1. Regulatory Updates
1.1. India
1.1.1. RBI notifies new regulatory measures for consumer credit and bank credit to NBFCs
The Reserve Bank of India (“RBI”), vide its notification dated November 16, 2023, has increased the risk weights for consumer finance assets in the books of banks and Non-Banking Financial Companies (“NBFCs”) from 100 per cent (one hundred per cent) to 125 per cent (one hundred twenty-five per cent). Similarly, the risk weight for credit card loan assets has been increased from 125 per cent (one hundred twenty-five per cent) to 150 per cent (one fifty per cent) for Scheduled Commercial Banks (SCBs) and from 100 per cent (one hundred per cent) to 125 per cent (one hundred twenty-five per cent) for NBFCs. RBI
1.1.2. RBI restricts Bajaj Finance’s digital loans over non-compliance issues
RBI, under Section 45L(1)(b) of the Reserve Bank of India Act, 1934, directed Bajaj Finance Ltd. (“Company”) to immediately halt the sanction and disbursement of loans for its ‘eCOM’ and ‘Insta EMI Card’ lending products. This decision was prompted by the Company’s non-compliance with the Guidelines on Digital Lending issued by RBI vide its circular dated September 02, 2022, specifically the failure to issue Key Fact Statements (“KFS”) to borrowers under these two products and deficiencies in KFS issued under other digital loans sanctioned by the Company. RBI will review these supervisory restrictions once the identified issues are rectified to RBI’s satisfaction. RBI
1.1.3. Monetary Penalties
RBI imposes monetary penalties on the following financial institutions:
| Name of the financial institution | Penalty Imposed | Reason |
| Axis Bank Ltd. | INR 90,92,000 (Indian Rupees Ninety Lakh Ninety-Two Thousand Only) | Contravention of/non-adherence with certain provisions of the directions issued by RBI on ‘Reserve Bank of India Know Your Customer (KYC) Directions, 2016’ (“KYC Directions”), ‘Loans and Advances – Statutory and Other Restrictions’, ‘Guidelines on Managing Risks and Code of Conduct in Outsourcing of Financial Services by banks’ and ‘Code of Conduct for Opening andOperating Current Accounts’. |
| Anand Rathi Global Finance Limited, Mumbai, Maharashtra | INR 20,00,000 (Indian Rupees Twenty Lakh Only) | Contravention of/non-adherence with directions issued by RBI on ‘KYC Directions’. |
| Manappuram Finance Limited, Thrissur | INR 42,78,000 (Indian Rupees Forty-Two Lakh Seventy-Eight Thousand Only) | Contravention of/non-adherence with directions issued by RBI on ‘Non-Banking Financial Company – Systemically Important Non-Deposit taking Company and Deposit taking Company (Reserve Bank) Directions, 2016’. |
1.2. Bangladesh
1.2.1. Bangladesh Bank allows liquidity support to the banks
In response to a liquidity crunch, Bangladesh’s central bank has reversed its policy, reintroducing cash support for commercial banks facing challenges. This shift follows a brief period of tightening monetary policy to control inflation, which led to a decline in banks’ cash reserves. The central bank is now accepting bids for cash support against government securities to address the looming cash shortage. This decision aims to ease liquidity stress and prevent a further increase in the call-money rate. The move is seen as a logical response to the current context of liquidity tightness. Financial Express
1.3. Pakistan
1.3.1. State Bank of Pakistan unveils five-year plan to achieve financial stability
The State Bank of Pakistan (“SBP”) has unveiled a strategic plan to achieve financial stability in the upcoming five years. This plan is known as SBP Vision 2028 and it consists of the key things that the SBP wants to do to achieve financial stability. This SBP Vision 2028 is the first plan since the passage of the State Bank of Pakistan Amendment Bill, 2021. As per SBP, this plan will bring financial stability and will contribute to the sustainable economic development of Pakistan. Arab News
2. Trends
2.1. SBI plans to launch ‘Yono Global’ mobile banking app in Singapore and the United States
State Bank of India (“SBI”) is planning to launch its global mobile banking app ‘Yono Global’ offering digitalised remittances, among other services, to customers in Singapore and the United States. Currently, Yono Global is operational in 9 (nine) foreign countries with a total balance sheet size of USD 78 Billion (United States Dollar Seventy Eight Billion Only). For its launch in Singapore, Yono Global will be integrated with Singapore’s PayNow. Economic Times
2.2. Razorpay plans cross-country merger to relocate to India
Fintech unicorn Razorpay is planning to relocate its parent company to India through a cross-country merger, which may result in a tax payment of USD 250 million (United States Dollar Two Hundred Fifty Million Only) to USD 300 million (United States Dollar Three Hundred Million Only) in the United States, its current domicile. The proposed merger involves combining its US-registered entity with its Indian arm, potentially at a reduced valuation. Advisors on both sides, including those in the US and KPMG and Deloitte in India, express hesitation due to the rapid growth of the payments processor in recent years. The company aims to seek approval from the National Company Law Tribunal (NCLT) in the next two months, but a substantial reduction in valuation may pose challenges in obtaining regulatory approval. Economic Times
2.3. RBI Governor Shri Shaktikanta Das proposes to link UPI with the fast payment system of Japan
RBI Governor, Shri Shaktikanta Das has proposed to link the United Payments Interface (“UPI”) with Japan’s local fast payment system to improve and fasten the cross-border payments and lessen the cost expenditure. This proposal was brought after the successful linkage of UPI with the fast payment system of Singapore, PayNow, in February 2023. Currently, the cost of sending remittances from Japan to India is very high as compared to the United Nations sustainable development goals target of 3 per cent (three per cent). Times of India
3. Sector Overview
3.2. India’s GDP is predicted to grow at 6 to 7.1 per cent in fiscal years 2024-2026: S&P Global Ratings
3.3. The microfinance sector extends INR 3.48 trillion in loans: Microfinance Industry Network
4. Business Updates
4.1. NPCI directs deactivation of inactive UPI IDs for enhanced security
National Payments Corporation of India (“NPCI”) has instructed banks and payment applications to deactivate all UPI IDs and numbers that have been inactive for a year by the end of this year. This move is prompted by the risk posed to security and reliability when customers change phone numbers without updating their bank accounts. NPCI emphasises the importance of customers regularly reviewing and verifying their information within the banking system to maintain a secure and seamless digital transaction experience. Additionally, during transactions, UPI applications will now display customer names instead of the names stored at the application’s end to enhance security. Inc 42
4.2. Federal Bank implements UPI Lite for seamless small-value digital transactions in India
Federal Bank, known for its pioneering efforts in banking innovation, has introduced UPI Lite to facilitate small-value digital transactions in India. UPI Lite, a simplified version of the UPI system by NPCI, addresses the increasing demand for quicker and more efficient small-value payments. This new offering brings several benefits for customers, including reduced transaction time, easy access to bank statements, a higher rate of payment success, and enhanced security. Notably, users can create a UPI Lite account seamlessly within their existing UPI app, eliminating the need to download a new application. The user-friendly interface compatibility with popular platforms like BHIM, PhonePE, Google Pay, and Paytm, coupled with robust security measures, positions UPI Lite to elevate the overall digital payment experience for customers. Live Mint
4.3. Slice secures USD 9 million in debt funding from Stride Ventures
Fintech After completing a Series C funding round led by Tiger Global, in which USD 50 million (United States Dollar Fifty Million Only) was raised in June 2022, lending tech unicorn Slice has now secured USD 9 million (United States Dollar Nine Million Only) in a debt funding round led by Stride Ventures. As per the company’s regulatory filing with the Registrar of Companies (RoC), Slice has approved a special resolution to allocate 7,500 (seven thousand five hundred) non-convertible debentures (NCD) at an issue price of INR 1 Lakh (Indian Rupees One Lakh Only) per share. Notably, these debentures are non-convertible and carry an annual interest rate of 14.25 per cent (Fourteen point two five per cent). Inc 42
4.4. RBI approves Reliance Capital resolution plan with IIHL as highest bidder
On November 17, 2023, RBI has given a ‘no objection’ letter for the resolution plan of Reliance Capital (“RC”). IndusInd International Holdings Limited (IIHL), became the highest bidder by offering INR 9,650 crore (Indian Rupees Nine Thousand Six Hundred Fifty Crore Only) to take over RC. RBI has appointed Mr Nageswara Rao Y to administer the Corporate Insolvency Resolution Process (CIRP) of the company. Economic Times
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.
