1. Regulatory Updates
1.1. India
1.1.1. RBI maintains repo rate at 6.5 per cent
The Reserve Bank of India (“RBI”) held its policy repo rate steady at 6.50 per cent (six point five zero per cent) during the December 2024 Monetary Policy Committee (MPC) meeting. The decision aligns with a neutral monetary stance, emphasising inflation control while supporting growth. India’s economy shows resilience despite global uncertainties, with GDP growth for Fiscal Year (“FY”) 2024-25 projected at 6.6 per cent (six point six per cent). Inflation remains a concern due to food price pressures, expected to ease by the fourth quarter. Key measures include reducing the Cash Reserve Ratio (CRR) to 4 per cent (four per cent), expanding financial inclusion via Unified Payments Interface (“UPI”) credit, and introducing frameworks for Artificial Intelligence (“AI”) ethics and digital fraud mitigation. RBI
1.1.2. RBI announces key policy updates
RBI outlines measures in its Statement on Developmental and Regulatory Policies, focusing on liquidity, regulation, financial inclusion, fintech, and payment systems. Key actions include a phased CRR reduction to enhance liquidity, increased interest rate ceilings on Foreign Currency Non-Resident Bank (FCNR(B)) deposits, and linking the FX-Retail platform with Bharat Connect for broader accessibility. Other initiatives include raising the collateral-free agriculture loan limit, enabling Small Finance Banks (SFBs) to offer pre-sanctioned credit lines via UPI, and establishing a Framework for Responsible and Ethical Enablement of Artificial Intelligence (FREE-AI). Advancements also feature the Secured Overnight Rupee Rate (SORR) benchmark and MuleHunter.AI to combat financial fraud. RBI
1.1.3. New interest Rate for FRB 2031
The Government of India announces a 7.59 per cent (seven point five nine per cent) annual interest rate for its Floating Rate Bond (“FRB”) 2031 for the period from December 7, 2024, to June 6, 2025. This rate is based on the average yield of the last three auctions of 182 (one hundred and eighty two) – day treasury bill auctions, with a fixed spread of 1 per cent (one per cent). RBI
1.1.4. RBI cancels CoR of Zavron Finance
RBI cancels the Certificate of Registration (“CoR”) of Zavron Finance Private Limited under section 45-IA (6) of the RBI Act, 1934, citing violations in digital lending practices. Key breaches include outsourcing critical functions, inadequate due diligence on Lending Service Providers (LSPs), and failure to comply with Fair Practices Code, such as not providing loan agreements in vernacular languages. RBI
1.1.5. RBI lifts restrictions on Navi Finserv
RBI removes supervisory restrictions on Navi Finserv Limited, Bengaluru, imposed under section 45L(1)(b) of the RBI Act, 1934. The decision follows the company’s adoption of revamped systems, compliance with regulatory guidelines, and commitment to fair loan pricing practices. Navi Finserv can now resume loan sanctioning and disbursal. RBI
1.1.6. Monetary Penalties
RBI imposes monetary penalties on the following financial institutions:
| Name of the Financial Institution | Penalty Imposed | Reasons |
| The Patiala Central Co-operative Bank Ltd., Patiala, Punjab | INR 5,00,000/- (Indian Rupees Five Lakh only) | Contravention of provisions of section 6A read with section 56 of the Banking Regulation Act, 1949 (“BR Act”). |
| The Panchkula Central Co-operative Bank Ltd., Haryana | INR 5,00,000/- (Indian Rupees Five Lakh only) | Contravention of provisions of section 26A read with section 56 of BR Act. |
| Zila Sahkari Bank Ltd., Mirzapur | INR 5,00,000/- (Indian Rupees Five Lakh only) | Contravention of provisions of section 26A read with section 56 of BR Act. |
| The Kulithalai Co-operative Urban Bank Ltd., Tamil Nadu | INR 1,00,000/- (Indian Rupees One Lakh only) | Non-compliance with specific directions issued by RBI under ‘Supervisory Action Framework (SAF)’ and certain directions issued by RBI on ‘Issue and regulation of share capital and securities – Primary (Urban) Co-operative Banks’. |
| The Bapatla Co-operative Urban Bank Ltd., Andhra Pradesh | INR 2,00,000/- (Indian Rupees Two Lakh only) | Non-compliance with certain directions issued by RBI on ‘Loans and advances to directors, their relatives, and firms / concerns in which they are interested’, ‘Exposure Norms and Statutory / Other Restrictions – UCBs’ and ‘Know Your Customer (KYC)’. |
1.2. Sri Lanka
1.2.1. Sri Lanka introduces guidelines for MBU
The Central Bank of Sri Lanka has issued guidelines for the establishment of Mobile Banking Units (“MBUs”) by licensed commercial banks. These guidelines outline the operational framework, including permissible activities, governance, risk management, and approval processes. The aim is to improve financial inclusion, particularly in underserved areas. Central Bank of Sri Lanka
1.3. Bangladesh
1.3.1. Regulatory guidelines on UBOs and bank ownership
Bangladesh Bank emphasises the need for transparency in bank ownership structures to enhance the identification of Ultimate Beneficial Owners (“UBOs”). Non-transparent ownership impedes effective regulatory oversight, especially with complex ownership chains involving legal entities. In response, Bangladesh Bank has issued a circular mandating scheduled banks to submit UBO information quarterly, beginning by March 31, 2025. Bangladesh Bank
2. Trends
2.1. MODIFI boosts India trade finance push
Amsterdam-based fintech MODIFI plans to invest a significant portion of its USD 15 million (United States Dollar Fifteen Million only) Series C funding in India to enhance operations and support Small and Medium Enterprises (“SMEs”). The company aims to finance over 500 (five hundred) SMEs, focusing on sectors like renewables, automotive, chemicals, and textiles. MODIFI has allocated INR 50 crore (Indian Rupees Fifty Crore only) for this initiative, building partnerships with trade bodies and expanding its local workforce to address SME working capital challenges and foster global competitiveness. The Hindu BusinessLine
3. Sector Overview
3.1. Indian fintech jobs to grow by 7.5 per cent
The Indian fintech industry is set to see a 7.5 per cent (seven point five per cent) rise in job opportunities, driven by digital payments, blockchain, and open banking growth, according to a recent report. Banking and Non-Banking and Financial Company (“NBFC”) sectors are expanding roles in compliance, digital lending, and AI-enhanced services. Continued growth in 2024 is expected, fueled by regulatory shifts and financial inclusion initiatives. ET BFSI
4. Business Updates
4.1. PhonePe ends partnership with Juspay
PhonePe has announced it will discontinue partnerships with third-party platforms like Juspay, citing conflicts of interest and a move toward direct integrations with merchants. This shift allows PhonePe to own the entire payment value chain, from transaction origination to settlement, and enhance control over success rates. The Economic Times
4.2. Razorpay partners MHA for payment security
Razorpay has partnered with the Ministry of Home Affairs (“MHA”) and the Indian Cyber Crime Coordination Centre (I4C) to enhance digital payment security. The fintech firm has connected with over 1,600 (one thousand and six hundred) cybercrime stations across 25 (twenty-five) states and union territories. The collaboration aims to raise cybersecurity awareness and equip businesses and customers with tools to combat cyber threats, addressing over 7,000 (seven thousand) daily complaints on the National Cybercrime Reporting Portal. Business Standard
4.3. NBFC asked to remove PE and VC observers from the board
RBI has conveyed its stance to NBFCs regarding the role of ‘observers’ appointed by private equity (“PE”) and venture capital (“VC”) funds. These observers, who currently participate in board meetings without legal liabilities, are being encouraged to assume formal directorial roles to ensure accountability and alignment with governance standards under the Companies Act, 2013. This perspective aligns with RBI’s broader push to strengthen regulatory norms for NBFCs. Since 2020, PE and VC investments in NBFCs have exceeded INR 88,000 crore (Indian Rupees Eighty-Eight Thousand Crore only), underscoring their significance in the financial sector. The Economic Times
4.4. Niyo enhances engagement with CleverTap partnership
Fintech startup Niyo has partnered with CleverTap to boost customer retention through personalised engagement and real-time interactions. By leveraging CleverTap’s automation tools, Niyo improved onboarding processes, increased click-through rates by 2x (two times), optimised conversion rates by 40 per cent (forty per cent), and re-engaged 12 per cent (twelve per cent) of dormant users. IBS Intelligence
4.5. Tata Capital and Tata Motors Finance merger progresses with NCLT directive
The National Company Law Tribunal (“NCLT”) has directed Tata Capital Ltd and Tata Motors Finance Limited to convene meetings with shareholders and creditors for approval of their proposed merger. The merger, already endorsed by the RBI and Competition Commission of India (CCI), aims to form a unified financial services entity with an asset base of INR 1.6 lakh crore (Indian Rupees One Lakh and Sixty Thousand Crore only). Expected to take 9 (nine) – 12 (twelve) months, the merger will strengthen capital, expand geographical reach, and pool expertise in vehicle financing. The Economic Times
4.6. NBFC-MFIs confront tightened lending norms and sluggish asset growth
NBFC-Microfinance Institutions (“NBFC-MFIs”) are expected to witness a sharp deceleration in asset growth to 5 per cent (five per cent) in FY25, according to an ICRA report. The slowdown stems from stricter lending norms aimed at addressing sectoral risks such as borrower over-leveraging, socio-political disruptions, and rising employee attrition. Overdue books surged in the first half of FY25, signalling heightened credit risks. With credit costs projected at 5.4 per cent to 5.6 per cent (five point four per cent to five point six per cent) and constrained net interest margins, profitability is under pressure. Stricter borrower indebtedness limits and lender count caps further challenge growth, as rejection rates for new borrowers are set to increase. ICRA
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.
