State-owned reinsurer General Insurance Corporation of India (GIC Re) has amended its Marine Hull War Risk scheme, withdrawing cover in several high-risk global regions from early March.

In a notice issued on March 1, GIC Re said the changes took effect from 7 pm India time Sunday. The reinsurer will cease to provide Marine Hull War risk cover in the specified zones from 7 pm on March 3 (Tuesday).

The move comes amid elevated geopolitical tensions in parts of West Asia, the Black Sea region and the Red Sea, where shipping routes have faced heightened security risks in recent years.

Ship owners operating international routes will now have to review their insurance arrangements carefully to ensure continued protection beyond March 3.

The revised High Risk Areas (HRA) include Pakistan waters, the Persian or Arabian Gulf and adjacent waters and ports, including the Gulf of Oman, Iran and all other countries under sanctions by the UN, UK, US or EU; and the Sea of Azov and parts of the Black Sea defined by specific geographical coordinates. The list also covers waters of Ukraine, Russia and Belarus, as well as parts of the Indian Ocean, Gulf of Aden and Southern Red Sea.

GIC Re has made it clear that Breach of Warranty cover will not be available in respect of any of these seven zones, therefore, if a vessel passes through, calls at a port, or is dry-docked in any of the listed areas, it will be treated as a breach of warranty under the policy.
In effect, ship owners and operators will not have war risk protection from GIC Re for operations in these regions after the cut-off date.Marine Hull War Risk insurance typically covers physical damage to ships arising from war, civil war, hostilities, terrorism, piracy and related perils. The withdrawal of cover in these areas could raise insurance costs for ship owners operating in or near conflict-prone waters, as they may need to seek alternate cover at higher premiums

In 2022, GIC had amended the policy clause, to include that while standard notice period is seven days, if the situation involves any of the five powers – China, France, Russia, the United Kingdom or the United States – the notice period reduces to 72 hours. Since the United States is involved in the current situation, the shorter 72-hour clause applies. The notice affects only War Risks cover, and amendments become binding automatically if no objection is raised.

GIC Re’s move comes as the Directorate General of Shipping has issued a fresh advisory to Indian-flag vessels amid rising tensions around Iran and the Strait of Hormuz. Ship owners have been asked to conduct risk assessments, security drills, test alert systems, and follow strict reporting protocols during transit.

Paris: Dubai‘s and Abu Dhabi‘s stock exchanges will be closed until Tuesday due to the ongoing conflict in the region, the UAE’s financial regulatory authority announced Sunday.

The Emirates have been hit by Iranian strikes since Saturday in response to the joint Israeli-US attacks.

Future steps to reduce excessive speculation in equity derivatives would be guided by careful data analysis and a balanced, mature approach, Tuhin Kanta Pandey, chairperson, Securities and Exchange Board of India (Sebi), tells Reena Zachariah and Nishanth Vasudevan.

Pandey, who completes his first year as the head of India’s capital markets regulator, said the recent measures by Sebi were not aimed at the entire derivatives market but at pockets of speculation in the segment. The Sebi chief also spoke on settlement regulations and promoter norms, among other issues. Edited excerpts:

You’ve said your goal is to keep policies market-friendly as the ecosystem evolves. Are you satisfied with the progress so far?

Broadly, yes. Within Sebi, there is a growing emphasis on what I would call optimum regulation. We recognise that regulation has costs and can create unintended consequences. Where multiple options achieve the same objective, we should choose the simpler one with lower compliance costs. Over time, rules tend to accumulate, increasing compliance burdens for both regulated entities and the regulator. Our comprehensive regulatory review aims to rationalise and streamline this. Ultimately, investor protection and market development must go together.

Over the past two years, Sebi has taken several steps to curb excessive speculation in equity derivatives. Is there a measure or a level that you are targeting at which you would consider that the objective has been achieved? Are you following a number-driven or principle-driven approach?
We are not following a number-driven approach. Our approach is principle-driven. The focus has been on assessing the impact of the measures we’ve introduced. Often, finfluencers highlight only the winners, creating an exaggerated perception of returns. By placing collective data in the public domain, we aimed to present a realistic view of outcomes in the market. Transparency itself is a powerful form of investor education. We also introduced safeguards such as tighter margin norms, especially on expiry days, to curb lottery-like speculation. Now, we need to assess the impact of these steps through data, rather than reacting month to month. We must recognise that there are also genuine, informed participants in the derivatives market. The objective is not to shut down the market, but to ensure it operates responsibly. Future steps, if any, will be guided by careful data analysis and a balanced, mature approach.

Some market participants warn that India should avoid the path taken by countries such as China and South Korea, where curbs on derivatives speculation have led to a loss of liquidity that has been hard to restore. Has Sebi factored in the risk of liquidity leaving the market as a result of its recent measures?

It is too sweeping to treat the entire F&O segment as one block. Derivatives play a vital role in price discovery, hedging, and risk management, which is why they exist globally. Our concerns were not about the broader derivatives market, but about short-tenor index options, particularly weekly and expiry-day contracts, where speculative activity had become concentrated. If there is a problem in one area, the response should address that area, not disrupt the entire system. There are multiple viewpoints on this – some argue weekly options should continue unchanged, others warn about liquidity risks, and some suggest calibrated measures such as eligibility criteria. The objective is to address concentrated risks while preserving the overall role and liquidity of the derivatives market. So there is, in my opinion, a need even for the media not to really call it F&O, and rather to coin it as ‘O’ on the expiry day and weekly.
So, just to be clear, your concern about derivatives is the pocket of speculation rather than the broader segment.
Yes. You can’t start badgering your body just because you have a boil on your nose. There are several views, like it should continue or let’s get out of weekly, or can we have something in between. There are people who are talking about what kind of criteria could be made for access, for example. Collectively, we should be comfortable that this is the right approach to take. Has Sebi discussed the topic of access (eligibility to trade) in F&O?
No, I’m not saying that. All I am saying is these are already different points of view. F&O has been one of the most hotly debated subjects. All I am saying is please don’t call it F&O, and if you have a problem, call it ‘O’ on the expiry date.

There are also some concerns over growing speculation through margin trading facility (MTF) exposures. Is Sebi looking into this?
We continuously monitor the situation, but MTF already operates within defined guardrails. There are net worth requirements and leverage limits. We have taken the view that re-pledging of client securities for additional leverage should not lead to over-leveraging. At this stage, we believe MTF should be allowed to function within these guardrails while keeping risks under watch. Liquidity in the cash market is important, and we are examining ways to deepen it. For instance, a working group is reviewing the short-selling and SLBM framework to understand barriers and encourage broader participation. Derivatives and cash markets must function together. Derivatives, particularly longer-tenor contracts, play an essential role in price discovery and hedging. The key is to ensure appropriate position limits and risk controls so that excessive speculation is contained and markets remain stable.

Sebi is reviewing its settlement regulations. While settlements have increased over time, litigation and case backlogs remain high. Are further simplifications being considered?
Yes. Greater clarity and proportionality are needed in settlement regulations. Clearer rules reduce ambiguity, limit multiple interpretations, and help bring down disputes and litigation. We do not want the system to become a ‘litigation paradise’. Simpler, clearer rules ultimately strengthen market confidence.

How is Sebi rethinking the concept of promoter, particularly, under ICDR (Issue of Capital and Disclosure Requirements), after moving away from the ‘once a promoter, always a promoter’ approach?
The review is not limited to ICDR. We are also examining LODR (Listing Obligations and Disclosure Requirements). A working group is gathering feedback, and the proposals will go through multiple committees before consultation papers are issued.

There are concerns that some companies report profits just before an IPO and then slip back into losses, raising allegations of window-dressing. How does Sebi view this?

It is important not to generalise from a few instances. One egregious case does not indicate a systemic problem. The key is to distinguish between isolated misconduct and a broader pattern. Rushing to introduce additional rules in response to individual cases risks overregulation and could burden compliant companies without solving the underlying issue.

Sebi is reportedly issuing notices to lawyers and tax consultants for alleged confidentiality breaches during M&A deals. Do you foresee jurisdictional or enforcement challenges, given that they are also regulated by other professional bodies?
If the investigation finds evidence of a violation, the matter proceeds to a quasi-judicial process within Sebi. A show-cause notice is issued, and the concerned parties are given an opportunity to respond and be heard before any order is passed. The outcome may confirm, modify, or set aside the investigation’s findings. These orders are subject to appeal before the Securities Appellate Tribunal.

Sebi has issued a sweeping recategorisation of mutual fund schemes, reshaping how equity, debt, and hybrid funds are structured and managed. The overhaul, which replaces the framework in place since 2017, introduces new categories, retires some existing ones, and changes investment rules across schemes. Here’s a look at the implications for fund houses and investors.

What are the key changes made in the recategorisation?

The recategorisation introduces several structural changes across equity, debt, and hybrid schemes. Sebi has created a new category of lifecycle funds and discontinued solution-oriented schemes such as retirement and children’s funds. Fund houses are now allowed to offer both value, and contra funds, subject to a 50% portfolio overlap cap, with similar limits also applied to sectoral and thematic funds.
The rules also expand the scope of residual allocations in equity and hybrid schemes to include assets such as gold and silver instruments and InvITs. In addition, arbitrage fund debt exposure is now restricted to short-term government securities and repo in government bonds.

How will this benefit investors?
The changes aim to make mutual funds simpler to understand and compare. Standardised categories and naming clarify what each scheme does, lifecycle funds introduce a goal-based option, and tighter overlap rules with new disclosures improve transparency, while phasing out older schemes reduces clutter.

What is this new category-Life Cycle funds?
Life Cycle Funds are open-ended, target-date funds that follow a glide-path strategy, investing across equity, debt, commodity derivatives, InvITs, and precious metals ETFs.
These funds can be launched with a tenure ranging from 5 to 30 years, in multiples of five years. They follow prescribed asset-allocation bands based on years to maturity and carry graded exit loads–3% if redeemed within one year of investment, 2% within two years, and 1% within three years. The structure gradually reduces equity exposure as the maturity date approaches, helping align the portfolio with the investor’s goal timeline.
What happens to existing solution-oriented schemes like children’s gift fund and retirement funds?
The solution-oriented schemes category stands discontinued with immediate effect. Existing schemes under this category are required to stop accepting subscriptions with immediate effect and shall be merged with another scheme having a similar asset allocation and risk profile.

Can mutual funds now offer both value and contra funds? What has changed for sectoral and thematic funds?
Earlier, mutual funds could offer either a value fund or a contra fund. Under the new regulations, they can offer both, provided the portfolio overlap between the two does not exceed 50%.

Similarly, for sectoral and thematic equity schemes, mutual funds must ensure that portfolio overlap with other equity schemes in the same category-or across other equity categories (except large-cap schemes)-does not exceed 50%.

CAN EQUITY MUTUAL FUND SCHEMES ALSO INVEST IN GOLD AND SILVER NOW?
Yes. Under the new rules, equity schemes can deploy their residual allocation in commodity derivatives, money market and other liquid instruments, gold and silver instruments, and InvITs, within regulatory limits. For example, a largecap fund must invest at least 80% in large-cap stocks, while the remaining 20% can now also include gold and silver ETFs.

WHAT ARE THE LIKELY IMPLICATIONS FOR ARBITRAGE FUNDS?
Arbitrage funds must now restrict their debt exposure to government securities with a maturity of less than one year and repo in government bonds. Arbitrage funds typically hold around 30% in fixed-income securities. This, along with the increase in securities transaction tax (STT) from April 1, is likely to lower arbitrage fund returns by about 50 basis points.

Reserve Bank of India governor Sanjay Malhotra told Sangita Mehta and Sruthijith KK in an interview that India’s Goldilocks phase can be sustained as macroeconomic fundamentals have strengthened over the decades while cautioning that global uncertainty, climate risk and technology disruptions continue to pose challenges. Policy rates are likely to stay at current levels or even go lower for an extended period, he said, provided there are no shocks. Malhotra also touched upon the economy, inflation, electronic payments, non-bank lenders, artificial intelligence and the insolvency code among other matters. The interview took place before the West Asian conflict began. Edited excerpts:

Given the change in tariff assumptions and the latest inflation and GDP data, have you revised your growth and inflation outlook?

In the recent MPC (monetary policy committee) statement, we mentioned that in view of the forthcoming revision in the base year and methodology, we will be giving the full-year projections of growth and inflation in the next policy. We have not yet finalised numbers for the next year. We are still analysing the impact of the changes. Our analysis will also account for the impact of changes in tariffs.

In the last two policies you have maintained that India is in the Goldilocks phase, but given the nature of economic cycles, how long do you expect it to last?

Broadly, over the years, macroeconomic fundamentals of our country have improved-from what used to be a sub-6% growth in the 80s and 90s, to more than 6% in the first decade of this century, and 6.6% in the last decade, and now about 7.3% during FY24-FY26, as per the new series. The momentum of growth is actually accelerating. Similarly, if you look at inflation, it used to be very high in the 80s and 90s. In the nine years preceding inflation targeting, the average headline inflation was 6.9%. In the subsequent nine years, however, it was 4.9%. If you look at recent trends, it is even lower. Health of corporates, banks, governments, private sector are all much better. That gives me confidence that in the short, medium, and long run, our macroeconomic fundamentals will continue to remain healthy and robust.

What could be the downside risks?

The downside risks are geopolitical tensions, geoeconomic uncertainties, and climate-related events. A large part of our population still relies on a monsoon-dependent agrarian economy. And then, technology disruptions.

Experts are interpreting MPC as ending the easing cycle. Is this as good as it gets for borrowers?

We expect the policy rate to be around this level or lower for a long time, barring any shocks.

Currently, inflation is looking benign. We have been in this stage for some time. So, 3-3.5% is the underlying inflation number, as per the old series, if you subtract precious metals. Going forward too, the underlying inflation is expected to remain low.
Now, what are the risks? It will depend on growth-inflation dynamics as they play out. We are still living in very uncertain times. We will assess it meeting by meeting based on incoming data.

While growth numbers are good, foreign and private investments are not as strong. What explains this?

The Indian economy continues to be very resilient. The GDP growth rate for the first half of this financial year was 7.6%, which is also the estimate for the full year, in terms of the new series. The strong growth rate is not only on the consumption side, which grew by 7.8%, but also on the fixed-investment side that expanded by 7.1%. On the supply side, manufacturing and services both have contributed. These numbers suggest that growth is broad-based.

Investment has picked up, including private investment. Gross foreign direct investment (FDI) has been robust. Last year it grew about 13%, and this year as well, growth of gross FDI is good. It is only net FDI which has not been growing as much, not because gross FDI is not increasing, but because repatriations and overseas direct investments have increased in the last two years. This is organic and healthy.

Our macroeconomic fundamentals are robust. There are investment opportunities abroad; therefore, increase in overseas direct investments is to be expected. The repatriations also tend to occur as per investment cycles.

Would you say the same for foreign institutional investors (FIIs)? Is India being hurt by the anti-AI trade?

FIIs have relatively shorter investment horizons. Relative valuations in our country were higher to some extent, though there has been some correction. Moreover, investments moved towards countries with AI opportunities. It has nothing to do with our macroeconomic fundamentals. India too is investing in all five layers of AI-energy, chips, infrastructure, LLMs and applications-and AI adoption is also rising. India will certainly be part of this AI story as evident from the AI summit held recently.

The weighted average call rate (WACR) is below the policy rate. Why?

Generally, the effort is to have the WACR closely aligned to the policy rate. Transmission to call rates have been strong. It is possible, at times, that the WACR may not align exactly with the policy rate. With large surplus liquidity in the system, it has recently moved below the policy rate, but it continues to remain within the corridor.

Forex reserves have touched an all-time high. To what extent can they cover external liabilities?

Our macroeconomic fundamentals remain strong. The external sector is robust. Going forward, the current account remains very manageable. Our forex reserves can cover current account deficits over decades. Several FTAs have been signed and some are in the pipeline. That will help the current account and also the capital account by bringing investments into India. Over $250 billion of investment pledges have been made during the AI summit. Earlier, $67.5 billion was committed by tech giants. The government has liberalised the insurance sector to allow 100% FDI.

Currency in circulation has crossed ₹40lakh crore despite a surge in UPI transactions. With the idea of digitisation, shouldn’t it come down over a period of time. What explains this?

We should look at it not in absolute terms but as a percentage of GDP, which is about 11-11.5%, slightly lower than earlier. As an economy grows, demand for cash too will increase. At the same time, due to increasing usage of digital payments including UPI, cash as a percentage of GDP has decreased. These trends play out gradually over the long term.

UPI volumes are rising but the budgetary allocation is ₹2,000 crore. How will the model be sustained?

We are committed to providing UPI and other payment services to the public. Some of them like UPI are free to the users, because they are for public good. I do not think funds will be a constraint in its proliferation and usage.

After a period of depreciation, do you expect the rupee to remain steady at current levels?

The level of the rupee is determined by demand and supply of foreign exchange. As per historical trends, the rupee has generally strengthened in the last quarter of a financial year. I would also like to emphasise that we do not target any levels. We only aim to curb any excessive volatility either way.

Recurring payments on international platforms using credit cards have become complicated. Is this being addressed?

There is a constant endeavour to make cross-border payments more accessible. We are linking UPI with fast payment systems of other countries.

On mis-selling of products, who determines suitability? Will there be coordination with the IRDAI?

The responsibility of determining suitability rests with the banks. We have a robust grievance redressal mechanism-first within banks, then the internal ombudsman, and then the RBI ombudsman. This is sufficient to address any interpretational issue.

RBI penalties are considered too low to dissuade non-compliance. Any plan to increase them?

The emphasis is not so much on penalising banks, but to improve compliance and risk culture. Over the years, performance has improved, though there is scope for improvement. Our objective is to build a strong, resilient banking system. Monetary penalties are only one of the tools. We also use discussions, moral persuasion, directions, etc.

Are recurring branch-level frauds a concern?

There is no systemic risk. Besides, we already have a robust regulatory and supervisory system. If there is any fraud, necessary corrective, deterrent and penal action is taken.

In the last circular, the RBI said the Tata Sons application for surrendering its upper-layer NBFC classification is under consideration and the deadline has passed. Where do we stand?

The matter is under examination.

Will there be a revised list for upper-layer NBFCs?

We do it every year. We will continue with the process.

Is concentration of investments among a few large business groups a concern?

India needs all its economic constituents to contribute. Larger entities may be able to contribute more. From the banking perspective, we have large exposure limits. Banks also have sectoral exposure limits. We use macro-prudential tools where needed. There is no systemic risk.

How is AI going to transform banking? What are the risks it can pose to banks?

Banks are already using it in some way, largely in KYC/AML (know your customer/anti-money laundering), fraud detection, customer support, and credit appraisals, etc. While there are benefits of AI adoption, there are risks as well.

Banks are already investing in cyber security to address the risks. They will have to keep up their vigil on improving cyber security. We have been continuously emphasising on this.

What is the frontier of innovation in the regulatory sandbox?

We are working on easing KYC for NRI (non-resident Indian) customers, improving AML, KYC, retail CBDC (Central Bank Digital Currency), etc. We also interact regularly with fintechs to understand the evolving landscape.

In order to expand the credit-GDP ratio, do we need more banks?

There is certainly scope for higher credit penetration and it requires a very diverse set of financial institutions. We have a very good financial intermediation system. Currently, we have a mix of banks and NBFCs (non-bank finance companies). We have about 2,000 banks-rural, urban, cooperative, commercial-and over 9,000 NBFCs. We also have other market-based instruments such as corporate bonds, etc., to meet credit needs.

At the same time, we continue to grant licences. We are open to more banks in the system. We have granted in-principle approval for one small finance bank to convert to a universal bank and one payments bank to become a small finance bank.

The Insolvency and Bankruptcy Code (IBC) was once viewed as a panacea for banks’ bad loan problems. A decade later, that belief is fading because of delays. How can it be resolved to improve recovery?

IBC is a major structural reform. It has improved recoveries and credit culture. Improvements have been made and will continue. Lenders must initiate action early and be proactively involved in the resolution process to maximise value.

Is governance in PSU banks a concern?

No. The regulatory and supervisory frameworks are robust. Regulations are largely similar for public and private sector banks.

Does India need bigger banks? Will scaling come from the public or private sector?

We are ownership-neutral. Scaling up can happen across any sector-public or private.

Has there been any change in stance on allowing higher stakes in banks?

No. There is no change in our stance. Higher shareholding is allowed but must be reduced within 15 years. Foreign banks can even have higher shareholding up to 100%. Voting rights, however, are capped at 26%. Recent investments reflect strong fundamentals of the banks and belief in the long-term growth of the country.

Deposit growth is lagging credit growth. Is this a risk to the economy?

Banks have the ability to create deposits. Once a loan is given leading to creation of credit, it simultaneously creates an equivalent amount of deposit.

Growth rate in deposits is lower than credit growth rate because of the larger deposit base of about ₹250 lakh crore vis-a-vis credit of about ₹205 lakh crore, but in absolute terms, both deposit and credit have grown by about ₹25 lakh crore in the last one year. It is not a matter of concern.

Do you support calls for equal tax treatment of banks and mutual funds?

Taxation is in the domain of the government. Diversification of investments is a healthy trend. While views may differ on relative tax treatment, in many jurisdictions, capital gains on fixed-income instruments are taxed at rates higher than those applicable to equities.

Should better-rated NBFCs be allowed to raise deposits directly for better transmission of policy rates?

Fundamentally, they are very different from banks. We do not see a case for allowing NBFCs to access deposits like banks do. We also do not encourage NBFCs to have public deposits. The regulatory treatment is different for them. They do not have deposit insurance or access to central bank liquidity facilities.

Having said that, if I understood you correctly, your question is more about lowering the cost of borrowing. In this context, we have already permitted co-lending, for banks and NBFCs to get together so that they can leverage their individual strengths to lower credit costs for borrowers at the last mile. Banks have access to low-cost deposits and NBFCs have the last mile reach.

Are there any proposals pending before you for an NBFC to convert into a bank?

We don’t have any applications from NBFCs.

Why are NBFCs not too enthusiastic about becoming banks?

The reason is that to a large extent an NBFC can do what a bank can undertake-which is financial intermediation activities-except raising demand deposits as they can raise funds through other means. On the other hand, banks are more tightly regulated than NBFCs. That could be one reason.

In your first year, you undertook several sweeping reforms and haven’t hesitated to take bold measures. Can we expect this momentum to continue?

We need to continuously improve; there is always scope for improvement. I tell my colleagues that we have to strive for perfection. While we have taken a number of measures, it is a journey, there is room for more improvement.

Is there any area of concern that is occupying the mind right now?

As someone has famously said, and I will quote, “The job of the central bank is to worry.” We have to continuously be alert to all those risks, whether it is geopolitics, climate, technology, cyber security.

You’ve completed one year as RBI governor, what is the unfinished agenda?

It is a continuous effort to strengthen the banking system, promote ease of doing business, improve financial inclusion and enhance customer centricity. At the same time, maintaining financial and price stability continues to be the guiding principle. Other areas which we are working on include increasing the safety and security of payment systems and enhancing convenience in forex management.