1. Regulatory Updates
1.1. India
1.1.1. RBI Transition to electronic insurance, IRDAI mandates digital policies from April 01, 2024
Starting April 01, 2024, it’s mandatory for insurance policies to be held in electronic form, similar to how shares are held in a demat account. The Insurance Regulatory and Development Authority of India (“IRDAI”) issued regulations on March 20, 2024, requiring insurers to have a board-approved policy for electronic insurance issuance. Regardless of how the proposal is received, insurers must issue policies electronically, subject to IRDAI’s exemptions. E-insurance involves obtaining policies digitally, stored in an e-Insurance Account (eIA), which can manage various types of insurance policies. Four insurance repositories—CAMS Insurance Repository, Karvy, NSDL Database Management (NDML), and Central Insurance Repository of India—facilitate the opening of e-Insurance accounts. Currently, there are no specific guidelines from IRDAI regarding the conversion of existing policies into digital format. The Economic Times
1.1.2. RBI defers exchange-traded currency derivatives norms
The Reserve Bank of India (“RBI”), through its notification dated April 04 2024, has deferred the implementation of its new rules on exchange-traded rupee derivatives (“Proposed Currency Derivatives Rules”) to May 03, 2024. RBI, through its circular dated January 05, 2024, introduced Proposed Currency Derivative Rules, which, along with many other changes, mandated rupee-denominated currency contracts traded through the National Stock Exchange of India (NSE) and the Bombay Stock Exchange (BSE) to have underlying exposure. Currently, the regulatory framework for participation in exchange-traded currency derivatives (“ETCD”) involving the rupee is governed by the provisions of the Foreign Exchange Management Act (FEMA) and RBI Master Direction – Risk Management and Inter-Bank Dealings dated July 05, 2016 (“Currency Derivative Rules”). Currency Derivate Rules allow participants with a valid underlying contracted exposure to enter into ETCDs involving the rupee up to a limit of USD 100 million (United States Dollar One Hundred Million Only) without having to produce documentary evidence of the underlying exposure. RBI
1.1.3. RBI cancels licences of four NBFCs
RBI, under Section 45-IA (6) of the Reserve Bank of India Act, 1934, has cancelled the Certificate of Registration (“CoR”) of the below-mentioned NBFCs.
| Name of the NBFC | Cancellation order date |
| Kundles Motor Finance Private Limited | March 12, 2024 |
| Nithya Finance Limited | March 14, 2024 |
| Bhatia Hire Purchase Pvt Ltd | March 19, 2024 |
| Jiwanjyoti Deposits and Advances Limited | March 21, 2024 |
1.1.4. Five NBFCs surrender their CoR to RBI
The following Non-Banking Financial Companies (“NBFCs”) have surrendered their CoR to RBI.
| Name of the Entity | Grounds for Surrender |
| Growing Opportunity Finance (India) Private Limited | Exit from Non-Banking Financial Institution (“NBFI”) business |
| Invel Commercial Pvt. Ltd. | Exit from NBFI business |
| Mohan Finance Ltd. | Exit from NBFI business |
| Saraswati Properties Limited | Exit from NBFI business |
| Quicker Marketing Pvt. Ltd. | Exit from NBFI business |
1.1.5. Monetary Penalties
RBI imposes monetary penalties on the following financial institutions:
| Name of the financial institution | Penalty Imposed | Reason |
| The Himachal Pradesh State Co-operative Bank Limited, Shimla | INR 5,00,000/- (Indian Rupees Five Lakh only) | Contravention of/non-adherence with section 26 A (2) read with section 56 of the Banking Regulation Act, 1949 (BR Act). |
| The Tirupattur Urban Co-operative Bank Ltd., Tirupattur, Tamil Nadu | INR 25,000/- (Indian Rupees Twenty Five Thousand only) | Contravention of/non-adherence with directions issued by RBI on ‘Exposure Norms and Statutory/ Other Restrictions – Urban Cooperative Banks (“UCBs”)’. |
| Tirumangalam Co-operative Urban Bank Ltd., Tirumangalam, Tamil Nadu | INR 25,000/- (Indian Rupees Twenty Five Thousand only) | Contravention of/non-adherence with directions issued by RBI on ‘Board of Directors – UCBs’ read with ‘Loans and advances to directors, their relatives, and firms/concerns in which they are interested’. |
| Bassein Catholic Co-operative Bank Limited | INR 61,60,000/- (Indian Rupees Sixty-One Lakh Sixty Thousand only) | Contravention of/non-adherence with directions issued by RBI on ‘Frauds in UCBs: Changes in Monitoring and Reporting mechanism’, ‘Know Your Customer (“KYC”)’, ‘Maintenance of Deposit Accounts’ and ‘Management of Advances’. |
| Nagpur Nagarik Sahakari Bank Ltd., Nagpur | INR 28,30,000/- (Indian Rupees Twenty-Eight Lakh Thirty Thousand only) | Contravention of/non-adherence with directions issued by RBI on ‘Interest Rate on Deposits’ and ‘KYC’. |
| IDFC First Bank Limited | INR 1,00,00,000/- (Indian Rupees One Crore only) | Contravention of/non-adherence with directions issued by RBI on ‘Loans and Advances – Statutory and Other Restrictions’. |
| LIC Housing Finance Limited | INR 49,70,000/- (Indian Rupees Forty-Nine Lakh Seventy Thousand only) | Contravention of/non-adherence with directions issued by RBI on ‘Non-Banking Financial Company – Housing Finance Company (Reserve Bank) Directions, 2021’. |
1.2. Bangladesh
1.2.1. MTB partners with IDEX Biometrics to introduce biometric payment cards in Bangladesh
Mutual Trust Bank (“MTB”), a private commercial bank based in Dhaka, Bangladesh, has partnered with Norway’s IDEX Biometrics to introduce biometric payment cards. By integrating IDEX Pay solution’s fingerprint sensors into its physical cards, MTB aims to enhance security by requiring cardholders to verify their identity physically for transactions. This move aligns with the trend among financial institutions worldwide, such as NatWest in the UK, Crédit Agricole in France, and Rocker in Sweden, who have adopted similar measures with IDEX Biometrics technology. Fintech Futures
1.3. Sri Lanka
1.2.1. Ministry of Finance withdraws microfinance bill for revision
The Ministry of Finance has decided to withdraw the Microfinance and Credit Regulatory Authority Bill. The ministry aims to redraft the bill in consultation with stakeholders to ensure it promotes a favourable environment for both microfinance and Small and Medium Enterprises (SMEs). The Committee on Public Finance (COPF) identified concerns regarding the bill’s potential to hinder microfinance activities in Sri Lanka. Acknowledging these concerns, the Ministry of Finance recognised the need for redrafting to better align with its objectives. Newswire
2. Trends
2.1. RBI’s action plan against illegal lending apps
RBI is considering the establishment of a public register to identify authorised lending apps and curb the increase of illegal lending platforms in India. This initiative aims to address the alarming trend of suicides linked to predatory practices employed by digital lenders. The central bank plans to create the Digital India Trust Agency (“DIGITA”) to oversee the credibility of domestic lending entities. Apps lacking a ‘verified’ signature from DIGITA would be classified as unauthorised, inviting stringent actions from authorities. Previously, the RBI directed Google to enforce stricter norms, resulting in the removal of 2,500 (two thousand five hundred) fraudulent apps. Inc 42
2.2. Paytm navigates regulatory hurdles, resumes lending operations
One 97 Communications’ Paytm has resumed its lending activities in collaboration with its existing non-bank lending partners, SMFG India Credit and Shriram Finance, after a hiatus of about two months. Paytm is exploring a potential partnership with Muthoot Finance for personal and merchant loans. Despite operating separately from Paytm Payments Bank Limited (“PPBL”), approximately 10-15 percent (ten to fifteen percent) of Paytm merchants had set up autopay mandates through their PPBL accounts. Since the restrictions on PPBL, Paytm has been transferring its settlement accounts to other banks, with over 85 percent (eighty-five percent) of transfers reportedly completed. Business Today
2.3. RBI to expand UPI payment options and plans CBDC distribution through non-bank operators
RBI has proposed to allow the utilisation of third-party Unified Payments Interface (“UPI”) applications for conducting UPI payments from Prepaid Payment Instruments (“PPI”) wallets. This move aims to enhance customer convenience and encourage the uptake of digital payments, particularly for small transactions. Currently, UPI payments from PPIs are limited to the issuer’s web or mobile app, but the inclusion of third-party UPI apps will offer users greater flexibility and simplify the payment process. This measure is expected to expedite the expansion of digital payments within the economy. Additionally, the RBI Governor revealed plans to distribute Central Bank Digital Currency (“CBDC”) through non-bank payment system operators, aiming to broaden access to CBDC-Retail among a wider range of users. RBI
3. Sector Overview
3.1. UPI transactions increased increase by 11 percent in March: NPCI
3.2. FinTech funding experiences a 66 percent year-over-year decrease: Tracxn
4. Business Updates
4.1. PhonePe users can now make payments through UPI in Singapore
After the United Arab Emirates (UAE), PhonePe users can now make payments through UPI in Singapore. This advancement permits customers to promptly conduct cross-border transactions between India and Singapore using their current Indian bank accounts. The development occurred as PhonePe entered into a two-year Memorandum of Understanding (MoU) with the Singapore Tourism Board (STB). Inc 42
4.2. CoinSwitch founders launch stock investing platform ‘Lemonn’
PeepalCo, the parent company of CoinSwitch, has introduced Lemonn, a new stock investment platform targeted at Indian users. Lemonn makes stock investing easy for Indians by waiving brokerage fees for the first three months and offering a selection of stocks from various industries. While currently focused on stocks, Lemonn plans to expand its offerings to include mutual funds, futures and options, and initial public offering (IPO) investments in the future. MoneyControl
4.3. NBFC Namdev Finvest bags USD 19 million to deepen presence in rural India
NBFC Namdev Finvest (“Namdev”) has raised USD 20 million (United States Dollar Twenty Million only) in pre-series-C funding, with an investment round led by Maj Invest Financial Inclusion Fund III. Namdev provides financial solutions to underserved populations in rural areas and operates in seven northwestern Indian states and is planning to expand to Bihar, Chhattisgarh, and Uttarakhand this year. BW Business
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.
