Weekly Round-up | Updates
1. Regulatory Updates
1.1. India
1.1.1. Reserve Bank of India (RBI) issues Master Directions on Minimum Capital Requirements for Operational Risk
In exercise of the powers conferred by Section 35A of the Banking Regulation Act, 1949, RBI being satisfied that it is necessary and expedient in the public interest to do so, issued directions which shall be called ‘Reserve Bank of India (Minimum Capital Requirements for Operational Risk) Directions, 2023′. These Directions require a specified Commercial Bank to hold sufficient regulatory capital against its exposures arising from operational risk. RBI
1.1.2. Government of India appoints Shri Swaminathan J. as RBI Deputy Governor
The Government of India has appointed Shri Swaminathan Janakiraman as the Deputy Governor of RBI, for a period of three years from the date of joining the post or until further orders, whichever is earlier. Shri Swaminathan was the Managing Director (Corporate Banking and Subsidiaries) of the State Bank of India (SBI) before being appointed as Deputy Governor. RBI
1.1.3. RBI releases updated portfolios of Deputy Governors
Consequent to the appointment of Shri Swaminathan Janakiraman as Deputy Governor, the following will be the portfolios of the Deputy Governors with effect from June 26, 2023. RBI
| Name | Departments |
| Dr. M.D. Patra | Co-ordinationCorporate Strategy and Budget DepartmentDepartment of Economic and Policy ResearchDepartment of Statistics and Information ManagementDeposit Insurance and Credit Guarantee CorporationFinancial Markets Operations DepartmentFinancial Markets Regulation DepartmentFinancial Stability DepartmentInternational DepartmentMonetary Policy DepartmentSecretary’s Department |
| Shri M. Rajeshwar Rao | Department of RegulationDepartment of CommunicationEnforcement DepartmentLegal DepartmentRisk Monitoring Department |
| Shri T Rabi Sankar | Central Security CellDepartment of Currency ManagementDepartment of External Investments & OperationsDepartment of Government and Bank AccountsDepartment of Information TechnologyDepartment of Payment and Settlement SystemsFintech DepartmentForeign Exchange DepartmentHuman Resource Management DepartmentInternal Debt Management DepartmentRight to Information (RIA) Division |
| Shri Swaminathan J. | Consumer Education and Protection DepartmentDepartment of SupervisionFinancial Inclusion and Development Department Inspection DepartmentPremise DepartmentRajbhasha Department |
1.1.4. RBI cancels the license granted to Mahalaxmi Cooperative Bank Ltd., Dharwad, Karnataka and allows it to function as a non-banking institution
RBI is satisfied to notify Mahalaxmi Cooperative Bank Ltd., Dharwad, Karnataka as a non-banking institution under Section 36A(2) read with Section 56 of the Banking Regulation Act, 1949. Accordingly, RBI has cancelled the license dated March 23, 1994, granted to Mahalaxmi Cooperative Bank Ltd., Dharwad, Karnataka to carry on banking business in India under Section 22 read with Section 56 of the Banking Regulation Act, 1949 with effect from the close of business on June 27, 2023. This makes it obligatory on the part of Mahalaxmi Cooperative Bank Ltd., Dharwad, Karnataka to stop conducting the business of ‘banking’ within the meaning of Section 5(b) of the Banking Regulation Act, 1949, including acceptance of deposits from non-members with immediate effect. RBI
1.2. Monetary Penalties
1.2.1. RBI imposed monetary penalties on several financial institutions
| Name of the Entity | Penalty Imposed | Reason |
| Textile Traders Co-operative Bank Ltd., Ahmedabad (Gujarat) | INR 4.50 lakh (Rupees Four Lakh Fifty Thousand only) | Contravention of directions issued by RBI on ‘Co-operative Banks – Interest Rate on Deposits’, ‘Customer Protection – Limiting Liability of Customers of Co-operative Banks in Unauthorized Electronic Banking Transactions’, and ‘Know Your Customer (KYC)’. |
| Uttarpara Co-operative Bank Ltd., West Bengal | INR 2.50 lakh (Rupees Two Lakh Fifty Thousand only) | Contravention of/ non-adherence with the directions issued by RBI on “Exposure Norms and Statutory / Other Restrictions – UCBs” and “Know Your Customer (KYC)”. |
| Solapur Siddheshwar Sahakari Bank Limited, Solapur (Maharashtra) | INR 1.50 lakh (Rupees One Lakh Fifty Thousand only) | Contravention of/ non-adherence with the directions issued by RBI on Know Your Customer (KYC). |
| Berhampur Co-operative Urban Bank Ltd., Odisha | INR 1 lakh (Rupees One lakh only) | Contravention of directions issued by RBI on (i) ‘Exposure Norms and Statutory/Other Restrictions – UCBs’ and (ii) ‘Know Your Customer (KYC)’. |
| Panihati Co-operative Bank Ltd | INR 2.50 lakh (Rupees Two Lakh Fifty Thousand only) | Contravention of directions issued by RBI on (i) ‘Exposure Norms and Statutory/Other Restrictions – UCBs’ and (ii) ‘Know Your Customer (KYC)’. |
| Ujjain Nagarik Sahakari Bank Maryadit, Ujjain, Madhya Pradesh | INR 1 lakh (Rupees One Lakh only) | Contravention of/ non-adherence with the directions issued by RBI on ‘Exposure Norms & Statutory/Other Restrictions – UCBs’ and ‘Investments by Primary (Urban) Co-operative Banks’. |
| Uttar Pradesh Co-operative Bank Limited, Lucknow | INR 28 lakh (Rupees Twenty-Eight Lakh only) | Non-compliance with the Reserve Bank of India (Know Your Customer (KYC)) Directions, 2016 and the directions of RBI on “Customer Service in State / District Central Co-operative Banks (StCBs / DCCBs)”. |
| CRIF High Mark Credit Information Services Private Limited, Mumbai | INR 25.75 lakh (Rupees Twenty-five lakh seventy-five thousand only) | Non-compliance with certain provisions of the Credit Information Companies (Regulation) Act, 2005 [CIC (R) Act] read with the Credit Information Companies Rules, 2006 [CIC Rules]. |
| Equifax Credit Information Services Private Limited, Mumbai | INR 24.25 lakh (Rupees Twenty-four lakh twenty-five thousand only) | Non-compliance with certain provisions of the Credit Information Companies (Regulation) Act, 2005 [CIC (R) Act] read with the Credit Information Companies Rules, 2006 [CIC Rules]. |
| Standard Chartered Bank-India | INR 30 lakh (Rupees Thirty Lakh Only) | Non-compliance with certain provisions of the ‘Reserve Bank of India (Know Your Customer (KYC)) Directions, 2016’. |
| TransUnion CIBIL Limited, Mumbai | INR 26 lakh (Rupees Twenty-six lakh only) | Non-compliance with certain provisions of the Credit Information Companies (Regulation) Act, 2005 [CIC (R) Act] read with the Credit Information Companies Rules, 2006 [CIC Rules]. |
| Experian Credit Information Company of India Private Limited, Mumbai | INR 24.75 lakh (Rupees Twenty-four lakh seventy-five thousand only) | Non-compliance with certain provisions of the Credit Information Companies (Regulation) Act, 2005 [CIC (R) Act] read with the Credit Information Companies Rules, 2006 [CIC Rules]. |
2. Trends
2.1. PhonePe launches Merchant Lending Market Place
PhonePe, a major fintech player, has made a strategic move to enter the merchant lending sector, aiming to compete directly with Paytm. The company has introduced a merchant lending marketplace that connects banks and non-banking financial companies (“NBFCs”) with its extensive base of 35 million (thirty-five million) merchants. Leveraging its distribution network and technological capabilities, PhonePe aims to expand its lending vertical.
To facilitate this expansion, PhonePe has launched a mobile app called ‘PhonePe for Business’ through which it claims to disburse loans quickly, in a matter of minutes. Additionally, the company is developing its own credit scoring system based on data science-driven models to enhance the efficiency of the merchant lending process. INC42
2.2. Bank loans to NBFCs under RBI scanner
RBI has started its annual inspection of banks and is especially giving attention to the loans that are being handed out by banks to NBFCs. Considering the share of bank loans to NBFCs and the percentage of loan book increasing to 13%-16% (thirteen to sixteen per cent) for the top 20 (twenty) players — a jump of 200-250 basis points, RBI is ascertaining the implication of these loans to the balance sheets of banks from an asset quality perspective. Hindu Business Line
2.3. Tata Motors Finance partners with Finserv to elevate and simplify digital lending capabilities
Tata Motors Finance Limited (TMFL), has partnered with Finserv, a leading global provider of payments and financial services technology solutions, to fortify its digital lending capabilities and enable top-notch customer experience. Tata Motors Finance has used FirstVisionTM from Fiserv to progress its digital strategy and stay up with quickly changing consumer expectations. Banking & Finance
3. Sector Overview
3.1. NBFC-MFI CreditAccess Grameen shares surge to 4% after the announcement of the social loan deal
3.2. NBFCs overtake bank stocks in FY24
3.3. Block deal: NBFC stock tanks 6% after shares worth ₹ 1,100 crores were sold
4. Business Updates
4.1. L&T Finance likely to sell its existing wholesale loan book
According to a media report, L&T Finance Holdings is looking to sell its wholesale loan book to interested banks, NBFCs and funds. The Company is also planning to repay or refinance its existing wholesale loan book. The sale of the wholesale loan book is expected to help the company achieve its target of becoming an over 80 per cent retail finance firm. Mint
4.2. Google to set up global fintech centre in Gujarat under its India Digitization Program
Google CEO Sundar Pichai has announced that the company shall open its global fintech operations centre at GIFT City in Gujarat through its existing USD 10 billion (United States Dollar Ten Billion Only) India Digitization Fund. According to Mr Pichai, the fintech centre shall cement India’s fintech leadership. BFSI.com
4.3. Apple in talks with NPCI, plans to launch UPI-based Apple Pay service in India
Apple is planning to launch a localized version of Apple Pay digital payment service in India. The tech giant is reportedly in talks with the National Payments Corporation of India (NPCI). According to the reports, preliminary talks have taken place, and Apple is moving forward with the plans. BFSI.com
4.4. Gold loan NBFCs can fuel MSMEs’ financing needs
Micro, Small and Medium Enterprises (MSMEs) have been monumental in accelerating growth through huge employment generation and fostering entrepreneurship. Despite being a significant contributor to India’s GDP, the MSME sector faces challenges in accessing adequate financial support. According to an MSME Lending Report by Aventus Capital, out of over 6.3 crore MSMEs in India, only 14 per cent have access to formal credit. NBFCs play a crucial role in addressing the challenges faced by underserved sectors. Unlike traditional institutions, NBFCs provide quick and efficient credit access for MSMEs. 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.
