The Reserve Bank of India unexpectedly left its main interest rate unchanged on Wednesday, citing global financial markets volatility, while it cut its growth forecast, in the first official assessment of a government decision to scrap most of the cash in circulation. The central bank’s monetary policy committee, headed by Gov. Urjit Patel, left the main interest rate unchanged at 6.25%. Four of five economists interviewed by The Wall Street Journal last week said they expected the RBI to cut its main rate by at least 0.25 percentage point.

A new strain of trickle-down economics has been spawned by the decision, on November 8th, to withdraw the bulk of India’s banknotes by the end of this year, The Economist reported. As holders of now-useless 500-and 1,000-rupee ($15) notes rushed to deposit them or part-exchange them for new notes, an e-commerce site offered helpers, at 90 rupees an hour, to queue outside banks in order to save the well-off the bother. Elsewhere, a chronic shortage of banknotes in a cash-dominated economy has left most trades depressed.

Effective implementation of Insolvency and Bankruptcy Code can potentially release about Rs 25,000 crore of capital over the next 4-5 years currently locked in bad loans, according to a report. "If implemented successfully, the code will help India's banking sector catch up with or even exceed the recovery rates of 32 per cent and average time taken of 2.8 years in other emerging markets," said an Assocham-Crisil joint study. It said the capital released can be deployed for other productive lending which could help in credit expansion.

In one of the most audacious experiments in India’s modern history, Prime Minister Narendra Modi banned the two largest bills — of 500 rupees, or about $7.50, and 1,000 rupees — which account for about 86 percent of the currency in a country where 78 percent of financial transactions are done in cash. Under the plan, people are allowed to exchange the old bills for new ones of 500 and 2,000 rupees, but only at banks or post offices, where their exchanges will be monitored and anyone with a large amount of cash will have to explain its source.

It was billed as a powerful tool in the clean-up of bank balance sheets laden with bad loans, but has proved to be a bit of a dud. The strategic debt restructuring (SDR) initiative, which allowed creditors to convert debt into equity and take over the management of defaulting companies, could well end up in failure judging by the experience so far, said officials at three large banks, Deal Street Asia reported. In the 14 months since it has been introduced, banks have invoked the provisions of SDR in at least 21 cases. Of these, they have closed out only two.

Banks can confiscate security in case of loan default as President Pranab Mukherjee has given assent to a law aimed at faster recovery and resolution of bad debts, The Indian Express reported. The Enforcement of Security Interest and Recovery of Debts Laws and Miscellaneous Provisions (Amendment) Act, 2016, has received nod from the President and it has been notified, officials said today.

Raghuram Rajan, India’s outgoing central bank governor, said in his final monetary policy statement that he was “comfortable” with recent progress made in cleaning up India’s banking system, but urged banks and over-indebted industrialists to keep up the effort to resolve their bad debt problems, the Financial Times reported. His comments come amid speculation over who will take the helm of the Reserve Bank of India after Mr Rajan steps down next month.

India's Suzlon Energy Ltd hopes to exit a process of corporate debt restructuring by March 2017, its chairman said on Thursday, a turnaround for a company that four years ago reeled under heavy debt after an ill-advised overseas expansion, the Economic Times reported. Suzlon's purchase of German wind energy firm RePower, now renamed Senvion, for 1.4 billion euros ($1.56 billion) in 2007 proved a costly mistake after the 2008 global financial crisis dented demand for wind turbines.

After more than a year of gridlock, the upper house of India’s parliament approved a contentious overhaul of the country’s convoluted tax system, an important step in Prime Minister Narendra Modi’s campaign to modernize Asia’s No. 3 economy, The Wall Street Journal reported. Lawmakers voted Wednesday to replace India’s jumble of federal, state and interstate sales taxes with a nationwide goods-and-services tax, or GST. Parliament’s lower house, where Mr.

The head of a credit fund controlled by Indian billionaire Uday Kotak said the government’s push to rid banks of bad loans will outlast the departure of a central bank governor who battled the problem, Bloomberg News reported today. Reserve Bank of India Governor Raghuram Rajan, who set a deadline for Indian lenders to clean up their soured debt by March 2017, leaves office in early September. The banking industry’s gross bad-loan ratio jumped to a 13-year high of 7.6 percent at the end of March, underscoring a key challenge for the next central bank head.