1. Regulatory Updates
1.1. India
1.1.1. RBI amends the Master Direction – Know Your Customer (KYC) Direction, 2016
The Reserve Bank of India (“RBI”) has updated the RBI Know-Your-Customer (“KYC”) guidelines to strengthen the customer verification system. Under this, banks and Non-Banking Financial Companies (“NBFCs”) have been asked to adopt a risk-based approach regarding KYC updates from time to time. RBI issued these guidelines after the government’s new instructions related to the Anti-Money Laundering Rules, Unlawful Activities (Prevention) Act (UAPA) and Weapons of Mass Destruction Act were put in place. These directions are intended to strengthen the financial system in order to protect the information of users and to prevent illegal activities. The revised KYC guidelines comply not only with domestic regulations but also with recommendations made by the Financial Action Task Force (FATF) to combat financing for terrorist activities and money laundering. RBI
1.1.2. RBI issues amended scale-based regulations for NBFCs
RBI, after careful consideration, found it essential in the interest of the public to regulate the financial system of the country to prevent such activities of NBFCs from being carried out in a way which is disadvantageous to the interest of investors, depositors as well as of such NBFCs. RBI, in exercise of the powers conferred to it under the RBI Act, 1934 and the Factoring Regulation Act, 2011, has issued a master direction on RBI (NBFC- Scale Based Regulation), 2023, which supersedes two master directions issued by RBI in the past namely, NBFC–Non-Systemically Important Non-Deposit taking Directions, 2016 and NBFC–Systemically Important Non-Deposit taking Company and Deposit taking Company Directions, 2016. RBI
1.1.3. Monetary Penalties
RBI imposes monetary penalties on the following financial institutions:
| Name of the financial institution | Penalty Imposed | Reason |
| Vadnagar Nagarik Sahakari Bank Ltd., Vadnagar, Gujarat | INR 2,00,000 (Indian Rupees Two Lakh Only) | Contravention of directions issued by RBI on ‘Loans and Advances to directors, relatives and firms/concerns in which they are interested’ read with Loans and Advances to Directors etc. – Directors as surety/guarantors – Clarification, and Co-operative Banks Interest Rate on Deposits. |
| People’s Co-operative Bank Ltd., Dholka, Gujarat | INR 3,00,000 (Indian Rupees Three Lakh Only) | Contravention of/non-compliance with directions issued by RBI on ‘Loans and advances to directors, relatives and firms/concerns in which they are interested’ and ‘Co-operative Banks Interest Rate on Deposits’. |
| Chhapi Nagarik Sahakari Bank Ltd., Banaskantha, Gujarat | INR 1,00,000 (Indian Rupees One Lakh Fifty Thousand Only) | Contravention of/non-adherence with directions issued by RBI on ‘Loans and advances to directors, relatives and firms/concerns in which they are interested’. |
| Mahila Co-operative Nagrik Bank Ltd., Bharuch, Gujarat | INR 2,00,000 (Indian Rupees Two Lakh Only) | Contravention of/non-adherence with directions issued by RBI on Placement of Deposits with Other Banks by Primary (Urban) Co-operative Banks (“UCBs”)’ and Know Your Customer (KYC). |
| Surat National Co-operative Bank Ltd., Surat, Gujarat | INR 6,00,000 (Indian Rupees Six Lakh Only) | Contravention of/non-adherence with directions issued by RBI on ‘Co-operative Banks – Interest Rate on Deposits’ and ‘Customer Protection Limiting Liability of Customers of Co-operative Banks in Unauthorised Electronic Banking Transactions’. |
| ICICI Bank Limited | INR 12,19,00,000 (Indian Rupees Twelve Crore Nineteen Lakh Only) | Contravention of/non-adherence with Sub-section (1) of Section 20 of the Banking Regulation Act, 1949 (“the BR Act”) read with directions issued by RBI on ‘Loans and Advances-Statutory and Other restrictions’, sub-section (2) of Section 6 and Section 8 of the BR Act read with directions issued by the RBI on ‘Financial Services provided by the Banks’, and non-compliance with the RBI directions on ‘Frauds classification and reporting by commercial banks and select FIs’. |
| West End Housing Finance Limited, Mumbai, Maharashtra | 1,70,000 (Indian Rupees One Lakh Seventy Thousand Only) | Contravention of/ non-adherence with RBI’s directions on National Housing Bank (NHB) directions on ‘Housing Finance Companies Approval of Acquisition or Transfer of Control (NHB) Directions 2016 and RBI direction on ‘Non-Banking Financial Company Housing Finance Company (Reserve Bank) Directions, 2021’. |
| Nagarik Sahakari Bank Ltd., Babra, Gujarat | INR 2,00,000 (Indian Rupees Two Lakh Only) | Non-adherence/ contravention of Section 26A (2) of the BR Act and RBI directions on ‘Loans and advances to directors, relatives, firms/concerns in which they are interested’, ‘Placement of Deposits with Other Banks by Primary UCBs’ and ‘Co-operative Banks Interest Rate on Deposits’. |
| Sevalia Urban Co-operative Bank Ltd., Sevalia, dist. Kheda, Gujarat | INR 50,000 (Indian Rupees Fifty Thousand Only) | Non-compliance with directions issued by RBI on ‘Loans and Advances to directors, relatives and firms/concerns in which they are Interested’ read with ‘Loans and Advances to Directors etc. – Directors as surety/guarantors – Clarification’. |
| Makarpura Industrial Estate Co-operative Bank Ltd., Dist. Vadodara, Gujarat | INR 2,00,000 (Indian Rupees Two Lakh Only) | Contravention of Section 26A (2) of the BR Act and RBI directions on ‘Loans and advances to directors, relatives, firms/concerns in which they are interested’. |
| Gujarat Mercantile Co-operative Bank Ltd., Ahmedabad, Gujarat | INR 4,50,000 (Indian Rupees Four Lakh Fifty Thousand Only) | Non-compliance with the direction issued by RBI on ‘Placement of Deposits with Other Banks by Primary UCBs and ‘Maintenance of Cash Reserve Ratio (CRR)’. |
| Bajaj Finance Limited, Pune, Maharashtra | INR 8,50,000 (Indian Rupees eight Lakh Fifty Thousand Only) | Non-compliance with the ‘Monitoring of Frauds in NBFCs (Reserve Bank) Directions, 2016’ issued by RBI. |
| Union Bank of India | INR 1,00,00,000 (Indian Rupees One Crore Only) | Non-compliance with directions issued by RBI on Loans and Advances – Statutory and Other Restrictions. |
| Kotak Mahindra Bank Limited | INR 3,95,00,000 (Indian Rupees Three Crore Ninety Five Lakh Only) | Non-compliance with RBI directions on ‘Managing Risks and Code of Conduct in Outsourcing of Financial Services by Banks’, ‘Recovery Agents engaged by Banks’, ‘Customer Service in Banks’ and ‘Loans and Advances – Statutory and Other Restrictions’. |
| RBL Bank Limited | INR 64,00,000 (Indian Rupees Sixty Four Lakh Only) | Non-compliance with certain directions of Reserve Bank of India (Prior approval for acquisition of shares or voting rights in private sector banks) Directions, 2015. |
1.2. Bangladesh
1.2.1. Foreign exchange reserves fall below USD 21 billion
Bangladesh’s foreign exchange reserves have fallen below USD 21 billion (United States Dollar Twenty One Billion Only) as the central bank constantly pumps dollars into the economy. According to a document of the International Monetary Fund (IMF), the country’s forex reserves stood at USD 40.7 billion (United States Dollar Forty Billion Seven Hundred Million Only) in August 2021, which reduced to USD 33.4 billion (United States Dollar Thirty-Three Billion Four Hundred Million Only) at the end of the year 2021-22. State-run banks are borrowing dollars from the central bank to make various payments, and due to this, reserves have been falling while export and remittance receipts have remained lower than expected. The Business Standard
1.3. Sri Lanka
1.3.1. Sri Lanka and India collaborate to link UPI and Lanka Pay
India and Sri Lanka signed an agreement last year in July 2022 on Unified Payments Interface (“UPI”) acceptance in Sri Lanka, and both governments recently announced that they are working together on fintech sector connectivity by linking UPI and Lanka Pay. Digital payments have become a mass movement and a way of life in India due to UPI, and Sri Lanka aims to follow the same in order to boost digital payments. The Economic Times
2. Trends
2.1. IDFC gets approval from CCI for merger with IDFC First Bank
The Infrastructure Development Finance Company (“IDFC”) has received approval from the Competition Commission of India (“CCI”) for its merger with IDFC First Bank. CCI approved the merger under the green channel route, but the proposed amalgamation would come into effect only after receiving the nod from various statutory and regulatory bodies such as the Securities and Exchange Board of India (SEBI), RBI and National Company Law Tribunal (NCLT). The approval of respective shareholders and creditors of IDFC and IDFC First Bank would also be necessitated for the merger to come into effect. The Economic Times
2.2. Jio Financial plans to launch a suite of loan products
Jio Financial Services (“JFS”) has started its lending and insurance business, and it plans to rapidly broaden its offerings by launching automobile loans, housing loans and other similar products to make itself a full-service financial services firm. JFS has already rolled out personal loans for salaried and self-employed individuals in Mumbai consumer durable loans across India. JFS insurance division has already entered into a partnership with 24 (twenty-four) companies in the insurance sector, and the payment banking arm plans on coming up with debit cards. Business Today
2.3. Bajaj Finance to acquire a substantial stake in Pennant Technologies
Bajaj Finance is set to acquire a 26 per cent (twenty-six per cent) stake in Pennant Technologies, a fintech engaged in providing technology services and software products for the banking and finance industry. Bajaj Finance has entered into a binding term sheet with Pennant Technologies, and the transaction is likely to be completed by December 2023. The acquisition aims to strengthen the technology roadmap of Bajaj Finance. Money Control
2.4. HSBC expanding into Indian Real Estate and Private Debt Investment
HSBC is planning to venture into financing real estate developments in India through the Foreign Portfolio Investment (FPI) route. They are also planning to enter into private debt space in other sectors apart from real estate. Currently, HSBC is evaluating three to four big deals in real estate and planning to invest approximately INR 250 crore (Indian Rupees Two Hundred Fifty Crore Only) to INR 500 crore (Indian Rupees Five Hundred Crore Only) in each project. Financial Express
3. Sector Overview
3.1. DGGI detected GST evasion of INR 1.36 trillion this fiscal year: Finance Ministry
3.2. India and China to account for half of global growth in 2023 and 2024: IMF
3.3. India ranks 4th in the world for foreign exchange reserves: Forbes
3.4. Startups in India slowdown in Q3 of 2023: 1 Lattice
4. Business Updates
4.1. Google India launches ‘DigiKavach’ to prevent financial fraud
Google launched the DigiKavach initiative in India with the aim of preventing financial fraud in the country. DigiKavach is a threat detection and warning system which is designed to identify and study the methods and modus operandi of scammers and follow it up by drawing insights to detect the threats early and implementing countermeasures to new emerging scams. Google has partnered with the Fintech Association for Consumer Empowerment (“FACE”) to combat exploitative digital lending apps on the Play Store, and FACE, with its market intelligence, will inform detection and enable quick action against applications that are not in compliance with Google’s play store policies. Times of India
4.2. SIDBI launches growth accelerator programme for small NBFCs
The Small Industries Development Bank of India (“SIDBI”) has launched a growth accelerator plan for small NBFCs. The programme is being conducted by SIDBI in association with the Finance Industry Development Council (FIDC). The programme has a duration of five months and has been designed to help NBFCs become eligible for institutional funding based on holistic evaluation criteria. The programme includes guidance from domain experts on governance, risk and technology to enhance and boost peer learning, reviews, and networking through a mix of in-person, virtual, and individual sessions. The Economic Times
4.3. Google partners with DMI Finance to offer sachet loans in India via Google Pay
Google has entered into a partnership with DMI Finance to provide sachet loan services in India. Google said that it will float a range of credit-focused products for consumers and merchants in India by partnering with banks and NBFCs through its payment application Google Pay. The company further said that it will offer sachet loans for merchants and consumers in India. Sachet loans are small ticket loans ranging from INR 10,000 (Indian Rupees Ten Thousand Only) to INR 1 lakh (Indian Rupees One Lakh Only). Inc 42
Disclaimer
The note is prepared for knowledge dissemination and does not constitute legal, financial or commercial advice. AK & Partners or its associates are not responsible for any action taken based on its contents.
