1. Regulatory Updates
1.1. India
1.1.1. RBI directs Kotak Mahindra Bank to cease new customer onboarding and credit card issuance
The Reserve Bank of India (“RBI”) has directed Kotak Mahindra Bank Limited to immediately cease onboarding new customers through its online and mobile banking channels and issuing fresh credit cards. This action is taken due to significant concerns arising from the RBI’s IT examination of the bank for the years 2022 and 2023, as well as the bank’s failure to address these concerns adequately and promptly. The examination revealed serious deficiencies and non-compliances in various areas such as IT inventory management, patch and change management, user access management, vendor risk management, data security, and business continuity. Despite continuous engagement with the bank, satisfactory outcomes have not been achieved. The restrictions will remain in place until the bank completes a comprehensive external audit approved by the RBI and addresses all deficiencies to the RBI’s satisfaction. RBI
1.1.2. Shri T. Rabi Sankar re-appointed as deputy governor of Reserve Bank of India
The Central Government has extended the term of Shri T. Rabi Sankar as Deputy Governor of the Reserve Bank of India for one year, starting from May 03, 2024, or until further notice, whichever comes first. RBI
1.1.3. RBI issues draft guidelines on digital lending to enhance transparency in aggregation of loan products
RBI has observed a rising trend in Lending Service Providers (“LSPs”) offering aggregation services for loan products, wherein borrowers are matched with lenders through digital platforms. However, this approach sometimes lacks upfront clarity about the lender’s identity for the borrower. To address this, RBI suggests a marketplace approach to improve transparency and streamline lending processes. In draft guidelines released on April 26, 2024, RBI mandates regulated entities (REs) to ensure that LSPs display all available loan offers from associated lenders to borrowers, alongside disclosing the mechanism used to determine lender willingness and presenting loan offers clearly for fair comparison. These guidelines aim to enhance transparency for borrowers and will supplement existing guidelines on digital lending, with stakeholders invited to provide comments until May 31, 2024. RBI
1.1.4. Monetary Penalties
RBI imposes monetary penalties on the following financial institutions:
| Name of the financial institution | Penalty Imposed | Reason |
| The Nakodar Hindu Urban Co-operative Bank Limited, Nakodar | INR 5,00,000/- (Indian Rupees Five Lakh only) | Contravention of/non-adherence with directions issued by RBI on ‘Investments by Primary Urban Co-operative Banks (“UCBs”)’. |
| Jogindra Central Co-operative Bank Ltd., Solan, Himachal Pradesh | INR 3,50,000/- (Indian Rupees Three Lakh Fifty Thousand only) | Contravention of/non-adherence with specific directions issued by National Bank for Agriculture and Rural Development (NABARD) on ‘Frauds-Guidelines for Classification, Reporting and Monitoring’. |
| The Fatehabad Central Cooperative Bank Limited, Fatehabad | INR 2,00,000/- (Indian Rupees Two Lakh only) | Contravention of/non-adherence with provisions of section 26A (2) read with section 56 of the Banking Regulation Act, 1949 (BR Act). |
| The Panvel Co-operative Urban Bank Ltd., Raigad, Maharashtra | INR 1,00,000/- (Indian Rupees One Lakh only) | Contravention of/non-adherence with specific directions issued under ‘Supervisory Action Framework’ (“SAF”) for Primary UCBs’. |
| Ambarnath Jai Hind Co-operative Bank Limited, Ambarnath, Maharashtra | INR 3,00,000/- (Indian Rupees Three Lakh only) | Contravention of/non-adherence with specific directions issued by RBI on ‘Maintenance of Deposit Accounts – Primary UCBs’. |
| Nagar Sahakari Bank Ltd., Gorakhpur | INR 1,00,000/- (Indian Rupees One Lakh only) | Contravention of/non-adherence with directions issued by RBI under ‘SAF for Primary UCBs’. |
| Dr. Jaiprakash Mundada Urban Co-operative Bank Limited, Hingoli, Maharashtra | INR 1,00,000/- (Indian Rupees One Lakh only) | Contravention of/non-adherence with RBI Directions on ‘Management of Advances-UCBs’ and ‘Exposure Norms & Statutory/ Other Restrictions – UCBs. |
| The Bishnupur Town Cooperative Bank Ltd., West Bengal | INR 1,00,000/- (Indian Rupees One Lakh only) | Contravention of/non-adherence with directions issued by RBI on ‘Know Your Customer (KYC) Directions, 2016’. |
| Bilaspur Nagrik Sahakari Bank Limited, Bilaspur (CG) | INR 1,00,000/- (Indian Rupees One Lakh only) | Non-adherence with the directions issued by RBI to Urban Co-operative Banks on ‘Exposure Norms & Statutory/Other Restrictions-UCBs’. |
| Sadbhav Nagarik Sahakari Bank Maryadit, Chhatarpur (MP) | INR 1,00,000/- (Indian Rupees One Lakh only) | Contravention of/non-adherence with directions issued by RBI under ‘SAF for Primary UCBs’. |
1.2. Bangladesh
1.2.1. Standard Chartered Bangladesh facilitates INR trade transaction for Unilever Bangladesh
Standard Chartered Bangladesh (SCB) has facilitated the first Indian rupee (“INR”) denominated trade transaction to aid the import operations of Unilever Bangladesh Ltd (“UBL”), the largest multinational FMCG company in Bangladesh. This transaction enables UBL to provide INR payment options to its suppliers based in India. Leveraging its global network and regional expertise, the British multinational bank offers seamless Bangladesh taka (BDT)-INR transactions and trade capabilities, thereby boosting bilateral trade between Bangladesh and India. Through this mechanism, trade invoicing, payment, and settlement in rupees can be conducted for Indian exports and imports with Bangladesh, totalling approximately USD 16 billion (United States Dollar Sixteen Billion only). The Daily Star
1.2.2. Interest rate spread widens in Bangladesh banking sector
The International In Bangladesh, the banking sector saw the interest rate spread surpassing 5 percent (five percent) in February 2024, the highest since 2015. This increase was driven by rising lending rates, with some banks charging nearly 13 percent (thirteen percent) for loans. However, deposit rates are gradually increasing at a slower pace, widening the spread. The removal of a lending rate cap in July 2021 led to the spread’s rise after initially declining post-cap introduction in April 2020. The recent increase in lending and deposit rates is attributed to the central bank’s shift from a monetary to an interest rate targeting framework to curb inflation. Dhaka Tribune
1.3. Philippines
1.3.1. Overseas Filipino remittances rise in February 2024, driven by multiple sources
In February, personal remittances from Overseas Filipinos (OFs) increased by 3 percent (three percent) to USD 2.95 billion (United States Dollar Two Billion Nine Hundred Fifty Million only), according to the central bank figures. Cumulatively, personal remittances also saw a 2.8 percent (two point eight percent) rise to USD 6.1 billion (United States Dollar Six Billion One Hundred Million only) in January-February 2024, up from USD 5.93 billion (United States Dollar Five Billion Nine Hundred Thirty Million only) in the same period last year. In terms of the country of origin, the United States accounted for the largest share of remittances during this period, followed by Singapore, Saudi Arabia, and Japan. Asian Banking & Finance
2. Trends
2.1. RBI plans to allow banks to freeze accounts during the cyber fraud crackdown
India’s central bank is planning to revise guidelines to allow banks to temporarily freeze accounts suspected of involvement in cyber crimes. This initiative comes amid a surge in online criminal activities. According to government data, individuals have lost nearly USD 1.26 billion (United States Dollar One Billion Two Hundred Sixty Million only) to cyber fraud in financial institutions since 2021, with approximately 4,000 (four thousand) fraudulent accounts being opened daily. Scammers target tens of thousands of Indians daily through phone calls, attempting to access their bank accounts and wallets to steal money. To combat this, the RBI is considering granting banks the authority to suspend such accounts without victims having to file police complaints initially. The Economic Times
3. Sector Overview
3.1. Banks and NBFCs reduce exposure to personal loans following RBI measures: CRISIL
3.2. Surge in payment frauds raises concerns in Indian banking sector: RBI
4. Business Updates
4.1. Hitachi Payment Services introduces upgradable ATMs to enhance financial inclusion
Hitachi Payment Services has introduced a versatile ATM that can be upgraded into a high-performance Cash Recycling Machine (CRM). Manufactured under India’s Make in India initiative, these ATMs offer flexibility to banks. The goal is to enhance access to banking services, especially in areas with limited banking facilities, thereby promoting financial inclusion. In addition to this launch, Hitachi Payment Services previously unveiled the first Unified Payments Interface (“UPI”) ATM on the Android platform for card-less cash withdrawals in September 2023. Hitachi Payment Services is committed to supporting recent initiatives like RBI’s decision to enable UPI for cash deposits. Their innovative solution is designed to facilitate UPI-based cash withdrawals and deposits. Financial Express
4.2. AU Small Finance Bank introduces new products to boost fee income
AU Small Finance Bank (“AU SFB”) has introduced a range of new products to boost fee income, including a Rupay credit card and ATM insurance. Among these offerings are two innovative credit cards: the AU SPONT Rupay Credit Card and the Secured Credit Card – NOMO, developed in collaboration with the National Payment Corporation of India (NPCI) and VISA, respectively. The NOMO Credit Card is AU SFB’s first foray into secured credit cards backed by a fixed deposit. Additionally, AU SFB has launched the AU 0101 Business App, tailored for proprietorships and Micro, Small and Medium Enterprises (“MSMEs”), and AU0101 Version 2.0, enhancing the mobile banking experience with new features. Notably, AU SFB has introduced ATM Insurance, allowing customers to purchase insurance via the bank’s ATMs using their debit cards, a first in the Indian banking industry. Business Standard
4.3. Razorpay launches ‘UPI Switch’ for faster and smoother transactions
Razorpay, a fintech company, has launched its own UPI infrastructure with ‘UPI Switch’ in partnership with Airtel Payments Bank. This cloud-based innovation aims to facilitate smoother and faster transactions. The solution boasts a success rate increase of 4-5 percent (four to five percent) and can handle up to 10,000 (ten thousand) transactions per second (TPS) simultaneously. Additionally, it promises five times faster access to UPI innovations for businesses. Razorpay’s UPI Switch ensures 99.99 percent (ninety-nine point nine nine percent) uptime, making it a highly advanced UPI Stack. The Economic Times
4.4. Cred receives in-principle approval for payment aggregator licence from RBIreceives in-principle approval for PA business
Fintech unicorn Cred has reportedly received an in-principle approval from RBI for its Payment Aggregator (“PA”) licence application. This licence would enable Cred to onboard merchants and offer digital payment solutions, although the final approval from the RBI is still pending. This news aligns with the RBI’s recent trend of granting PA licences to various players in the digital payments industry. Last month, the RBI granted PA licences to Innoviti, a digital payments solutions company, and Concerto Software and Systems, a payment solutions provider. Inc 42
4.5. BharatPe launches ‘BharatPe One’- an all-in-one payment device
BharatPe, a leading fintech company, has introduced a new ‘all-in-one’ payment device called ‘BharatPe One’, which combines a point-of-sale (PoS) system, QR code scanner, and speaker functionalities. The device supports both dynamic and static QR codes, tap-and-pay, and traditional card payments for both debit and credit cards. Powered by Android, it features an HD touchscreen display and is compatible with 4G and Wi-Fi connections. Although the pricing details are undisclosed, BharatPe has announced plans to launch BharatPe One in over 100 (one hundred) cities in India initially, with further expansion to 450 (four hundred fifty) cities within the next six months. Inc 42
4.6. PayU receives RBI approval for payment aggregator operations
PayU Payments, backed by Prosus, has announced that it has received in-principle approval from RBI to function as a PA and onboard new merchants. This approval follows recent steps by the RBI to enhance oversight in the payments sector, requiring online payment companies to monitor merchants’ transaction-related activities and ensure compliance with updated guidelines. PayU, a payment gateway, also offers services such as buy-now-pay-later, competing with companies like Razorpay and PhonePe. Live Mint
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.
