially in remote regions. Agents remain concentrated in urban areas, while rural populations lack access. Digital platforms, though promising, have not achieved the desired reach due to limited internet literacy and language barriers. Bancassurance and micro-insurance models have shown potential but remain underutilized. Without effective last-mile connectivity and localized engagement, insurers find it difficult to penetrate India’s vast and diverse market, leaving millions uninsured or underinsured.

• Regulatory Challenges

The general insurance industry operates under a strict regulatory environment governed by IRDAI. While essential for policyholder protection, frequent changes in guidelines regarding solvency margins, product pricing, or distribution norms create operational disruptions. Insurers must continuously adapt to maintain compliance, which adds to administrative overheads. Smaller and newer players may struggle more, impacting competition and innovation. Further, unclear guidelines on emerging areas like cyber insurance and climate-related risks leave insurers in a gray area, delaying product development and risk coverage expansion.

• Underwriting and Pricing Difficulties

Inaccurate risk assessment and outdated actuarial data hamper effective underwriting and pricing in general insurance. Often, premiums do not adequately reflect the real risk associated with a policy, especially in health and property insurance. Adverse selection and moral hazard worsen claim ratios. With limited access to granular data, insurers rely on assumptions or industry averages. This leads to underpricing or overpricing, impacting profitability or competitiveness. As risk profiles evolve (e.g., due to climate change), insurers struggle to adapt quickly with adequate premium adjustments.

Future of General Insurance in India:

• Digital Transformation

The future of general insurance in India is deeply tied to digital innovation. Insurers are increasingly leveraging AI, machine learning, and blockchain to streamline underwriting, claims processing, and fraud detection. Mobile apps, chatbots, and self-service portals will make policy management more accessible. This tech-driven approach will improve efficiency, reduce turnaround time, and enhance customer satisfaction. With rising smartphone penetration and UPI adoption, digital channels will likely dominate policy sales and renewals, especially among younger and tech-savvy consumers.

• Customized and Usage-Based Products

India’s insurance market is shifting from generic to personalized offerings. Usage-based models like pay-as-you-drive (motor insurance) and health insurance with wellness-linked premiums will grow. Insurers will harness data from wearables, IoT devices, and driving behavior to tailor policies. This trend not only improves risk assessment but also promotes preventive habits among policyholders. As customers demand flexibility and relevance, insurers will focus on modular and micro-insurance products catering to specific needs like travel, electronics, or rural risks.

• Rural and Semi-Urban Expansion

With urban markets nearing saturation, the future lies in tapping rural and semi-urban India. Government initiatives like PMFBY (crop insurance) and Ayushman Bharat are pushing insurers to penetrate deeper. Micro-insurance and parametric insurance products designed for low-income groups will see increased adoption. Insurers will partner with local agents, NGOs, and digital fintech platforms to improve accessibility. Expanding reach in these underserved areas will not only support financial inclusion but also provide a huge untapped market for long-term growth.

• Climate and Catastrophe Risk Insurance

India’s exposure to floods, cyclones, and droughts has highlighted the need for climate-resilient insurance. The future will see growth in catastrophe risk cover, parametric insurance, and weather-indexed products. Insurance companies will integrate climate modeling and satellite data for better risk assessment. Regulatory nudges and global ESG frameworks will also push for sustainability-linked insurance offerings. As climate change impacts more regions and industries, insurers will play a key role in providing financial protection and promoting environmental resilience.

• Health and Cyber Insurance Growth

Post-COVID, awareness and demand for health insurance has surged and will continue rising, particularly in Tier 2 and Tier 3 cities. Custom wellness benefits, OPD cover, mental health inclusion, and family-focused plans will shape the market. Simultaneously, the digital economy’s rise brings cybersecurity threats, fueling growth in cyber insurance. MSMEs, startups, and even individuals will seek protection against data breaches, ransomware, and cyber fraud. These two sectors will dominate future product innovation and revenue generation for general insurers.

• Collaborations with InsurTechs and FinTechs

InsurTechs will become vital partners for traditional insurers. These tech-driven startups bring agility, customer insight, and digital capabilities that can transform distribution, claims, and pricing models. Collaborations will enhance customer experience through embedded insurance (like travel or device insurance at the point of purchase) and hyper-personalized offerings. APIs, open insurance, and real-time underwriting will become standard practices. The convergence of insurance with fintech ecosystems like UPI and credit platforms will enable seamless financial protection for millions of Indians.

Central Bank Digital Currencies (CBDCs) are digital forms of a country’s official currency, issued and regulated by the central bank. CBDCs are centralized and fully backed by the government, ensuring stability and legal recognition. They aim to combine the efficiency of digital payments with the trust and security of fiat money. CBDCs can streamline transactions, reduce costs, and enhance financial inclusion. Available in retail (for the public) and wholesale (for financial institutions) forms, CBDCs represent a modern evolution of currency in the digital age, maintaining sovereignty while adapting to fintech advancements.

Features of CBDCs:

• Centralized Issuance

CBDCs are issued and regulated exclusively by a nation’s central bank, such as the Reserve Bank of India (RBI) or the Federal Reserve. This ensures legal backing, currency stability, and state control over monetary policy. Unlike decentralized cryptocurrencies, CBDCs offer centralized governance, reducing the risk of speculation and volatility. This centralized issuance also allows governments to track money supply, enhance transparency, and enforce compliance with regulatory frameworks. As legal tender, CBDCs maintain public trust and can coexist with traditional cash and digital payment systems.

• Legal Tender Status

CBDCs hold the same legal status as physical currency, meaning they are recognized by law for payment of all debts and transactions. This legal tender status makes them universally acceptable across the country, unlike cryptocurrencies, which lack official recognition in many jurisdictions. With government backing, CBDCs ensure security, credibility, and seamless acceptance by businesses, individuals, and institutions. This feature promotes user confidence while allowing smoother integration into existing financial systems. Their legal tender nature also enables central banks to retain monetary sovereignty in the digital era.

• Digital and Programmable Nature

CBDCs are purely digital, offering instant, cashless, and contactless transactions. Their programmable nature allows features like automated tax payments, conditional transfers (smart contracts), and time-bound subsidies. Governments can embed rules into the currency, enhancing efficiency in welfare schemes, compliance, and auditing. Unlike cash or traditional bank transfers, programmable CBDCs provide more precise control and traceability of money flow. This feature supports advanced use cases such as targeted monetary policy tools or incentives, making CBDCs not just a digital form of currency but also a powerful governance instrument.

• Enhanced Financial Inclusion

CBDCs have the potential to increase financial inclusion by providing digital access to the unbanked and underbanked population. Through mobile wallets or basic apps, people without traditional bank accounts can store and transact money securely. In remote or rural areas, CBDCs reduce dependency on physical bank branches and cash availability. Their simplicity, low cost, and interoperability with existing digital infrastructure enable broader access to formal financial systems. This democratization of currency aligns with government goals of inclusive growth and reduced dependency on physical cash.

• Secure and Efficient Transactions

CBDCs support secure, real-time transactions with minimal intermediaries, reducing costs and delays typically seen in traditional banking. Transactions can be completed instantly across regions, even internationally if interoperable with other CBDCs. Their blockchain or distributed ledger-based architecture can ensure robust data integrity, reduce fraud, and improve traceability. Moreover, central banks can incorporate cybersecurity measures to prevent hacking and misuse. These secure systems enhance public trust and streamline both retail and wholesale payments, fostering a faster, more resilient financial ecosystem.

Example of CBDCs:

• Digital Rupee (e₹) – India

India’s Reserve Bank launched the Digital Rupee pilot in December 2022, in both wholesale and retail forms. The retail e₹ allows person-to-person and person-to-merchant payments through QR code-based wallets. The wholesale version targets settlement of interbank transactions. The digital rupee seeks to improve the efficiency of the payment system, reduce transaction costs, and offer a sovereign alternative to cryptocurrencies. Interoperable with UPI and other platforms, it supports financial inclusion, traceable transactions, and innovation in public service delivery. The RBI is gradually expanding its pilot cities and participants.

• eNaira – Nigeria

Launched in October 2021 by the Central Bank of Nigeria, eNaira is Africa’s first CBDC. It aims to promote financial inclusion, improve cross-border payments, and reduce cash dependency. Accessible via a digital wallet, it enables peer-to-peer transfers and merchant payments. The eNaira supports real-time, low-cost transactions and complements Nigeria’s existing banking system. Despite initial skepticism, the government has integrated eNaira into social programs to increase adoption. Its implementation showcases a developing economy’s approach to CBDC with emphasis on digital access and economic inclusivity.

• Digital Yuan (e-CNY) – China

The People’s Bank of China has been piloting the Digital Yuan (e-CNY) since 2020. As one of the most advanced CBDC projects, e-CNY enables offline payments and programmable features. It’s designed to increase payment system efficiency, reduce transaction costs, and counter private cryptocurrencies like Bitcoin. Used in retail transactions, public transport, and online shopping in pilot cities, the digital yuan is distributed through commercial banks. China aims to enhance monetary sovereignty and internationalize the yuan, making e-CNY a critical step in its digital economic strategy.

• Sand Dollar – Bahamas

The Sand Dollar is the world’s first fully operational retail CBDC, launched in October 2020 by the Central Bank of The Bahamas. It enhances financial access in the archipelago nation, especially in remote islands where banking infrastructure is limited. Residents use mobile wallets to make transactions, pay bills, and receive salaries. The Sand Dollar ensures secure, low-cost digital payments and includes KYC-compliant features. By integrating with local banks and mobile providers, it promotes inclusive finance and serves as a global model for small economies adopting digital currency.

• e-Krona – Sweden

Sweden’s Riksbank began testing the e-Krona in response to its society’s rapid shift away from cash. As one of the most cashless countries globally, Sweden sees the e-Krona as a complement to banknotes, ensuring access to central bank money. The e-Krona is designed for everyday payments and may be distributed via banks or digital wallets. The pilot explores offline usability, security, and resilience. It aims to maintain financial stability and public trust in a digital economy while preparing for scenarios where physical cash becomes obsolete.

Challenges of CBDCs:

• Threat to Traditional Banking

CBDCs may reduce the role of commercial banks by offering individuals a direct account with the central bank. In times of financial stress, people may quickly shift funds from banks to CBDC wallets, causing liquidity issues and potential bank runs. This disintermediation can disrupt traditional credit creation and affect financial stability. Banks might face difficulty in sourcing deposits, leading to increased reliance on borrowing from the central bank or capital markets. To mitigate this, central banks may need to impose holding limits or offer tiered interest rates on CBDCs to balance innovation and systemic stability.

• Privacy Concerns

One of the most debated challenges of CBDCs is ensuring user privacy. Unlike cash, CBDC transactions are traceable, which could lead to fears of mass surveillance and data misuse by the government or hackers. While traceability helps prevent illegal activities like money laundering, excessive monitoring may undermine civil liberties and erode public trust. Designing CBDCs with a balance between traceability for regulatory compliance and anonymity for user privacy is complex. Failure to address privacy issues effectively could deter public adoption, especially in countries with strong concerns about state overreach or lack of robust data protection frameworks.

• Cybersecurity Risks

CBDCs are fully digital and susceptible to cyber threats, including hacking, malware attacks, and system outages. A breach in the central bank’s digital infrastructure could compromise financial data, disrupt services, and erode confidence in the national currency. Additionally, large-scale cyberattacks targeting CBDC platforms could destabilize the economy and affect national security. Ensuring resilient, tamper-proof systems requires significant investment in advanced cybersecurity measures, real-time monitoring, and regular audits. The risk of cyberattacks makes operational security a top priority and a major challenge in implementing CBDCs at both national and cross-border levels.

• Technology and Infrastructure Gaps

The rollout of CBDCs demands robust digital infrastructure, including secure servers, fast internet, and user-friendly interfaces. In countries with low digital literacy, poor connectivity, or outdated systems, implementing CBDCs equitably is a major challenge. A lack of smartphone access, especially in rural and underprivileged areas, may exclude vulnerable populations. Additionally, central banks may face difficulties ensuring interoperability with existing financial systems. Addressing these technological gaps requires substantial investment in infrastructure development, public-private collaboration, and targeted education programs to ensure digital inclusion and avoid widening the financial divide.

• Monetary Policy Complexities

CBDCs can significantly alter the transmission of monetary policy. While they offer opportunities like programmable interest rates or direct stimulus distribution, their actual impact remains uncertain. Excessive use of CBDCs could affect the demand for bank deposits and change the effectiveness of traditional policy tools such as repo rates and reserve requirements. Central banks may find it difficult to calibrate interest rates and liquidity management in an environment where money demand shifts rapidly. Balancing innovation with economic stability will require new frameworks and empirical studies to understand the full macroeconomic implications of CBDC deployment.

Sustainable Bonds are fixed-income financial instruments specifically issued to raise funds for projects that have positive environmental or social impacts. These bonds include green bonds (for environmental initiatives), social bonds (for projects like affordable housing or education), and sustainability bonds (a mix of both). Issuers can be governments, corporations, or financial institutions. Investors are increasingly drawn to sustainable bonds due to growing awareness of climate change, social responsibility, and ethical investing. These bonds follow specific frameworks, such as the ICMA’s Green and Social Bond Principles, ensuring transparency and accountability in fund usage. In India, regulatory bodies like SEBI have issued guidelines for green debt securities to promote sustainable finance and align with global Environmental, Social, and Governance (ESG) goals.

Features of Sustainable bonds:

• Purpose-Driven Financing

Sustainable bonds are issued to finance or refinance projects that deliver measurable environmental and/or social benefits. These may include renewable energy, clean transportation, affordable housing, healthcare, and education. The purpose must be clearly defined in the bond’s framework. Issuers must disclose how the funds will be used and ensure that the projects align with sustainability goals. This targeted approach makes sustainable bonds distinct from traditional bonds, as investors know their capital is directly contributing to global sustainability objectives, in line with UN Sustainable Development Goals (SDGs).

• Transparency and Reporting

A key feature of sustainable bonds is their emphasis on transparency and continuous reporting. Issuers are expected to provide detailed disclosures about the use of proceeds, project selection criteria, and anticipated environmental or social impact. Regular updates and annual reports—including third-party audits or impact assessments—build trust among investors. This transparency ensures that funds are not misused or diverted to unrelated activities. The emphasis on clear communication aligns sustainable bonds with Environmental, Social, and Governance (ESG) investing standards, helping investors track both financial performance and societal impact.

• Alignment with Global Frameworks

Sustainable bonds are typically structured in alignment with globally recognized frameworks like the Green Bond Principles (GBP), Social Bond Principles (SBP), or Sustainability Bond Guidelines (SBG) issued by the International Capital Market Association (ICMA). These frameworks guide issuers on project eligibility, transparency, reporting, and evaluation. By adhering to these standards, issuers increase their credibility in global markets. This alignment ensures uniformity across borders, attracting international investors who prioritize ESG compliance, ethical investing, and alignment with the UN Sustainable Development Goals (SDGs).

• Third-Party Certification and Verification

To enhance investor confidence and prevent “greenwashing,” sustainable bonds often undergo independent third-party review. External reviewers assess whether the bond’s objectives, project selection process, and fund utilization meet sustainability standards. These certifications may include second-party opinions, ESG ratings, or post-issuance audits. Independent verification ensures that proceeds are genuinely used for environmental or social causes. This practice improves transparency and accountability, and can positively influence investor decisions, particularly those who follow responsible investment mandates or manage ESG-focused portfolios.

• Attractive to ESG Investors

Sustainable bonds are particularly appealing to Environmental, Social, and Governance (ESG)-focused investors. With increasing awareness around climate change, social justice, and responsible corporate governance, investors are prioritizing ethical financial instruments. Sustainable bonds offer a dual benefit: steady financial returns and measurable societal or environmental impact. Many pension funds, insurance companies, and sovereign wealth funds now include ESG criteria in their investment decisions. Sustainable bonds, by aligning with these values, offer a viable option for institutions seeking both long-term value and reputational integrity in their portfolios.

Example of Sustainable bonds:

• World Bank Sustainable Development Bonds

The World Bank regularly issues Sustainable Development Bonds to fund a broad range of projects aligned with the UN SDGs. These include clean water, education, healthcare, and climate action initiatives. Investors are attracted to their AAA-rated credit and strong impact transparency. The proceeds directly support poverty reduction, environmental protection, and inclusive economic growth. World Bank bonds are widely regarded as benchmarks for sustainability in global capital markets due to their credibility, disclosure, and development impact.

• European Investment Bank (EIB) Sustainability Awareness Bonds

The EIB’s Sustainability Awareness Bonds (SABs) fund environmental and social projects, such as climate resilience, water sanitation, education, and public health. These bonds are aligned with EU Taxonomy and contribute to Europe’s Green Deal objectives. The EIB ensures transparent impact reporting and rigorous due diligence. SABs attract institutional investors seeking credible green and social returns. As one of the first major issuers in this space, the EIB has helped shape sustainable finance standards globally.

• Indian Railway Finance Corporation (IRFC) Green Bonds

IRFC issued Green Bonds to raise capital for low-emission and electrified rail transport infrastructure across India. These bonds help reduce carbon emissions, promote sustainable mobility, and align with India’s climate goals under the Paris Agreement. The IRFC bonds are certified under the Climate Bonds Standard and are listed on international exchanges like the London Stock Exchange. Their global listing has attracted ESG-focused investors, showcasing India’s commitment to sustainable transport infrastructure and green financing.

• Apple Inc. Green Bonds

Apple has issued several Green Bonds, raising billions to finance energy efficiency, renewable energy, green buildings, and recycling innovation. These include powering global operations with 100% renewable energy and developing recycled materials like aluminum. Apple publishes detailed impact reports annually, offering transparency to ESG investors. Its bonds align with ICMA Green Bond Principles and reflect the company’s climate commitments. Apple’s strong brand and sustainability record make these bonds attractive to both retail and institutional ESG investors.

• Government of France Sustainability Bonds

France was one of the first countries to issue sovereign Green and Sustainability Bonds. These bonds fund climate initiatives, biodiversity conservation, renewable energy, and energy efficiency programs. France ensures transparency through annual allocation and impact reports verified by independent parties. The bonds are aligned with both national climate policy and EU sustainability frameworks. France’s leadership in sustainable finance has inspired other nations to issue sovereign ESG bonds, strengthening the global green bond market and funding climate adaptation at scale.

Challenges of Sustainable bonds:

• Greenwashing Risk

One major challenge is greenwashing, where issuers label bonds as “sustainable” without genuinely using proceeds for green or social purposes. This misleads investors and dilutes the credibility of sustainable finance. Lack of rigorous standards or enforcement mechanisms allows questionable projects to be funded under the sustainable banner. As a result, investor confidence may waver, and the integrity of the market may suffer unless robust verification, independent audits, and transparent impact reporting become mandatory across issuers and regions.

• Lack of Universal Standards

There is no globally uniform regulatory framework governing sustainable bonds. Different countries and organizations follow varying definitions, taxonomies, and certification requirements. This creates confusion for investors and challenges in comparing bonds across markets. The inconsistency can result in reduced transparency, diminished investor trust, and difficulty in evaluating actual impact. Harmonization of standards, such as alignment with the EU Green Bond Standard or ICMA Principles, is necessary to ensure comparability and foster wider acceptance in global financial markets.

• Verification and Reporting Issues

Ensuring the credibility of impact reporting is a persistent challenge. Many issuers lack the resources or expertise to conduct third-party verifications or publish regular impact assessments. This raises concerns about fund allocation and environmental or social performance. Without consistent post-issuance disclosure, investors may be unable to verify whether the bond is achieving its intended objectives. Improving impact reporting practices, making assurance processes mandatory, and involving external reviewers are essential steps to strengthen investor confidence.

• Limited Market Depth

The market for sustainable bonds, especially in developing countries, remains limited. Fewer issuers, lower liquidity, and a smaller investor base can reduce demand and inhibit growth. Smaller issuers often struggle with the cost and complexity of issuing sustainable bonds due to lack of technical support. This challenge restricts the reach of sustainable financing, particularly for smaller enterprises and local governments. Strengthening market infrastructure, offering incentives, and building investor awareness are crucial to expand participation and issuance.

• High Issuance Costs

Issuing a sustainable bond often involves additional costs compared to conventional bonds. These include expenses for third-party verification, environmental assessments, impact reporting, and compliance with frameworks like the Green Bond Principles. These costs may deter small issuers or first-time participants. Without public subsidies or technical assistance, the cost-benefit ratio may not appear favorable. Reducing procedural complexity, offering tax benefits, or creating pooled issuance platforms could help make sustainable bonds more accessible and cost-effective.

• Difficulty in Measuring Impact

Quantifying the actual environmental or social impact of funded projects is inherently complex. Outcomes like reduced carbon emissions or improved public health often unfold over long periods and are influenced by multiple external factors. There may be a lack of reliable data, inconsistent metrics, or methodological challenges in calculating impact. This uncertainty can hinder investor trust and accurate pricing of sustainability-linked returns. Developing standardised metrics and tools for transparent impact measurement is essential for long-term credibility.

Neo-banks are fully digital-only financial institutions that offer banking services without any physical branches. Unlike traditional banks, neo-banks operate through mobile apps or websites, providing services like savings accounts, money transfers, budgeting tools, loans, and spend analytics. They typically partner with licensed banks to ensure regulatory compliance and deposit safety, since most neo-banks are not independently licensed by central banks like the RBI. Neo-banks focus on delivering a seamless user experience, quick onboarding, lower fees, and innovative features such as instant credit, automated savings, and financial insights. In India, examples include Fi Money, Jupiter, and Niyo. Neo-banks aim to serve tech-savvy customers and underserved segments, contributing to financial inclusion through technology-driven solutions.

Features of Neo-Banks:

• 100% Digital Operations

Neo-banks operate entirely online without physical branches. They provide banking services via mobile apps and web platforms, allowing customers to open accounts, transfer money, apply for loans, or invest—all digitally. This eliminates paperwork and long wait times, offering faster and more efficient banking. Neo-banks are built using cloud-based infrastructure, which allows them to scale quickly and integrate with other fintech services. Their 24/7 availability ensures convenience, particularly for tech-savvy users. The digital-only model also reduces operating costs, making neo-banks more agile than traditional banks. However, the lack of physical presence may be a drawback for customers who prefer face-to-face service or need help with complex financial issues.

• Seamless User Experience

Neo-banks prioritize user-friendly interfaces and intuitive mobile apps. They emphasize customer-centric design, enabling smoother navigation, real-time transaction updates, personalized dashboards, and easy-to-understand financial reports. Services such as automated budgeting, bill reminders, and instant notifications help users manage their money better. Neo-banks often integrate with UPI, wallets, and third-party apps, allowing users to handle multiple tasks without switching platforms. This seamless experience is particularly attractive to millennials and Gen Z users who value speed, customization, and accessibility. Regular app updates based on user feedback ensure continuous improvement. This feature positions neo-banks as smart, lifestyle-driven alternatives to traditional banking interfaces that often feel outdated.

• Low Operational Costs

Since neo-banks do not maintain costly branch networks or legacy systems, their overhead expenses are significantly lower. These cost savings are passed on to customers in the form of lower fees, better interest rates, and cashback offers. They often charge zero account maintenance fees, provide free debit cards, and offer fee-free transactions, making them attractive for cost-conscious users. Moreover, lean operations allow neo-banks to adapt quickly, launch new features, and remain competitive. Their technology-driven backend also enables automation of processes like customer onboarding, fraud detection, and loan approval, reducing the need for manual intervention and lowering human resource expenses.

• Focused Financial Products

Neo-banks often cater to specific user segments such as freelancers, small businesses, students, or digitally active individuals. They offer targeted financial products like instant salary advances, invoice financing, expense trackers, and goal-based savings. Their services are often curated to support digital lifestyles, including subscription tracking, investment tools, and crypto-friendly wallets. Neo-banks also collaborate with NBFCs and traditional banks for underwriting and compliance while handling the front-end digital experience. This focus enables them to design better solutions than one-size-fits-all banking models. Their niche offerings often address pain points that traditional banks overlook, making them highly personalized and user-relevant.

• Real-Time Services and Insights

Neo-banks provide instant banking services like immediate account creation, real-time balance updates, and instant payment notifications. They also offer financial insights and analytics, such as monthly spending patterns, category-wise breakdowns, and savings suggestions. Using AI and machine learning, some platforms can predict future expenses or recommend smarter ways to budget. Real-time credit scoring, risk profiling, and personalized recommendations make the banking experience highly dynamic and proactive. These features help users take better financial decisions on the go, empowering them with actionable data, unlike traditional banks which typically lack real-time personalization in their core operations.

• Integration with Fintech Ecosystem

Neo-banks are well-integrated with the larger fintech ecosystem, often collaborating with payment gateways, mutual fund platforms, tax filing services, and insurance aggregators. This provides users with a one-stop financial platform, combining banking, investments, and other money management tools. Open APIs and modular technology stacks enable them to plug into multiple services, offering a holistic financial experience. Many also offer embedded finance options, allowing businesses to provide banking services directly to customers through neo-bank infrastructure. This fintech-driven integration sets them apart from conventional banks and makes them a versatile tool for modern personal and business finance.

Traditional Banks

Traditional banks are brick-and-mortar financial institutions licensed and regulated by a country’s central authority—such as the Reserve Bank of India (RBI). They offer a wide range of services including savings and current accounts, fixed deposits, loans, credit cards, remittances, and more. Customers interact with traditional banks through physical branches, ATMs, and increasingly, online platforms. These banks include public sector banks (e.g., SBI, PNB), private sector banks (e.g., HDFC, ICICI), and foreign banks operating in India. Traditional banks play a critical role in monetary transmission, economic development, and financial inclusion. They follow strict regulatory norms related to capital adequacy, risk management, and asset classification. Though slower to innovate than neo-banks, they offer trust, legacy, and full-service reliability, catering to both individuals and institutions.

Features of Traditional Banks:

• Physical Presence

Traditional banks have an extensive network of physical branches and ATMs across urban and rural areas. This infrastructure allows customers to conduct transactions, seek personal assistance, and access various banking services in person. The physical presence builds trust and familiarity, especially for customers uncomfortable with digital platforms. It also helps in catering to rural populations and small businesses that require manual banking support. Though costly to maintain, branch networks help banks deliver inclusive financial services, promote financial literacy, and build long-term relationships with clients through face-to-face interactions.

• Regulatory Compliance

Traditional banks operate under strict regulations laid down by the Reserve Bank of India (RBI) and follow international norms like Basel III. They must maintain specific capital adequacy ratios, statutory liquidity ratios, and follow protocols for KYC (Know Your Customer), risk assessment, and asset classification. This regulatory framework ensures stability, transparency, and risk mitigation in banking operations. Compliance also helps protect depositors’ interests and ensures accountability. Regular audits, disclosures, and inspections are part of their governance, which makes traditional banks trustworthy and reliable institutions in the eyes of the public and investors alike.

• Wide Range of Services

Traditional banks offer a comprehensive suite of services such as savings and current accounts, fixed deposits, recurring deposits, loans (personal, home, vehicle), credit cards, remittances, insurance, and investment products. They cater to both retail and corporate customers, enabling financial support at individual and organizational levels. In addition, banks provide trade finance, foreign exchange, treasury management, and government bond sales. Their ability to offer bundled services under one roof enhances customer convenience and encourages long-term banking relationships. This variety makes them essential to individuals, businesses, and government bodies.

• Risk Management and Security

Traditional banks are equipped with robust risk management systems to safeguard against credit, operational, and market risks. They employ detailed due diligence, credit appraisal mechanisms, and asset classification norms to assess borrower credibility and monitor loan quality. These banks also invest in cybersecurity infrastructure, internal audits, and fraud detection technologies to protect customer data and funds. RBI mandates periodic stress tests and provisioning for bad loans, ensuring financial stability. This structured approach makes traditional banks more resilient during economic shocks or financial crises, maintaining public trust in the system.

• Large and Diverse Customer Base

Traditional banks serve a wide spectrum of customers, including individuals, SMEs, corporations, and government bodies. Their established brand image, long history, and trusted presence attract millions of customers across urban and rural areas. Banks provide tailored services such as priority banking for high-net-worth individuals (HNIs), MSME loans, and agricultural credit. Their large customer base not only generates diverse revenue streams but also enables economies of scale. This diversity helps them absorb shocks from specific segments and sustain operations during economic downturns, contributing to the financial stability of the banking sector.

• Trust and Legacy

Traditional banks enjoy strong public trust, built over decades of service and stability. Many are public sector banks (e.g., SBI, PNB) with government backing, reinforcing their credibility. Their long-standing legacy reflects in strong customer loyalty, intergenerational relationships, and a perception of safety. Unlike newer digital entrants, traditional banks are viewed as secure custodians of savings. Their proven ability to weather financial crises adds to their reputation. This trust is crucial in encouraging people—especially in semi-urban and rural India—to participate in the formal financial system and maintain long-term banking relationships.

Key differences between Neo-Banks and Traditional Banks

Non-Banking Financial Companies (NBFCs) play a vital role in advancing financial inclusion in India, especially in underserved rural and semi-urban areas. Unlike traditional banks, NBFCs offer flexibility, faster processing, and customized financial products, enabling them to bridge the credit gap for individuals and small businesses. With simplified documentation and doorstep services, they provide credit to sectors often excluded by mainstream banks such as micro-enterprises, small traders, and low-income households. By leveraging technology, NBFCs also deliver insurance, pensions, and digital payments, aligning with India’s broader goal of inclusive economic growth. Their presence helps promote entrepreneurship and financial resilience in remote regions.

• Microcredit Access for the Unbanked:

NBFCs are key providers of microcredit to individuals and businesses who lack formal income documentation or credit history. By offering small-ticket loans with minimal paperwork and flexible repayment schedules, they enable marginalized populations—such as daily wage earners, women entrepreneurs, and informal workers—to access funds for income-generating activities. NBFC-MFIs (Microfinance Institutions) have played a particularly important role in empowering rural women by facilitating self-help groups and entrepreneurship. Their field agents and local partnerships help reduce barriers to access, trust, and financial literacy. In regions where banks are absent or unwilling to lend due to risk concerns, NBFCs ensure credit reaches the last mile, thereby enhancing economic participation.

• Tailored Products for Diverse Needs

NBFCs design and deliver financial products tailored to the specific needs of underserved communities. For example, they offer vehicle loans to small transport operators, gold loans to households without collateral, and consumer durables financing to low-income families. Unlike banks with rigid criteria, NBFCs assess borrowers based on alternate data—such as business turnover or cash flows—rather than credit scores. Their agility in creating sector-specific products, such as loans for farmers, artisans, or small shopkeepers, addresses the unique challenges these groups face. NBFCs also provide financing for affordable housing, education, and health-related emergencies, making essential services accessible. These targeted offerings make NBFCs a critical instrument in deepening financial inclusion across economic strata.

• Expanding Reach Through Technology

NBFCs leverage digital tools and mobile technology to extend financial services to remote areas. With mobile apps, SMS alerts, e-KYC, and biometric authentication, they streamline loan approval, disbursement, and recovery processes—even in regions lacking physical infrastructure. Fintech NBFCs offer online onboarding, digital lending, and wallet-based services that improve convenience and transparency. This technological adoption reduces cost-to-serve, improves credit assessments through alternative data (e.g., mobile usage, payment history), and enhances user experience. Such digital-first strategies allow NBFCs to scale quickly, penetrate rural markets, and serve customers previously excluded due to geographic or documentation barriers. As a result, they help bridge the urban-rural financial divide and drive digital inclusion.

• Supporting MSMEs and Informal Sector:

NBFCs play a pivotal role in supporting Micro, Small, and Medium Enterprises (MSMEs) and informal sector workers, who often struggle to obtain funding from traditional banks. They offer working capital loans, machinery finance, and invoice discounting to small businesses with limited credit history. By providing timely credit, NBFCs help these enterprises manage cash flows, expand operations, and weather economic fluctuations. Many NBFCs adopt relationship-based lending, allowing for trust and flexibility in underwriting. They also support gig workers, vendors, and home-based entrepreneurs—segments critical to India’s economy. As enablers of employment and productivity, NBFCs strengthen local economies and contribute to inclusive growth by promoting self-reliance and business resilience in underserved regions.

Punjab and Maharashtra Cooperative Bank was established in 1984 and grew into one of India’s top 10 urban cooperative banks. It had over 137 branches across 6 states and served thousands of depositors. The bank catered to both retail and institutional clients and had earned trust over the years through its aggressive growth and high deposit interest rates. By 2019, it had deposits worth over ₹11,000 crore and a loan book exceeding ₹8,000 crore.

Discovery of Financial Irregularities

In September 2019, the Reserve Bank of India (RBI) imposed operational restrictions on PMC Bank after uncovering a ₹6,500+ crore scam, where the bank fraudulently hid and underreported its bad loans. The fraud came to light when a whistleblower informed RBI about the misreporting of loan exposures to a bankrupt real estate firm – Housing Development and Infrastructure Ltd. (HDIL).

Undisclosed Exposure to HDIL

PMC Bank had illegally lent over 73% of its total loan book (~₹6,226 crore) to HDIL and related entities, which had already been declared bankrupt. Bank officials used 21,000 fake accounts to hide the bad loans from regulators and auditors. These dummy accounts masked non-performing assets (NPAs), giving the illusion of a healthy loan portfolio.

Management’s Role in the Scam

Top executives at PMC Bank, including the Managing Director Joy Thomas and Chairman Waryam Singh, were directly involved in sanctioning and hiding loans to HDIL. Internal systems and software were manipulated to conceal the real numbers from auditors and the RBI. The auditors also failed to detect the deception, pointing to lapses in checks and balances.

RBI’s Immediate Action

On 23rd September 2019, RBI put PMC Bank under Section 35A of the Banking Regulation Act, restricting withdrawals for depositors initially to ₹1,000, later increased in phases. The bank was not allowed to offer new loans or renew existing ones, and the Board of Directors was superseded. An administrator was appointed to manage the crisis.

Public Outcry and Depositor Hardship

The sudden restrictions caused widespread panic among account holders. Many customers had life savings in the bank and couldn’t access funds for medical emergencies, education, or business needs. Emotional distress led to several deaths reportedly due to shock or suicide, highlighting the deep financial and psychological impact on the common public.

Legal and Investigative Proceedings

The Mumbai Police’s Economic Offences Wing (EOW) and Enforcement Directorate (ED) launched investigations. Multiple arrests were made, including PMC officials and HDIL promoters Rakesh and Sarang Wadhawan. ED attached HDIL’s properties worth crores under the Prevention of Money Laundering Act (PMLA). Investigations revealed that PMC gave loans despite HDIL defaulting on repayments for years.

Loopholes in Cooperative Banking Regulation

The crisis exposed serious regulatory gaps in India’s dual control structure over cooperative banks – RBI oversees banking operations, while state governments regulate administration. PMC operated with weak internal controls, and regulatory supervision was inadequate. The case led to demands for comprehensive reform in cooperative banking regulation, especially on audit and oversight.

RBI’s Corrective Measures and Policy Changes

Post-PMC crisis, the RBI and government took various steps:

• Amended Banking Regulation Act (2020) to bring cooperative banks under stricter RBI control.

• Enhanced guidelines on audit quality and loan exposure limits.

• Issued advisories on whistleblower mechanisms and stricter internal audits to detect frauds early.

Resolution Through Merging with Unity Small Finance Bank:

In November 2021, the RBI approved the merger of PMC Bank with Unity Small Finance Bank (USFB), backed by Centrum Group and BharatPe. Under the resolution plan:

• Depositors were to receive back their full deposits in a staggered manner.

• Unity took over assets and liabilities, with the goal to revive operations and restore trust.

• Large depositors had to wait longer, while smaller depositors got quicker access.

Impact on Banking Sector and Financial Confidence:

The PMC Bank debacle led to loss of public confidence in cooperative banks. Even strong urban cooperative banks saw withdrawal pressures. The crisis triggered debates around:

• Deposit insurance coverage (enhanced later to ₹5 lakh).

• Need for timely financial disclosures and audits.

• Greater oversight on urban cooperative banks to protect depositors.

Lessons Learnt and Way Forward:

The PMC crisis taught regulators, banks, and customers several lessons:

• Importance of transparency in reporting loan exposures.

• Need for robust governance and accountability mechanisms.

• Strengthening whistleblower protection and digital monitoring systems.

• Depositors also became more aware of risks associated with high-return promises.
  The crisis pushed RBI and the government to tighten norms for the cooperative banking sector and enhance trust in India’s financial system.

The Income Recognition and Asset Classification (IRAC) norms, introduced by the Reserve Bank of India (RBI), are essential guidelines followed by banks and financial institutions to assess the quality of their loan assets. These norms ensure transparency in the banking sector by identifying the performance status of loans and classifying them accordingly. They help in recognizing income only when it is realized and classifying assets based on the borrower’s repayment behavior. The main categories include Standard, Sub-Standard, Doubtful, and Loss Assets, each representing different levels of credit risk and influencing a bank’s financial health and provisioning requirements.

• Standard Assets

Standard assets are loans or advances that do not pose any risk of default. As per Reserve Bank of India (RBI) guidelines, a standard asset is one that remains performing — meaning the borrower makes regular payments of interest and principal without any delay. These assets exhibit normal risk and are not considered problematic. They do not carry any default history and are fully compliant with the agreed repayment schedule. Banks are required to classify performing assets as standard and maintain lower provisioning requirements, which enhances profitability. These assets reflect the financial health of the borrower and are considered safe for the bank. Examples include loans to large corporations, home loans with steady repayment, and education loans under active repayment. Maintaining a high proportion of standard assets is crucial for a bank’s balance sheet quality. Banks regularly monitor standard assets to detect early warning signals, if any, to ensure timely intervention and avoid future slippages into non-performing categories.

• Sub-Standard Assets

Sub-standard assets are non-performing loans (NPAs) that have remained in default for a period not exceeding 12 months. When a borrower fails to make interest or principal payments for more than 90 days, the account is classified as a non-performing asset, and within this, if it is a recent default (less than a year), it is termed a sub-standard asset. These assets carry higher credit risk and require increased provisioning by banks — typically 15% or more. Sub-standard classification reflects early signs of distress and deteriorating repayment capacity. Though still recoverable, sub-standard assets often indicate short-term liquidity issues or temporary business setbacks faced by borrowers. Banks are advised to closely monitor and restructure such loans where feasible. Timely recovery strategies such as rescheduling, settlement offers, or legal proceedings are considered to avoid further slippage into doubtful or loss categories. The classification alerts banks to initiate remedial actions and preserve asset quality.

• Doubtful Assets

Doubtful assets are those which have remained in the sub-standard category for more than 12 months. These loans show a prolonged default history, and the possibility of full recovery becomes increasingly uncertain. RBI mandates higher provisioning norms for doubtful assets — between 25% and 100%, depending on the period they’ve remained in this category and the extent of collateral cover. Banks assess doubtful assets with skepticism as repayment chances are significantly reduced, even if some security is available. This classification reflects serious financial stress in the borrower’s business and a weakened ability or intent to repay. Recovery often depends on the sale of collateral or legal actions like the SARFAESI Act or insolvency proceedings. Doubtful assets impact the bank’s profitability and reputation and require aggressive recovery efforts. Regular monitoring, asset restructuring, and negotiated settlements are pursued where viable. Moving assets out of this category often requires a turnaround in borrower performance or enforced recovery through courts or asset reconstruction companies.

• Loss Assets

Loss assets are those that are identified as unrecoverable and considered of no value to the bank, either fully or partially. As per RBI, these are loans that a bank or an auditor or even the RBI itself has deemed uncollectible, although there may be some residual recovery possible in exceptional cases. These assets have either been in default for an extended period or have no viable business or collateral backing. Banks are required to make 100% provisioning for loss assets, recognizing them as a total loss in their financial statements. Even if legal action is pending or collateral is theoretically available, these assets must be treated as fully impaired. Typically, these loans have been written off or are under liquidation or bankruptcy proceedings. Classifying an asset as a “loss” ensures complete transparency and prudent accounting. It alerts stakeholders to the deterioration in credit quality and signals the need for stricter credit appraisal and monitoring processes to prevent such losses in the future.

From 2021 to 2023, India witnessed an unprecedented surge in Initial Public Offerings (IPOs), marking a historic boom in its capital markets. Fuelled by strong retail participation, abundant global liquidity, favorable government policies, and bullish stock markets, companies across sectors rushed to raise capital through public issues. Startups, tech unicorns, and traditional businesses alike saw this period as an opportune time to tap investor appetite. Over 150 companies went public, collectively raising more than ₹1.8 lakh crore. Notable listings included Zomato, Nykaa, LIC, and Paytm. This IPO frenzy showcased India’s evolving financial landscape, with increased digitization, higher retail participation via apps, and growing confidence in equity markets. However, the boom also brought valuation concerns, regulatory scrutiny, and post-listing volatility.

• Rise of Tech and Digital Startups

Between 2021 and 2023, India saw a new wave of tech startups entering the public market. Companies like Zomato, Nykaa, PolicyBazaar, and Paytm made headlines by launching high-value IPOs, often crossing billion-dollar valuations. These firms leveraged digital platforms, created new-age customer experiences, and drew substantial investor interest. Most had never posted a profit, yet the promise of long-term scalability and innovation attracted institutional and retail investors. Their IPOs marked a shift in investor mindset—from traditional profit-based metrics to growth-driven potential. Although post-listing performance was mixed, the listings showcased India’s maturing tech ecosystem. The IPO boom gave startups access to public capital and greater visibility, but also brought them under strict regulatory and investor scrutiny, pushing them to improve transparency and accountability in operations.

• Record-Breaking Fundraising

The IPO boom resulted in record capital mobilization. Companies raised over ₹1.8 lakh crore between 2021 and 2023, with 2021 alone contributing ₹1.18 lakh crore—the highest ever in a calendar year. Traditional giants like LIC (₹21,000 crore) and Adani Wilmar, along with tech-first businesses, led the charge. The availability of liquidity due to low interest rates, recovery from COVID-19 disruptions, and strong secondary market performance created an ideal environment for companies to go public. Many firms used IPO proceeds for debt repayment, expansion, and strengthening their balance sheets. This surge was supported by higher retail and institutional investor participation, reflecting deepening trust in Indian equities. The massive inflow of capital boosted financial markets and supported broader economic recovery. However, valuation concerns and market saturation emerged, prompting more cautious investor behavior toward the end of 2023.

• Surge in Retail and First-Time Investors

One of the most defining aspects of the IPO boom was the surge in retail investor participation, especially among first-time market entrants. Fueled by digital trading platforms like Zerodha, Groww, Upstox, and widespread financial awareness, millions opened demat accounts. Retail investors eagerly applied for IPOs expecting quick listing gains, often leading to oversubscription by multiple times. SEBI’s reforms and easier online application processes under ASBA (Application Supported by Blocked Amount) also supported the trend. IPOs like Nykaa and Paras Defence saw massive oversubscriptions, largely driven by retail bids. While this enthusiasm democratized investing, many investors lacked long-term strategies and faced losses when newly listed stocks fell below offer prices. The boom highlighted the need for financial literacy and risk education, especially for newcomers. Nonetheless, the period cultivated a strong culture of retail equity participation and reshaped India’s investor demographic landscape.

• Government and Regulatory Push

The Indian government and SEBI played a pivotal role in enabling the IPO boom. The disinvestment of LIC marked a milestone in India’s economic reforms and attracted millions of first-time investors. Regulatory initiatives such as T+1 settlement, simplified IPO application processes, and digitization of KYC streamlined the IPO participation journey. SEBI also revised disclosure norms, tightened monitoring of book-building processes, and introduced frameworks to enhance transparency. The regulator emphasized investor protection, especially after volatile listings like Paytm. Government-backed reforms to boost startup funding and relax foreign investment norms encouraged unicorns to consider IPOs as a viable fundraising route. Regulatory clarity also allowed for SME and main board IPOs to flourish. Overall, institutional support ensured smoother IPO operations, increased public trust, and strengthened India’s capital market ecosystem for sustainable long-term growth.

• Post-Listing Performance and Market Volatility

While many IPOs generated hype and heavy oversubscription, their post-listing performance varied widely. Companies like Zomato and Nykaa initially delivered strong listing gains but later faced significant price corrections. Paytm, one of the biggest IPOs, saw its shares crash by over 50% shortly after listing, raising concerns over valuation mismatches and poor earnings visibility. Such volatility created unease among investors, especially retail participants expecting instant returns. Analysts criticized companies for aggressive pricing and lack of consistent profits. The broader market correction in late 2022 and 2023 further impacted investor sentiment. This turbulence highlighted the importance of due diligence, realistic valuation, and long-term business models over hype-driven investment. Regulators and brokerages urged caution and provided more detailed risk disclosures. While IPOs remain an important capital-raising tool, the period emphasized the need for sustainable fundamentals over mere market frenzy. Lessons learned may shape a more disciplined IPO culture going forward.

• SME IPO Growth and Regional Participation

The IPO boom wasn’t limited to large corporations and tech unicorns—Small and Medium Enterprises (SMEs) also tapped into public markets in unprecedented numbers. Exchanges like NSE Emerge and BSE SME platforms facilitated over 100 SME listings during this period, helping regional businesses access equity capital. Sectors like pharma, manufacturing, textiles, and IT saw mid-sized firms going public. With lower compliance norms, simplified documentation, and localized investor outreach, SME IPOs gained traction across Tier-II and Tier-III cities. Many investors found SME stocks attractive due to niche business models and early-stage growth potential. Retail and HNI investors played a key role in their subscription. However, concerns around low liquidity and price volatility were noted, prompting calls for tighter governance. Still, the SME IPO surge democratized fundraising and created a vibrant entrepreneurial ecosystem at the grassroots level, contributing significantly to employment and regional economic development.

In January 2023, U.S.-based short-seller Hindenburg Research published a report accusing the Adani Group, one of India’s largest conglomerates, of accounting fraud, stock manipulation, and corporate governance lapses. The report was released just days before the launch of Adani Enterprises’ ₹20,000 crore Follow-on Public Offer (FPO), triggering sharp declines in the group’s stock prices. Within days, Adani companies collectively lost over $100 billion in market capitalization, making it one of the largest wealth erosions in Indian stock market history.

The controversy brought global attention to the group’s financial practices and raised questions about the robustness of India’s regulatory framework. It also stirred political debates and intensified scrutiny from investors, credit agencies, and foreign institutions. The episode was a test for market resilience and the effectiveness of Indian regulators like SEBI (Securities and Exchange Board of India). It raised concerns over corporate transparency, regulatory oversight, and investor protection mechanisms in emerging markets. While the Adani Group denied all allegations and called the report malicious, the case sparked broader discussions about short-selling, disclosure norms, and systemic risks in the Indian financial ecosystem.

• Market Volatility

The Adani-Hindenburg episode triggered unprecedented market volatility, with Adani stocks witnessing steep intraday losses across multiple trading sessions. Adani Enterprises, Adani Ports, and Adani Green Energy were among the hardest hit, with price corrections of up to 50–60% in just a few weeks. The broader indices like Nifty 50 and Sensex also saw negative spillovers due to the heavy index weightage of Adani Group companies. Investor sentiment turned cautious, especially among foreign institutional investors (FIIs), some of whom began withdrawing from Indian equities fearing systemic risk.

The FPO of Adani Enterprises was fully subscribed but later withdrawn to protect investor interest. Credit agencies like Moody’s and S&P revised their outlook on Adani companies, adding further pressure. Domestic mutual funds and banks with exposure to Adani stocks also saw increased scrutiny. Retail investors were impacted by the sudden wealth erosion and uncertainty surrounding price recovery. The episode highlighted the fragility of emerging markets in the face of external shocks and speculative reports. It also raised concerns about over-leveraging, promoter-driven growth, and the interconnectedness between large corporates and financial institutions. The overall market mood remained jittery for weeks, underlining the importance of transparency, governance, and investor communication.

• SEBI’s Role:

Following the Hindenburg allegations, SEBI faced immense pressure to respond swiftly and effectively. Initially, SEBI issued a public statement confirming its ongoing surveillance of the market and the Adani stocks. Later, under Supreme Court direction, SEBI was tasked with conducting a detailed probe into possible regulatory violations, including allegations of stock price manipulation, lack of disclosure of related-party transactions, and the use of offshore shell companies.

SEBI’s investigation involved examining Foreign Portfolio Investor (FPI) links, corporate structure opacity, and compliance with minimum public shareholding norms. The regulator submitted an interim report to the court, but critics argued that its actions lacked speed and transparency. The Supreme Court-appointed expert committee concluded that SEBI had not found conclusive evidence of manipulation but recommended tightening disclosure norms and beneficial ownership rules.

In response, SEBI began proposing reforms aimed at improving disclosure standards, monitoring high-leverage positions, and enhancing the tracking of offshore fund flows. While SEBI’s role was both questioned and defended, the incident highlighted the need for greater regulatory agility, proactive enforcement, and real-time monitoring capabilities. The case may become a turning point for strengthening India’s market oversight and improving investor protection mechanisms in line with global best practices.

India’s financial markets have undergone significant reforms in recent years to enhance efficiency, transparency, and investor protection. With increasing participation from retail and institutional investors, there has been a growing need to modernize market infrastructure. Regulatory bodies like SEBI and RBI have introduced technological innovations and policy changes to reduce systemic risks and improve settlement cycles. Two such major reforms are the T+1 settlement cycle and the ASBA (Application Supported by Blocked Amount) system. These changes aim to streamline trading and IPO application processes while boosting investor confidence and aligning India’s markets with global best practices.

• T+1 Settlement:

The T+1 settlement reform, introduced by SEBI, shortens the trade settlement cycle from T+2 (trade date plus two days) to T+1. Implemented in phases starting in February 2022, the reform was fully operational by January 2023. Under T+1, funds and securities are exchanged one day after the trade date, reducing counterparty risk, improving liquidity, and enhancing capital efficiency. This move has positioned India among the fastest-settling markets globally, boosting investor confidence, especially among retail traders. For institutional investors, it enhances fund rotation speed and portfolio rebalancing capabilities. However, T+1 also requires upgraded systems, real-time processing, and greater operational discipline from brokers, depositories, and custodians. Despite initial resistance from foreign investors due to time zone and currency conversion constraints, the transition has largely been smooth, marking a significant leap in market modernization and efficiency.

• ASBA (Application Supported by Blocked Amount):

ASBA is a payment mechanism introduced by SEBI in 2008 to improve the IPO application process. Under this system, investors apply for IPO shares without transferring funds upfront. Instead, the application amount is blocked in the applicant’s bank account and is debited only if the shares are allotted. This reform eliminates the need for refunds in case of non-allotment, reducing delays and errors. ASBA improves transparency, minimizes misuse of funds, and ensures fair allocation. It is mandatory for all retail investors applying through the book-building process. Over the years, it has been integrated with UPI for faster and more seamless transactions. By keeping the funds in the investor’s account till allotment, ASBA also allows interest earnings and greater control over personal finances. The system has significantly increased investor trust in the IPO process, streamlined operations for bankers and registrars, and modernized the primary market infrastructure in India.