1. Regulatory Updates
1.1. India
1.1.1. RBI Governor announces principle-based framework for digital payment authentication
During the first Monetary Policy Committee (“MPC”) statement of 2024, Reserve Bank of India (“RBI”) Governor Shri Shaktikanta Das announced additional measures, including the proposal for a principle-based framework for authenticating digital payments. Governor Das highlighted the popularity of One-Time Passwords (OTP) as an additional factor of authentication (AFA) and mentioned the MPC’s intention to implement a principle-based framework for securing digital payments. To enhance the utilisation of such security measures, the RBI aims to adopt this framework for digital payment transactions, with further instructions to be issued separately. RBI
1.1.2. RBI mandates key fact statement for transparency in retail and MSME loans
RBI has instructed banks and Non-Banking Financial Companies (“NBFCs”) to furnish a Key Fact Statement (“KFS”) to all retail and Micro, Small and Medium Enterprises (“MSMEs”) borrowers. The KFS should encompass comprehensive details of the loan agreement, including interest rates and additional fees like processing fees and documentation charges. The central bank aims to improve transparency by extending the requirement of a KFS, which initially applied to specific lenders, to encompass all retail and MSME loans. This move is designed to empower borrowers with essential information, such as the all-inclusive annual percentage rate (APR), facilitating well-informed decision-making. RBI
1.1.3. RBI raises annual remuneration ceiling for Non-Executive Directors
RBI has decided to increase the maximum annual remuneration limit for non-executive directors from INR 20 lakh (Indian Rupees Twenty Lakh Only) to INR 30 lakh (Indian Rupees Thirty Lakh Only). This change is applicable immediately and extends to private banks, small finance banks, payment banks, and wholly-owned subsidiaries of foreign banks. The revision aims to ensure that banks can attract qualified individuals to serve on their boards. Banks are required to establish suitable criteria for fixed remuneration for non-executive directors, subject to board approval before any review of existing remuneration. Additionally, private banks need regulatory approval for part-time chairman remuneration in line with banking regulations. RBI
1.1.4. Nine NBFCs and One HFCs surrender their Certificate of Registration to RBI
The following NBFCs and Housing Finance Companies (HFCs) surrendered their Certificate of Registration (CoR) to RBI.
| Name of the Entity | Grounds for Surrender |
| S.M.I.L.E. Microfinance Limited | Exit from Non-Banking Financial Institution (“NBFI”) business. |
| JFC Impex Pvt. Ltd. | Exit from NBFI business. |
| Cauvery Tradefin Private Limited | Exit from NBFI business. |
| Ginni Tradefin Limited | Exit from NBFI business. |
| J G Trading & Investment Pvt Ltd | Ceases to be a legal entity owing to amalgamation/merger/dissolution/voluntary strike-off. |
| S. K. Finserve Private Limited | Ceases to be a legal entity owing to amalgamation/merger/dissolution/voluntary strike-off. |
| Microfirm Capital Private Limited | Ceases to be a legal entity owing to amalgamation/merger/dissolution/voluntary strike-offs. |
| Bohra & Co Pvt Ltd | Ceases to be a legal entity owing to amalgamation/merger/dissolution/voluntary strike-off. |
| Mahyco Grow Finance Private Limited | Ceases to be a legal entity owing to amalgamation/merger/dissolution/voluntary strike-off. |
| Reliance Home Finance Limited | Exit from Housing Finance Institution business. |
1.1.5. RBI cancels licenses of three NBFCs
RBI, under Section 45-IA (6) of the Reserve Bank of India Act, 1934, has cancelled the license of the below-mentioned NBFCs.
| Name of the NBFC | Cancellation order date |
| Bharathu Investment & Finance India Limited | January 17, 2024 |
| Cox & Kings Financial Service Limited | January 17, 2024 |
| PSPR Enterprises Private Limited | January 25, 2024 |
1.1.6. RBI cancels the license of Jai Prakash Narayan Nagari Sahakari Bank Ltd., Maharashtra
RBI, vide order dated January 12, 2024, has cancelled the license of Jai Prakash Narayan Nagari Sahakari Bank Ltd., Basmathnagar, Maharashtra due to factors such as inadequate capital and earning prospects as per Sections 11(1) and 22(3)(d) read with Section 56 of the Baking Regulation Act, 1949 (“BR Act”), non-compliance with requirements under Section 22(3)(a), 22(3)(b), 22(3)(c), 22(3)(d) and 22(3)(e) of the BR Act, prejudicial conduct affecting interest of the depositors and public, including inability to pay to the present depositors in full. RBI
1.1.7. Monetary Penalties
RBI imposes monetary penalties on the following financial institutions:
| Name of the financial institution | Penalty Imposed | Reason |
| Power Finance Corporation Limited | INR 8,80,000 (Indian Rupees Eight Lakh Eighty Thousand Only) | Contravention of/non-adherence with the directions issued by RBI on ‘Liquidity Risk Management Framework for Non-Banking Financial Companies and Core Investment Companies’. |
| The Nakodar Hindu Urban Cooperative Bank Ltd., Nakodar, Dist. Jalandhar, Punjab | INR 6,00,000 (Indian Rupees Six Lakh Only) | Contravention of/non-adherence with directions issued by RBI on Income Recognition, Asset Classification, Provisioning and Other Related Matters (IRAC Norms) and specific directions issued by RBI under Supervisory Action Framework (SAF). |
| Zoroastrian Co-operative Bank Ltd., Mumbai | INR 43,30,000 (Indian Rupees Forty Three Lakh Thirty Thousand Only) | Contravention of/non-adherence with certain provisions of the directions issued by RBI on ‘Maintenance of Deposit Accounts’, ‘Interest Rate on Deposits’ and ‘Frauds in UCBs: Changes in Monitoring and Reporting mechanism’. |
| Bombay Mercantile Co-operative Bank Ltd | INR 63,30,000 (Indian Rupees Sixty Three Lakh Thirty Thousand Only) | Contravention of/non-adherence with certain provisions of the directions issued by RBI on ‘Exposure Norms and Statutory / Other Restrictions – UCBs’, ‘Gold Loan – Bullet Repayment – UCBs’ and ‘Unclaimed Deposits and Inoperative/ Dormant Accounts in UCBs’ |
| The Navnirman Co-operative Bank Ltd., Ahmedabad, Gujarat | INR 1,00,000 (Indian Rupees One 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’. |
1.2. Bangladesh
1.2.1. Private sector short-term foreign debt in Bangladesh declines in December
According to Bangladesh Bank data, the short-term foreign debt of the private sector declined by 1.43 per cent (one point four three per cent) to USD 11.79 billion (United States Dollar Eleven Billion Seven Hundred Ninety Million Only) in December compared to the previous month. This decrease is attributed to the preference for domestic borrowing, which has proven to be more appealing than acquiring loans from abroad. Over the course of 2023, private-sector borrowing has consistently decreased each month due to the rising interest rates in the international market, which has dissuaded private-sector borrowers. In January 2023, the debt level was recorded at USD 15.58 billion (United States Dollar Fifteen Billion Five Hundred Eighty Million Only). The Daily Star
1.3. Sri Lanka
1.3.1. Sri Lanka and World Bank sign USD 150 million deal to strengthen financial sector safety net
The Government of Sri Lanka (GOSL) and the World Bank have inked a deal for USD 150 million (United States Dollar One Hundred Fifty Million Only) funding to enhance the resilience of the country’s financial sector through the Financial Sector Safety Net Strengthening Project (FSSNP). Simultaneously, a project agreement between the World Bank and the Central Bank of Sri Lanka (“CBSL”) was formalised for the project’s implementation. The project’s primary objective is to fortify Sri Lanka’s financial sector safety net, with a specific focus on the Sri Lanka Deposit Insurance Scheme (“SLDIS”) overseen by the CBSL. The initiative also seeks to bolster the financial and institutional capabilities of SLDIS in alignment with global best practices for efficient deposit insurance schemes. CBSL
2. Trends
2.1. NPCI developing ‘Digital Payments Score’ for user credit ratings and retail credit access
The National Payments Corporation of India (“NPCI”) is developing a ‘Digital Payments Score’ to provide users with a credit score, facilitating access to retail credit, according to a senior executive. The NPCI plans to collaborate with select lenders for a pilot program aimed at enhancing the credit identity of Indian consumers. Despite significant growth in loan disbursements by Indian fintech companies, the retail credit market in India remains under-penetrated. Fintechs are expected to play a crucial role in driving the Digital Payments Score, focusing on balancing utilisation and credit risks while minimising friction. The parameters for calculating this score will evolve during the process, as stated by Praveena Rai, COO of NPCI. The Economic Times
2.2. CRED to acquire Kuvera, expanding into mutual funds market
Fintech unicorn CRED, led by Kunal Shah, is set to acquire online wealth management platform Kuvera in a deal involving a combination of cash and stock. The specific size of the deal has not been disclosed. This acquisition marks CRED’s entry into the mutual funds market. Kuvera, recognised as a top-five direct mutual fund platform, boasts a user community exceeding 3 lakh (three lakhs), managing assets exceeding INR 50,000 crore (Indian Rupees Fifty Thousand Crore Only). In addition to its commission-free mutual fund offerings, Kuvera provides various tools for comprehensive asset tracking, advisory services, risk-based asset exploration, family accounts, and diverse asset classes. ET BFSI
3. Sector Overview
3.1. India’s bank credit growth may moderate in FY25 due to deposit challenges: S&P Global Ratings
3.2. Liquidity deficit in Indian banking system eases to INR 2.4 trillion: Financial Express
4. Business Updates
4.1. Nium secures RBI approval for PPI and PA licenses, enhancing fintech offerings in India
Global fintech firm Nium has received an in-principal approval from RBI for prepaid payment instrument (PPI) and payment aggregator (“PA”) licenses. These licenses will enable Nium to enhance its financial product offerings in India, including prepaid cards and merchant payment acquiring. The PPI license allows Nium to issue prepaid cards for various applications, collaborating with strategic card partners. The PA license enables the company to provide merchant onboarding and acquiring services, connecting to real-time payment options like Unified Payments Interface (“UPI”). Nium, operational in over 34 (thirty-four) countries, aims to establish itself as an end-to-end acquiring solution provider. With a total of 13 (thirteen) licenses, Nium plans to expand its services in India, promoting financial inclusion and offering advanced payment solutions. Inc 42
4.2. Fintech unicorn Slice launches UPI-enabled prepaid account, expands services amid financial growth
Slice, a fintech unicorn backed by Tiger Global, has launched a UPI-enabled prepaid account for users after a three-month beta testing period, primarily targeting its existing customer base. The account includes a UPI handle (@slice) and a virtual prepaid account for users to add money, spend via UPI or card, and link to other bank accounts. Autoload functionality is incorporated for seamless transactions and automated recurring payments. Slice, initially a buy now pay later (BNPL) platform, pivoted its business after RBI restrictions and now offers personal loans and UPI payment services. The FY23 financials reveal significant revenue growth and the incorporation of a gaming feature in UPI transactions for user engagement. Inc 42
4.3. Fintech companies Juspay, Zoho, and Decentro secured payment aggregator licenses
On February 06, two fintech startups, Juspay and Decentro, secured the final license to function PA. They will join previously licensed entities such as Razorpay, Cashfree, Zomato, and others. Juspay has been operating as a payment gateway, managing the technology stack for e-commerce payments. On the other hand, Decentro, a technology firm, facilitates financial services like lending and KYC for e-commerce and other consumer-facing entities. Additionally, Zoho, a Software as a Service (“SaaS“) startup, obtained the PA license from the RBI on February 02, making it the first enterprise SaaS player to receive such approval. The Economic Times
4.4. Juspay acquires LotusPay to enhance BFSI offerings
SoftBank-backed fintech firm Juspay has acquired LotusPay, a software provider catering to merchants and banks, in an all-cash deal. LotusPay, founded in 2016, specialises in National Automated Clearing House (NACH) debit services and provides cloud-based software solutions. Juspay’s acquisition of LotusPay is strategically aimed at bolstering its Banking, Financial Services, and Insurance (“BFSI“) vertical. The focus is on enhancing recurring payment capabilities and strengthening offerings to both the BFSI segment and merchants. 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.
