PolicyRadar Weekly Briefing

India held its breath through two simultaneous elections and a cascade of institutional shocks. West Bengal recorded a staggering 92.8% turnout across 152 seats — the highest since Independence — while Tamil Nadu hit 84%, also a state record. Between the two polling days, Raghav Chadha and six AAP Rajya Sabha MPs defected to BJP in the biggest parliamentary crossover of the year, pushing BJP's upper house tally to 113. The RBI cancelled Paytm Payments Bank's licence — its most aggressive fintech enforcement action yet — while MPC minutes revealed unanimous concern over the Iran war's second-round economic effects. Diplomatically, Trump shared a post calling India a "hellhole," New Zealand signed a historic FTA, and the Strait of Hormuz remained closed as peace talks stalled. On the Pahalgam attack anniversary, PM Modi declared India will "never bow to any form of terror."

The Reserve Bank of India cancelled Paytm Payments Bank's banking licence on April 24 — the most significant regulatory action against a fintech company in India's history. The board of Paytm Payments Bank (PPBL) approved the winding-up of PPBL, and Paytm shares fell 8%. The same week, MPC minutes showed all members voted unanimously for a status quo on rates, with every communication — from the Governor's speech at Princeton to the RBI Bulletin — citing the West Asia conflict as the primary macroeconomic risk. The Bulletin flagged "early signs of deceleration" in select economic indicators.

Fintech & Digital Payments

The Paytm cancellation sends an unambiguous signal: the RBI will not hesitate to revoke licences when compliance concerns persist. MobiKwik's shares rose on the same day after receiving NBFC approval — the market is already repricing around a stricter regulatory regime. The RBI also released draft PPI rules covering capital requirements, wallet limits, and escrow norms, suggesting a broader tightening of digital payments oversight.

Monetary Policy & Inflation

The MPC's unanimous hold reflects a central bank trapped between conflicting signals. The Iran war is driving supply-side inflation through energy and fertiliser prices — the fertiliser subsidy bill is expected to rise 20% in FY27. But the Bulletin's "early signs of deceleration" warning suggests growth is softening. Governor Malhotra's "watchful" stance at Princeton was diplomatic language for: we have no room to move in either direction.

External Balance

Forex reserves jumped $2.36 billion to $703.3 billion — a positive signal amid the war. But the rupee weakened after the RBI partially rolled back forex derivative curbs, and Goldman Sachs hiked its oil price outlook as the Hormuz blockade continued. Engineering exports to the UAE crashed 66.8% and to Saudi Arabia 45% in March. Core sector output contracted 0.4% — the worst in 19 months and the first hard industrial data confirming the war's impact on production.

AI & Banking Risk

FM Sitharaman held an unprecedented meeting with bank heads on AI risks, specifically citing concerns over Anthropic's Mythos model. A panel under SBI chief C.S. Setty was formed to assess Mythos-related risks. The RBI's fintech crackdown and the FM's AI risk meetings running in parallel signal both institutions moving into defensive postures on technology-driven threats.

The RBI's draft PPI rules are open for comment — the final version will reshape the operating framework for every digital wallet in India. The Setty panel's findings on AI risks will determine whether banks face new model governance requirements. And the Russia oil waiver still expires May 16 with no renewal in sight.

The RBI is simultaneously fighting a fintech compliance crisis, a war-driven inflation threat, and an emerging AI risk to banking — all while holding rates steady and hoping the external environment doesn't get worse.

1. Bengal and Tamil Nadu Vote: Record Turnouts Reshape the Electoral Map

West Bengal's Phase 1 across 152 seats recorded 92.88% turnout — but the number needs context. The Election Commission's Special Identification Revision (SIR) removed lakhs of voters from the rolls before polling, with inadequate redressal mechanisms. Scroll.in reported that entire families found themselves deleted without explanation. The Supreme Court declined direct relief to excluded poll duty officers, directing them instead to appellate tribunals. A separate Calcutta HC order stayed an ECI memo that had branded 800 individuals as "troublemakers." In Odisha, 9.8 lakh voter deletions prompted the CEO to direct officers to verify before removing names. Against this backdrop, the record turnout may partly reflect a shrunken denominator, not just higher civic participation. Bengal's campaign was dominated by the Modi-Mamata showdown, with 294 candidates facing serious criminal charges. Phase 2 (142 seats) is next. In Tamil Nadu, 84.69% turnout across all 234 constituencies was also a state record, with a three-way DMK-AIADMK-TVK contest. [Politics]

2. AAP's Rajya Sabha Earthquake: Chadha and Six MPs Defect to BJP

Raghav Chadha led six other AAP Rajya Sabha MPs into BJP, raising the ruling party's upper house tally to 113 in the 245-member chamber. AAP petitioned the Rajya Sabha Chairman to disqualify all seven, calling the move unconstitutional. Chadha released a video citing a "toxic work environment." An FIR was filed against AAP leaders in Mumbai for protesting the merger. The defection compounds Kejriwal's crisis: he is already boycotting his excise case proceedings, and the Delhi HC rejected his recusal plea against Justice Sharma the same week. [Politics]

3. Trump on India: "hellhole" — Diplomatic Crisis in a Tweet

Trump shared a post calling India a "hellhole," prompting the MEA to describe the remarks as "inappropriate" and "in poor taste." Congress seized on the moment, calling Modi a "weak PM" who failed to protect national dignity. The incident landed in the same week as reported progress on an India-US interim trade deal — creating an awkward contradiction between the diplomatic and political tracks. [Foreign]

4. Trade Diversification Accelerates: NZ FTA Signed, Korea Pact Under Review

India and New Zealand inked an FTA — the first India has concluded with a developed Western economy in years. NZ Trade Minister Todd McClay called it a "once-in-a-generation deal" with a $20 billion investment pipeline. Separately, India and South Korea agreed to review their existing economic pact amid a widening trade deficit. The trade diversification push faces a headwind: the US announced a preliminary 123% anti-dumping duty on Indian solar cells, threatening a sector the government has been aggressively promoting. [Trade]

5. Ashok Lahiri Appointed NITI Aayog Vice-Chairman

Former Chief Economic Advisor Ashok Lahiri was appointed NITI Aayog Vice-Chairman alongside four new members including scientist Gobardhan Das. The restructuring places a seasoned economist at the helm at a moment when the war economy demands coordinated institutional responses. [Governance]

92.8% — Voter turnout in West Bengal Phase 1; record since Independence, though lakhs were removed from rolls before polling under the Special Identification Revision

123% — Preliminary US anti-dumping duty on Indian solar cells, threatening a sector central to India's energy transition

113 — BJP's Rajya Sabha tally after seven AAP MPs crossed over

-0.4% — Core sector output in March, worst in 19 months; first hard data confirming the war's industrial impact

Rs 20 / Rs 100 — Per-litre losses for fuel retailers on petrol and diesel respectively; government denies any price hike plans

66.8% — Drop in engineering exports to the UAE in March; 45% to Saudi Arabia

73 — Opposition MPs who signed a fresh notice seeking removal of CEC Gyanesh Kumar, citing nine charges of misbehaviour

Finance generated 985 articles this week across an unusually broad front. The Paytm licence cancellation alone would have dominated — but it arrived alongside MPC minutes warning of war-driven inflation, Goldman hiking its oil price outlook, and the Finance Minister convening an emergency meeting on AI threats to banking. Bihar's request for a Rs 12,000 crore RBI loan to cover delayed social security pensions is a reminder that the war economy's fiscal stress is cascading to state governments. This sector is operating on multiple simultaneous crisis fronts.

West Bengal Phase 2 — 142 seats — Central forces staying seven extra days. The Bhangar bomb case under NIA. After 93% turnout in Phase 1, the pressure is on the Election Commission to maintain security and credibility in the remaining seats.

Russia oil waiver expires May 16 — We flagged this last edition. The diplomatic back-channel has still not produced results. If the US doesn't renew, India loses discounted Russian crude while Hormuz remains closed — a double supply shock.

Setty panel on AI banking risks — The SBI chief-led panel assessing Mythos-related risks will set the tone for how aggressively India regulates AI in financial services. Early findings could influence upcoming RBI circulars.

AAP disqualification petition — The Rajya Sabha Chairman's response to AAP's petition against the seven defecting MPs will test the anti-defection law in a high-profile, politically charged scenario.

Iran's Hormuz proposal — and India's shifting stance — Iran shared a new proposal to reopen the Strait while delaying nuclear talks. Trump cancelled the US delegation's Pakistan visit. Meanwhile, Rajnath Singh said India "may play a role in bringing peace" — the first explicit signal from a senior minister that India could move from the sidelines into mediation. Whether a counter-proposal materialises next week will determine whether oil markets get relief or Goldman's forecast plays out.

Opposition's CEC removal motion — 73 MPs signed a notice seeking Gyanesh Kumar's removal, citing nine charges of "proven misbehaviour." Filed during election week, this is the most serious institutional challenge to the Election Commission's credibility since the CEC appointment controversy.

Post-election fuel price hike? — Fuel retailers are losing Rs 20/litre on petrol and Rs 100/litre on diesel. The Oil Ministry has denied any price hike plans — but multiple sources tie the denial explicitly to the election calendar. Once Bengal and Tamil Nadu results are in, watch for a revision.