India – AKP Banking & Finance Digest- September 30, 2024.
1. Regulatory Updates
1.1. India
1.1.1 WMA limit set at INR 50,000 crore for October 2024 to March 2025
RBI, in consultation with the Government of India, has set the Ways and Means Advances (“WMA”) limit at INR 50,000 crore (Indian Rupees Fifty Thousand Crores only) for the second half of Fiscal Year (“FY”) 2024-25 (October 2024 to March 2025). If the government utilises 75 per cent (seventy-five per cent) of this limit, the RBI may trigger fresh market loans. The WMA interest rate will align with the repo rate, while overdrafts will incur a 2 per cent (two per cent) higher rate. The RBI retains the flexibility to revise the limit based on prevailing conditions. RBI
1.1.2. Monetary Penalties
RBI imposes monetary penalties on the following financial institutions:
| Name of the Financial Institution | Penalty Imposed | Reasons |
| The Bihar Awami Co-operative Bank Limited, Patna | INR 1,50,000/- (Indian Rupees One Lakh Fifty Thousand only) | Contravention of/non-adherence with directions issued by RBI on ‘Know Your Customer (KYC)’ |
| The Surat People’s Co-operative Bank Limited, Surat | INR 61,60,000/- (Indian Rupees Sixty One Lakh Sixty Thousand only) | Contravention of/non-adherence with directions issued by RBI on ‘Income Recognition, Asset Classification, Provisioning and Other Related Matters’, ‘Loans and advances to directors and their relatives, and firms/concerns in which they are interested’, ‘Maintenance of Deposit Accounts’ and ‘Customer Service’. |
1.2. Philippines
1.2.1. BSP enhances credit operations with new discount window facility
Bangko Sentral ng Pilipinas (“BSP”) will enhance its rediscounting facility by launching the Discount Window Facility (“DWF”), effective two months after the publication of BSP Circular No. 1202 on September 24, 2024. The DWF allows banks to offer government and BSP securities in exchange for advances, aligning BSP’s credit operations with global standards. Bangko Sentral ng Pilipinas
1.2.2. Banks maintain optimism for 2024-2025 growth
According to the 2023 Banking Sector Outlook Survey, banks remain optimistic about double-digit assets, loans, and income growth for 2024-2025. Fewer banks, i.e. 48.7 per cent (forty-eight point seven per cent), expect a non-performing loan (“NPL”) ratio above 5 per cent (five per cent), signalling improved loan portfolio quality. Universal and commercial banks anticipate lower NPL ratios, while smaller banks are more cautious. Most banks will prioritise corporate and retail lending, sustainable projects, and digital transformation. However, credit, operational, and macroeconomic risks are top concerns, prompting enhanced risk governance to ensure institutional stability. Bangko Sentral ng Pilipinas
1.3. Bangladesh
1.3.1. Bangladesh Bank raises repo rate to 9.5 per cent
The Bangladesh Bank increased its policy rate, or repo rate, by 50 (fifty) basis points to 9.5 per cent (nine point five per cent), effective September 25, to tackle persistent double-digit inflation. This marks the fourth hike in 2024 and the eleventh since May 2022. The new rate will raise borrowing costs for banks and increase loan interest rates for consumers, aiming to reduce spending and control inflation. The central bank also adjusted the Standing Lending Facility (SLF) rate to 11 per cent (eleven per cent) and the Standing Deposit Facility (SDF) rate to 8 per cent (eight per cent). Dhaka Tribune
2. Trends
2.1. NPCI to help Africa and South America build UPI-like payment systems
The National Payments Corporation of India (“NPCI”), through its international arm NPCI International Payments Ltd (“NIPL”), is engaging with over 20 (twenty) countries in Africa and South America to help build digital payment systems similar to India’s Unified Payments Interface (“UPI”). These efforts aim for a launch by 2027, with NIPL close to finalising agreements with several nations. Earlier this year, NPCI signed agreements with Peru and Namibia to develop UPI-like systems, further extending India’s influence in global digital payments. Inc42
3. Sector Overview
3.1. NBFC loan growth to moderate to 18 per cent in FY25
S&P Global Ratings projects Non-Banking Financial Companies (“NBFCs”) loan growth will slow to 18 per cent (eighteen per cent) in FY25, down from 20 per cent (twenty per cent) in FY24, due to RBI measures, including raising risk weights on unsecured loans. Despite this, NBFCs are expected to outperform banks, which are forecasted to grow at 14 per cent (fourteen per cent). Strong retail lending and robust capital levels, especially in upper-layer NBFCs, will continue to support credit growth. Business Standard
3.2. BHIM introduces e-RUPI vouchers for artisans under PM Vishwakarma Scheme
The PM Vishwakarma Scheme, launched by Prime Minister Narendra Modi, aims to uplift traditional artisans and craftspeople across India by offering skill enhancement, access to modern tools, and support for scaling their businesses. Registered artisans, known as Vishwakarmas, can now access e-RUPI vouchers exclusively through its app, facilitating efficient fund disbursement for modern toolkits. Inc42
3.3. Indian startup funding dips 7 per cent
Indian startup funding fell by 7 per cent (seven per cent) in the first nine months of 2024, reaching USD 7.6 billion (United States Dollar Seven Billion Sixty Million only) compared to USD 8.2 billion (United States Dollar Eight Billion Twenty Million only) in the same period last year, according to Tracxn’s India Tech 9M 2024 report. The number of funding rounds also declined from 1,579 (one thousand five hundred seventy-nine) to 1,036 (one thousand and thirty-six). In comparison, US startups secured USD 86.2 billion (United States Dollar Eighty-Six Billion Twenty Million only) in the same period. Business Standard
4. Business Updates
4.1. InCred partners with Ola to offer personal loans
InCred Financial Services has partnered with Ola Financial Services to enable Ola users to apply for personal loans of up to INR 10 Lakh (Indian Rupees Ten Lakh only) directly through the Ola app. This collaboration aims to enhance financial accessibility for millions across India. Founded in 2016, InCred operates in the Banking, Financial Services, and Insurance (BFSI) sector through multiple entities, including InCred Finance and InCred Capital. Infomance
4.2. HDB Financial Services prepares for IPO
HDB Financial Services, an upper-layer NBFC, is preparing for an initial public offering (IPO) to meet RBI’s listing requirements. The company has secured approval from its parent, HDFC Bank, for an IPO of up to INR 2,500 crore (Indian Rupees Two Thousand Five Hundred Crore) in fresh shares. The IPO process follows RBI’s scale-based regulation, which mandates upper layer NBFCs to list within three years. HDB Financial is expected to file draft papers with Securities and Exchange Board of India (SEBI) soon, joining other NBFCs in pursuing public listings. The Business Line
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.
