1. Regulatory Updates
1.1. India
1.1.1.RBI issues directives to Regulated Entities on AIF investments to address regulatory concerns
Reserve Bank of India (“RBI”) vide its notification dated December 19, 2023, has refrained Regulated Entities (“RE”) from investing in any Alternative Investment Funds (“AIF”) scheme with downstream investments in debtor companies of the RE within the past 12 (twelve) months. Suppose an AIF scheme, in which an RE is already invested, makes a downstream investment in such debtor companies. In that case, the RE shall liquidate its investment within 30 (thirty) days or make a 100 per cent (hundred per cent) provision on the investments if liquidation is not feasible within the prescribed timeframe. RBI
1.1.2. RBI releases draft omnibus framework for recognizing self regulatory organisations
RBI has released the draft omnibus framework for recognizing Self-Regulatory Organizations (“SRO”), which prescribes parameters such as objectives, responsibilities, eligibility criteria, governance standards, application process and other basic conditions that will govern the recognition procedure. The Stakeholder and members of the public can communicate their feedback and comments via mail before January 25, 2024. After reviewing these feedbacks, the final omnibus framework shall be issued. RBI
1.1.3. RBI expands Card-on-File Tokenisation for enhanced security and convenience
The adoption of Card-on-File Tokenisation (“CoFT”) has significantly enhanced transaction security and approval rates within the payment system. Previously, CoFT was only enabled through merchants’ applications or web pages. However, RBI has introduced a new capability by enabling CoFT through card-issuing banks and institutions via mobile banking and Internet banking channels. This enhancement allows cardholders to tokenise their cards for multiple merchant sites through a streamlined and unified process. RBI
1.1.4. Monetary Penalties
RBI imposes monetary penalties on the following financial institutions:
| Name of the Financial Institution | Penalty Imposed | Reason |
| The Lakhvad Nagarik Sahakari Bank Limited, Lakhvad, Dist. Mehsana, Gujarat | INR 2,00,000 (Indian Rupees Two Lakh Only) | Contravention of/non-adherence with certain provisions of the 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 ‘Placement of Deposits with Other Banks by Primary (Urban) Co-operative Banks (“UCBs”)’ |
| Sanmitra Sahakari Bank Limited, Pune, Maharashtra | INR 1,00,000 (Indian Rupees One Lakh Only) | Contravention of/non-adherence with certain provisions of the directions issued by RBI on ‘Maintenance of Deposit Accounts – Primary UCBs’. |
| The Manmandir Co-operative Bank Limited, Vita, Maharashtra | INR 3,00,000 (Indian Rupees Three Lakh Only) | Contravention of/non-adherence with certain provisions of the directions issued by RBI under ‘Know Your Customer Directions, 2016 (“KYC Directions”)’ and ‘Maintenance of Deposit Accounts – Primary UCBs’. |
| Sarvodaya Co-operative Bank Limited, Mumbai, Maharashtra | INR 1,00,000 (Indian Rupees One Lakh Only) | Contravention of/non-adherence with certain provisions of the specific directions issued by RBI under the Supervisory Action Framework (SAF). |
| Contai Co-operative Bank Limited, Dist. Purba Medinipur, West Bengal | INR 1,00,000 (Indian Rupees One Lakh Only) | Contravention of/non-adherence with certain provisions of the KYC Directions issued by RBI. |
| Shree Morbi Nagarik Sahakari Bank Ltd., Morbi, Gujarat | INR 50,000 (Indian Rupees Fifty Thousand Only) | Contravention of/non-adherence with directions issued by RBI on ‘Placement of Deposits with Other Banks by Primary UCBs’ |
| Progressive Mercantile Co-operative Bank Ltd., Ahmedabad, Gujarat | INR 7,00,000 (Indian Rupees Seven Lakh Only) | Contravention of/non-adherence with directions issued by RBI on ‘Placement of Deposits with Other Banks by Primary UCBs’ with Other Banks by Primary UCBs’. |
| Bhabhar Vibhag Nagarik Sahakari Bank Limited, Bhabhar, District Banaskantha, Gujarat | INR 50,000 (Indian Rupees 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’ read with RBI directions on ‘Loans and Advances to directors etc. – directors as surety/guarantors – Clarification’. |
| The Kutch Mercantile Co-operative Bank Ltd., Rapar, Dist. Kachchh, Gujarat | INR 3,00,000 (Indian Rupees Three Lakh Only) | Contravention of/non-adherence with directions issued by RBI on Placement of Deposits with Other Banks by Primary UCBs’ and ‘Policy and Practice regarding Nominal Membership’ read with RBI directions on ‘Exposure Norms and Statutory/Other Restrictions- UCBs’. |
| The Thane District Central Co-operative Bank Limited, Thane, Maharashtra | INR 2,00,000 (Indian Rupees Two Lakh Only) | Violation of Section 20 read with Section 56 of the Banking Regulation Act, 1949 (BR Act). |
1.2. Bangladesh
1.2.1. Bangladesh Bank sets criteria for Bancassurance approval by banks
The Bangladesh Bank (“BB”) has introduced guidelines for Bancassurance, allowing banks in Bangladesh to sell insurance products. Eligibility criteria include demonstrating positive net profit for three consecutive years and maintaining a capital to risk-weighted asset ratio with a capital conservation buffer not below 12.5 per cent (twelve point five per cent). Banks are also required to meet a credit rating of at least Grade-2 as per BB’s guidelines on risk-based capital adequacy. Further, prior approval from BB and a corporate agent license from the Insurance Development and Regulatory Authority (IDRA) are mandatory for banks to engage in selling bancassurance. BB introduced bancassurance on December 11, allowing banks to sell insurance products through their extensive networks. The Daily Star
1.3. Sri Lanka
1.3.1. Sri Lanka’s economy records positive growth after economic crisis
Sri Lanka’s financially troubled economy has experienced positive growth for the first time since the onset of the economic crisis, as indicated by official data. The Department of Census and Statistics (DCS) reported a year-on-year Gross Domestic Product (GDP) growth rate of 1.6 per cent (one point six per cent) in the third quarter. In contrast, Sri Lanka had registered a negative 8 per cent (eight per cent) growth rate when it declared bankruptcy in April 2022, and the economic downturn had persisted since the fourth quarter of 2021. The Economic Times
2. Trends
2.1.RBI considers mandatory in-person hearings for potential wilful defaulters
RBI is contemplating a shift in its approach towards potential wilful defaulters by considering the introduction of mandatory in-person hearings with borrowers during the identification of stressed loan accounts. Previously, such hearings were optional and occurred at the final stage, just before classifying a borrower as a wilful defaulter. This potential change is being considered based on recommendations from banks, which believe that initiating a dialogue at an early stage increases the likelihood of successful recoveries. LiveMint
2.2. Macquarie to invest USD 400 million in Indian EV platform via new NBFC
Australian financial services firm Macquarie is set to invest a total of USD 400 million (United States Dollar Four Hundred Million Only) in the Electric Vehicle (“EV”) platform in India by launching a Non-Banking Finance Company (“NBFC”). The end-to-end EV platform will offer services such as fleet leasing, battery services and heavy transportation solutions. Macquarie is planning to set up an NBFC worth USD 1.2–2 billion (United States Dollar One Billion and Two Hundred Million to United States Dollar Two Billion Only) in the next 6-8 (seven to eight) years. The Firm is expected to apply for a license with RBI which will help commercial fleet operators to avail credit. Bharat Times
2.3. BharatPe initiates fundraising and board restructuring for strategic growth
BharatPe has sanctioned the fundraising initiative to bolster its financial position. The Fintech intends to raise funds in multiple tranches. Even though the final decision is pending, it is reported that the company is looking forward to secure INR 500 crore (Indian Rupees Five Hundred Crore Only) through unlisted Non-Convertible Debentures (NCDs). Additionally, there was board restructuring in the company with the appointment of Colin Bryant as a Director and the elevation of Sumeet Singh as a whole-time Director. The fintech further intends to renew its partnership with Unity Small Finance Bank to develop new products in collaboration. Inc 42
3. Sector Overview
3.2. India is projected to contribute 16 per cent to global growth: IMF
3.3. India faces middle-income trap without accelerated growth: Former RBI Governor Raghuram Rajan
4. Business Updates
4.1. PayCraft launches One Nation Corporate Card
PayCraft, in partnership with the National Securities Depository Limited (NSDL) Payments Bank and the National Payments Corporation of India (NPCI), has launched the ‘One Nation Corporate Card’, which provides pan India services. The Card is a multipurpose card that facilitates transactions across four channels: Automated Teller Machine (ATM), Point of Sale (POS), e-commerce websites, and metro stations. The Card functions as a transit card to enable both offline and retail payments designed for corporates and small and medium enterprises (SMEs). Times of India
4.2. RBI approves the operation of Razorpay and Cashfree as Payment Aggregators
Digital payment startups Razorpay and Cashfree have obtained final approval from RBI to function as payment aggregators, marking the end of a nearly year-long embargo. This approval allows them to onboard new merchants and expedite their growth, bringing these payment companies under the regulatory oversight of the central bank for the first time. Google for Google Pay, Enkash, and Open Financial are among the other entities reported to have received similar approval. RBI had imposed restrictions on these fintech startups, including Paytm and PayU, nearly a year ago during intense competition with other players like Billdesk, Juspay, and CCAvenue. Times of India
4.3. Finhaat secures USD 3 million in seed funding for B2B insurance distribution expansion
Mumbai-based startup Finhaat, launched in 2022 as a Business-to-Business (B2B) insurance distribution platform, has raised USD 3 million (United States Dollar Three Million Only) in a seed funding round led by Omnivore with participation from Kettleborough VC. The funds will be utilised to enhance technological models, introduce innovative products, expand its partner network, and recruit resources for new verticals. Finhaat focuses on providing digital insurance services in tier 2 and tier 3 cities, covering over 65 per cent (sixty-five per cent) of pin codes in India. The startup’s primary objective is to develop its technology further, introduce new products, and expand its operations to new verticals. Inc 42
4.4. PhonePe enhances financial services with new ‘Credit’ feature and consumer loans expansion
PhonePe, the digital payments app owned by Walmart, has introduced a new feature allowing users to manage credit cards and make payments for bills and loans. In the newly added ‘Credit’ section, users can access their credit bureau score at no extra cost, along with summarised insights like credit utilisation, credit age, and timely payments. Additionally, PhonePe plans to expand its credit services by introducing consumer loans through the app. The company is actively collaborating with the banking and non-banking financial companies to develop a lending platform that offers a variety of financial products. 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.
