1. Regulatory Updates
1.1. India
1.1.1. RBI issues revised guidelines on Forex Risk Hedging
The Reserve Bank of India (“RBI”) has issued the revised guidelines on ‘Risk Management and Inter-Bank Dealing-Hedging of foreign exchange risk’ (“Guidelines”). The Guidelines empower Authorized Dealers (“AD”) to categorize users as retail or non-retail, allowing them to provide forex derivative contracts and foreign currency interest rate derivative contracts accordingly. ADs are now authorized to offer various foreign exchange contracts involving Indian National Rupee or other currencies to both retail and non-retail users for cash, tom, and spot transactions. The Guidelines clearly define essential terms and classify users into retail and non-retail categories, specifying the eligibility criteria and access to different derivative contracts for each group. Furthermore, the Guidelines outline specific instructions for hedging, rebooking of contracts, and documentation requirements, particularly in dealings with non-resident users. The effective date for the implementation of these Guidelines is April 05, 2024. RBI
1.1.2. RBI re-appoints Dr Michael Debabrata Patra as Deputy Governor
RBI has re-appointed Dr Michael Debabrata Patra as Deputy Governor starting from January 15, 2024, for a further period of one year. RBI
1.1.3. Five NBFCs surrender their Certificate of Registration to RBI
The following Non-Banking Finance Company (“NBFC”), have surrendered their Certificate of Registration (CoR) to RBI.
| Name of the Entity | Grounds for Surrender |
| Radical Fincap Private Limited | Exit from Non-Banking Financial Institution (“NBFI”) business |
| Volkswagen Finance Private Limited | Exit from NBFI business |
| Sterling Guaranty & Finance Limited | Exit from NBFI business |
| Esteem Credits and Investments Private Limited | Exit from NBFI business |
| Sampada Business Solutions Limited | Meeting the criteria prescribed for unregistered Core Investment Company (CIC) that does not require registration |
1.1.4. RBI cancels the license of two cooperative banks
RBI, vide order dated January 12, 2024, has cancelled the license of the following banks:
| Name of the Bank | Grounds of Cancellation |
| Shree Mahalaxmi Mercantile Co-operative Bank Ltd., Dabhoi, Gujarat | 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. |
| The Hiriyur Urban Co-operative Bank Ltd., Hiriyur, Karnataka | Inadequate capital and earning prospects as per Sections 11(1) and 22(3)(d) read with Section 56 of the 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. |
1.1.5. Monetary Penalties
RBI imposes monetary penalties on the following financial institutions:
| Name of the Financial Institution | Penalty Imposed | Reason |
| Navsarjan Industrial Co-operative Bank Ltd., Ankleshwar, dist. Bharuch, Gujarat | INR 7,00,000 (Indian Rupees Seven Lakh Only) | Contravention of/non-adherence with certain provisions of the directions issued by RBI on ‘Know Your Customer Direction, 2016 (“KYC Directions”)’ ‘Placement of Deposits with Other Banks by Primary (Urban) Co-operative Banks (“UCBs”)’, and contravention of ‘Section 26A (2) read with Section 56 of the BR Act’. |
| The Mehsana Jilla Panchayat Karmachari Co-operative Bank Ltd., Mehsana, Gujarat | INR 3,00,000 (Indian Rupees Three Lakh Only) | Contravention of/non-adherence with certain provisions of the directions issued by RBI on ‘Placement of Deposits with Other Banks by Primary UCBs’ and contravention of provisions of Section 26A(2) read with Section 56 of the BR Act. |
| The Halol Urban Co-operative Bank Ltd., Panchmahal, Gujarat | INR 2,00,000 (Indian Rupees Two 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’, ‘Placement of Deposits with Other Banks by Primary UCBs’ and ‘(Co-operative Banks – Interest Rate on Deposits) Directions, 2016’. |
| The Stambhadri Co-operative Urban Bank Ltd., Khammam, Telangana | INR 50,000 (Indian Rupees Fifty Thousand Only) | Contravention of/non-adherence with certain provisions of the directions issued by RBI on ‘Board of Directors – UCBs’ read with the directions issued by RBI on ‘Loans and advances to directors, their relatives, and firms/concerns in which they are interested’. |
| The Subramanianagar Co-operative Urban Bank Ltd., Salem, Tamil Nadu | INR 25,000 (Indian Rupees Twenty Five Thousand Only) | Contravention of/non-adherence with certain provisions of the directions issued by RBI on ‘Board of Directors – UCBs’ read with the directions issued by RBI on ‘Loans and advances to directors, their relatives, and firms/concerns in which they are interested’. |
| Sakthi Finance Limited, Coimbatore, Tamil Nadu | INR 6,00,000 (Indian Rupees Six Lakh Only) | Contravention of/non-adherence with certain provisions of the KYC Directions issued by RBI. |
| ESAF Small Finance Bank Limited | INR 29,55,000 (Indian Rupees Twenty Nine Lakh Fifty Five Thousand Only) | Contravention of/non-adherence with certain provisions of the directions issued by RBI on ‘Customer Service in Banks’. |
| Punjab and Sind Bank | INR 1,00,00,000 (Indian Rupees One Crore Only) | Contravention of/non-adherence with certain provisions of the directions issued by RBI on ‘Loans and Advances – Statutory and Other Restrictions’. |
| Dhanlaxmi Bank Ltd | INR 1,20,47,000 (Indian Rupees One Crore Twenty Lakh Forty-Seven Thousand Only) | Contravention of/non-adherence with certain provisions of the directions issued by RBI on Loans and Advances – Statutory and Other Restrictions’, KYC Directions,’ and ‘Reserve Bank of lndia (Interest Rate on Deposits) Directions, 2016’. |
1.2. Sri Lanka
1.2.1. Sri Lanka and India discuss early launch of UPI payment system
Half a year following its announcement by the respective prime ministers, India has engaged in discussions with Sri Lanka regarding the expedited implementation of the Unified Payments Interface (“UPI”) payment system. The discussions also involved a reaffirmation of India’s commitment to supporting the debt restructuring process in the financially challenged island nation. In July 2023, Prime Minister Narendra Modi and Sri Lanka’s President Ranil Wickremesinghe formalized an agreement on the acceptance of the UPI in Sri Lanka during Wickremesinghe’s two-day visit to India. Financial Express
1.3. Indonesia
1.3.1. Indonesia witnesses less fintech investments in 2023, says Tracxn
In 2023, Indonesian fintech startups experienced a challenging year as funding directed toward the industry saw a substantial 51 per cent (Fifty-One per cent) decline compared to the previous year. Investors exercised caution amid increasing global uncertainty, as reported by the private data market research firm Tracxn. The company’s report, ‘Geo Annual Report: Indonesia FinTech 2023,’ highlighted that investors remained cautious due to the global macroeconomic slowdown and other geopolitical issues. The contraction in funding was evident across all stages, with the seed stage experiencing an 84 per cent (Eighty-Four per cent) nosedive, while early-stage funding saw a substantial 79 per cent (Seventy-Nine per cent) decrease. In contrast, late-stage deals demonstrated more resilience, experiencing a milder decline of 40 per cent (Forty per cent). The Jakarta Post
2. Trends
2.1. Fino Payments Bank seeks SFB license from RBI after its board’s consensus
Fino Payments Bank, a subsidiary of Fino Paytech Limited, has applied for a Small Finance Bank (“SFB”) license with RBI under guidelines for on-tap licensing of SFB. In July 2023, the bank’s board approved the proposal to apply for an SFB license and also directed the formation of a committee to advance the reverse merger evaluation with its parent entity, Fino Paytech Limited. Inc 42
2.2. Paytm plans to invest in GIFT city to offer payment solutions for cross-border remittance
One97 Communications Limited (OCL), the parent company of the publicly listed fintech unicorn Paytm, has expressed its intention to invest INR 100 crore (Indian Rupees One Hundred Crores only) in Gujarat International Finance Tec (“GIFT”) City to establish a global financial ecosystem. In a bid to streamline cross-border remittances, Paytm plans to provide faster and cost-effective solutions driven by artificial intelligence (AI). The company is also gearing up to set up a development center within GIFT City, serving as the epicenter for creating the aforementioned solutions and functioning as a technological hub. This center is expected to generate employment opportunities and house engineers dedicated to the development of top-tier financial products and services. Notably, Paytm recently extended its partnership with the global travel tech company Amadeus to enhance the booking experience. Inc 42
2.3. Insuretech platform Onsurity announces to expand product offerings
The Founder and CEO of Onsurity, Yogesh Agarwal, has revealed the platform’s intentions to expand its offerings and further penetrate India’s small and medium-sized enterprises (SME) market in the realm of employee healthcare and wellness. Onsurity is set to introduce additional product lines, with a focus on launching a liability product line. This line will encompass a range of insurance products, including director and officer indemnity, commercial general liability, and public liability insurance. The Hindu Business Line
3. Sector Overview
3.1. Bank borrowings increase by sixty-seven per cent in 2023: RBI
3.2. Microfinance association asks dedicated fund for equity support to small, emerging MFIs: Sa-Dhan
3.3. Bank lending to NBFCs shows deceleration in November, despite persistent year-on-year growth: RBI
4. Business Updates
4.1. US-based cybersecurity company SentinelOne acquires Bengaluru based startup PingSafe
AI-powered cybersecurity company SentinelOne, based in the United States, is set to acquire the Bengaluru-based cybersecurity startup PingSafe through a combination of cash and stock transactions. Established in 2021, PingSafe aspires to serve as a comprehensive platform addressing enterprise cloud security needs. The platform utilizes cloud APIs and logs to autonomously identify vulnerabilities without requiring human intervention. Over the past 12 (twelve) months, PingSafe has quadrupled its user base, catering to notable entities such as Flipkart, Razorpay, PolicyBazaar, SBI General, Tata 1mg, and others. PingSafe specializes in offering a next-generation cloud security platform based on intelligence regarding attackers. SentinelOne intends to integrate PingSafe’s cloud-native application protection platform (CNAPP) into its ‘Singularity Platform’, anticipating that this integration will bring about a ‘paradigm shift’ in cloud security. Inc 42
4.2. Power Finance Corporation receives RBI approval to set up a finance company in GIFT City
RBI has granted approval to Power Finance Corporation (“PFC”) to establish a wholly-owned finance company within the GIFT City in Gujarat. PFC Chairman and Managing Director Parminder Chopra stated that this entity within the International Financial Services Centre (IFSC) will open up new business prospects for PFC and contribute to the advancement of the nation’s power sector. According to a regulatory filing, PFC has received a no-objection letter from the RBI, allowing the establishment of a finance company as a wholly-owned subsidiary in the GIFT City. The Economic Times
4.3. SMFG India Credit Co. raises funds from Sumitomo Mitsui Banking Corporation
SMFG India Credit Co. Ltd., previously known as Fullerton India Credit Co. Ltd., has secured INR 600 crore (Indian Rupees Six Hundred Crores Only) from Sumitomo Mitsui Banking Corporation in Tokyo. This funding was obtained by issuing its inaugural Perpetual Debt Instrument (“PDI”) through the External Commercial Borrowing (ECB) route. This issuance of PDI has strengthened the tier 1 capital base of the NBFC, demonstrating the consistent and strong backing from its parent company, Sumitomo Mitsui Financial Group. The Hindu 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.
