Key Developments Reshaping Karnataka’s Banking Landscape in 2025

Management Restructuring in Karnataka Bank

From October 13, 2025, the Bank underwent changes majorly in the senior department level. Five deputy general managers have now become general managers, seven assistant general managers have become deputy general managers and three general managers have changed in their responsibilities by function.

This shows a clear effort to put new perspectives in departments which are seen to be important in this space, such as risk, credit and legal and recovery. Institutional loyalty is respected while providing promotions. Better zonal command can exist as there are reassignments in different states. Better asset quality management can be reflected which is a national priority.

RBI Master Directions and other regulations (September Circulars)

• Master Direction on Regulation of Payment Aggregators (PA), 2025

Karnataka is prominent in Fintech; payment aggregators are required to register with RBI by December 2025. Unregistered entities face shutdown by February 2026. This could disrupt informal digital payment setups unless compliance is ensured.

• Lending Against Gold & Silver Collateral, 1st Amendment, 2025

Karnataka is greatly deals with gold-backed lending. This amendment would affect jewelers, artisans and small manufacturers, mainly because this Amendment restricts speculation lending for gold or silver purchases.

• Directions for Settlement of Deceased Claims

There are a lot of co-operative and rural banks that still are prevalently in use in Karnataka, a lot of accounts have nominee detail problems (usually, due to literacy issues, or even lack of awareness). The new directions simplify the process as banks can now settle deceased claims without insisting on legal documents for accounts where balance is up to 15 lakhs for commercial banks and up to 5 lakhs for co-operative banks, making it more customer centric.

RBI keeps a neutral stance for the repo rate

Repo rate unchanged, would indicate that inflation is under reasonable control and that the economy is growing steadily enough, not requiring any urgent tightening or loosening of monetary policy.

Finance Minister urges rural banks to increase agro-credit disbursement

This is in reference to the Karnataka Grameen Bank emphasizing urgent need for rural and regional banks to meet demands for “new rural India”. Sitharaman urged KaGB and other rural banks to increase their share in agricultural lending, not only for traditional crop loans but also to support emerging segments such as agritech, food processing, dairy, fisheries, and allied sectors.

News in 2025

The Karnataka Micro Loan and Small Loan (Prevention of Coercive Actions) Act, 2025.

Enacted in February 2025 by the Government of Karnataka, the primary goal is to regulate unlicensed microfinance institutions (MFIs) and digital lending apps. The main reason of enactment was the large number of incidents that had been reported from across the state of harassment by those who borrowed from these institutions. MFIs were accused of lending without going through the borrowers’ capacity to repay, thus trapping them in a loop debt cycle, which pushes exorbitant interest rates around 21% and 29%.

RBI (Nomination Facility in Deposit Accounts, Safe Deposit Lockers and Articles kept in Safe Custody with the Banks) Directions, 2025.

These directions will come into force from 1-11-2025. It puts forth strict requirements, mainly during the account opening time. Banks must offer the nomination facility when opening accounts or lockers. Customers can decline to nominate anyone, but banks must record this in writing or electronically. Banks must process registration, cancellation, or change of nomination within 3 working days. If a nominee dies before receiving the deposit or asset, the nomination becomes void. The claim will then be processed under the RBI (Settlement of Claims in respect of Deceased Customers of Banks) Directions, 2025. All previous RBI circulars on nomination are repealed. Actions already taken remain valid if they complied with earlier applicable rules.