1. Regulatory Updates
1.1. India
1.1.1. RBI Governor urges prudent interest rate practices in the microfinance sector
Reserve Bank of India (“RBI”) Governor Shri Shaktikanta Das has expressed concern over some Non-Banking Finance Company-Microfinance Institutions (NBFC-MFIs) reportedly having wider net interest margins. Speaking at the FIBAC event, the governor emphasised the significance of microfinance in promoting financial inclusion for marginalised clients. He urged microfinance institutions to consider the affordability and repayment capacity of borrowers, despite deregulated interest rates. He further highlighted the need for judicious use of flexibility in interest rate setting, particularly cautioning against usurious practices. RBI
1.1.2. Monetary Penalties
RBI imposes monetary penalties on the following financial institutions:
| Name of the financial institution | Penalty Imposed | Reason |
| Bank of Baroda | INR 4,34,00,000 (Indian Rupees Four Crore Thirty-Four Lakh Only) | Contravention of/non-adherence with certain provisions of the directions issued by RBI on ‘Creation of a Central Repository of Large Common Exposures – Across Banks’ dated September 11, 2013 read with ‘Central Repository of Information on Large Credits (CRILC) – Revision in Reporting’ dated February 13, 2014, ‘Loans and Advances – Statutory and Other Restrictions’, and ‘Reserve Bank of India (Interest Rate on Deposits) Directions, 2016’ |
| Citibank N.A. | INR 5,00,00,000 (Indian Rupees Five Crore Only) | Contravention of/non-adherence with certain provisions of the directions issued by RBI on Section 26A of the Banking Regulation Act, 1949 (“BR Act”) read with Paragraph 3 of ‘The Depositor Education and Awareness Fund Scheme, 2014 – Section 26A of BR Act – Operational Guidelines’, Section 10(1)(b)(ii) of the BR Act, and non-compliance with RBI directions on ‘Managing Risks and Code of Conduct in Outsourcing of Financial Services by banks’ read with ‘Reserve Bank of India Know Your Customer (“KYC”) Direction, 2016’. |
| Indian Overseas 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’. |
| Vejalpur Nagarik Sahkari Bank Limited, Vejalpur, district Panchmahal, Gujarat | INR 25,000 (Indian Rupees Twenty-Five Thousand Only) | Contravention of/non-adherence with certain provisions of the directions issued by RBI on ‘Placement of Deposits with Other Banks by Primary (Urban) Co-operative Banks (“UCBs”)’. |
| Khambhat Nagarik Sahakari Bank Limited, Khambhat, Gujarat | INR 50,000 (Indian Rupees Fifty Thousand 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’. |
| Shri Mahila Sewa Sahakari Bank Limited, Ahmedabad, Gujarat | INR 2,50,000 (Indian Rupees Two Lakh Fifty Thousand Only) | Contravention of/non-adherence with directions issued by RBI on ‘Placement of Deposits with Other Banks by Primary UCBs’ and ‘Reserve Bank of India (Co-operative Banks – Interest Rate on Deposits) Directions, 2016’. |
| Porbandar Vibhagiya Nagarik Sahkari Bank Limited, Porbandar, Gujarat | INR 2,00,000 (Indian Rupees Two Lakh Only) | Contravention of/non-adherence with directions issued by RBI on ‘Placement of Deposits with Other Banks by Primary UCBs’. |
| Sarvodaya Nagarik Sahakari Bank Limited, Himmatnagar, Gujarat | INR 1,00,000 (Indian Rupees One Lakh Only) | Contravention of/non-adherence with directions issued by RBI on ‘Placement of Deposits with Other Banks by Primary UCBs’. |
| Mehsana Urban Co-operative Bank Limited, Mehsana | INR 15,00,000 (Indian Rupees Fifteen Lakh Only) | Contravention of/non-adherence with directions issued by RBI on ‘Interest Rate on Deposits’ |
| Nasik Merchant’s Co-operative Bank Limited, Nashik | INR 48,30,000 (Indian Rupees Forty-Eight Lakh Thirty Thousand Only) | Contravention of/non-adherence with the directions issued by RBI on ‘Frauds in UCBs: Changes in Monitoring and Reporting mechanism’ and on ‘Maintenance of Deposit Accounts’ |
| Sangli Sahakari Bank Limited, Mumbai, Maharashtra | INR 2,00,000 (Indian Rupees Two Lakh Only) | Contravention of/non-adherence with directions issued by RBI on ‘Board of Directors-UCBs’ |
| Sappers Finance and Consultancy Private Limited, Kolkata | INR 1,50,000 (Indian Rupees One Lakh Fifty Thousand Only) | Contravention of/non-adherence with directions issued by RBI on (i) ‘Requirement for obtaining prior approval of RBI in cases of acquisition/transfer of control of Non-Banking Financial Companies (“NBFCs”)’; and (ii) ‘Non-Banking Financial Company Returns (Reserve Bank) Directions, 2016’ read with directions issued by RBI on ‘Format of Statutory Auditors’ Certificate (SAC) to be submitted by NBFCs’. |
| Pudukkottai Co-operative Town Bank Limited, Pudukkottai, Tamil Nadu | INR 25,000 (Indian Rupees Twenty Five Thousand Only) | Contravention of/non-adherence with directions issued by RBI on ‘Board of Directors-UCBs’ |
1.2. Bangladesh
1.2.1. Mutual Trust Bank partners with DGePay for seamless Bangla QR payments
Mutual Trust Bank Ltd has joined forces with DGePay Services Ltd, a licensed white label merchant acquirer and payment system operator sanctioned by the Bangladesh Bank. Through this collaboration, customers gain access to a widespread merchant platform for smooth transactions, allowing them to execute Bangla Quick Response (QR) payments. Additionally, merchants benefit from the capability to accept payments through this system. The Daily Star
1.2.2. Bangladesh Bank notices increased dollar reserve in private banks
Bangladesh Bank has observed a growth in dollar reserves within private banks, attributing it to increased remittances and decreased import liabilities. The central bank praised the recent move by the Bangladesh Foreign Exchange Dealers’ Association (Bafeda) and the Association of Bankers, Bangladesh (ABB) to devalue the dollar by Tk 0.50 (Bangladeshi Taka Zero point Five Only). During a press conference, spokesperson Mezbaul Haque revealed a reduction in short-term foreign debt liability from USD 16.41 billion (United States Dollar Sixteen Billion Four Hundred Ten Million Only) in September of the previous year to USD 12.42 billion (United States Dollar Twelve Billion Four Hundred Twenty Million Only), with an optimistic projection of further decrease to USD 6.9 billion (United States Dollar Six Billion Nine Hundred Million Only) in the coming year. Dhaka Tribune
1.3. Sri Lanka
1.3.1. Central Bank of Sri Lanka reduces interest rate to increase growth
Central Bank of Sri Lanka (CBSL) has reduced the rates of its standing deposit facility rate (SDFR) and the standing lending facility rate (SLFR) by 100 (Hundred) basis points to 9 per cent (nine per cent) and 10 per cent (ten per cent) respectively. This decision has been taken after the careful analysis of current and expected developments in the national and international economy with an objective to achieve and maintain medium inflation rate at 5 per cent (five per cent). Daijiworld
2. Trends
2.1. Jio Financial Services seeks RBI approval for its conversion to CIC from NBFC
Jio Financial Services has formally requested RBI to convert its status from an NBFC to a Core Investment Company (CIC). This conversion is in compliance with RBI’s directive, which stipulated the need for Jio Financial Services to undergo this change as part of the approval process for altering the company’s shareholding structure and control. This approval was granted in conjunction with the demerger of the financial services business from Reliance Industries Limited (RIL). Economic Times
2.2. MFIN urges RBI to address digital lending overlap and regulation compliance
The Microfinance Institutions Network (“MFIN”) has urged RBI to reassess and address the overlap between microfinance and digital lending. MFIN is advocating for the RBI to ensure that fintech lenders adhere to microfinance regulations to prevent weak underwriting and safeguard customer protection. Additionally, MFIN recommends that data be reported to the microfinance bureau rather than the retail credit bureau. They propose that the central bank reviews the interest rates and recovery practices of digital lenders. MFIN suggests that the RBI mandates all regulated entities in microfinance to engage in daily reporting for better oversight, especially considering the potential impact of small amounts on responsible finance and avoiding overindebtedness. Business Line
2.3. NBFCs approach RBI to re-evaluate the increased risk weights
NBFCs through its representative body Finance Industry Development Council (FIDC) have requested RBI to re-evaluate the increased risk weights assigned to bank loans taken by NBFCs and consumer credit saying. FIDC has indicated that this will probably result in a significant rise in the cost of funds for crucial sectors. This is particularly concerning as the micro, small and medium enterprises (“MSME”) and self-employed sectors are recovering from the effects of Covid and aiming to boost capital expenditure by modernizing and expanding their productive capacity. Financial Express
2.4. SBI empanels startups and fintechs for digital solutions in KYC, credit profiling, and more
The State Bank of India (“SBI”) is set to hire startups and fintech companies by empanelling them for a range of services, including digital KYC, credit profiling, property, and car aggregation. The bank has invited bids for the development, customisation, and integration of digital solutions. The selected entities will assist SBI in building in-house marketplaces for the sale and purchase of tickets, vehicles, properties, commercial and agricultural equipment, agricultural commodities, and health services, as well as offering advisory services to customers. The Economic Times
3. Sector Overview
3.2. India’s GDP is predicted to rise to 6.5 per cent in financial year 2024-25: Goldman Sachs
3.3. India’s banking liquidity deficit hits 5-Year high, expected to ease next week: Economists
4. Business Updates
4.1. RBI approves Wint Wealth Group’s majority stake acquisition in Ambium Finserve
RBI has granted approval for Wint Wealth Group’s acquisition of majority stake in Ambium Finserve Pvt. Ltd., an NBFC based in Chandigarh. Wint Wealth Group, a wealth-tech conglomerate specialising in fixed-income investments, has initiated wholesale lending operations through the acquired NBFC, now operating under the brand name Wint Capital. The current loan portfolio of Wint Capital is approximately INR 50 crore (Indian Rupees Fifty Crore Only), with expectations to reach INR 500 crore (Indian Rupees Five Hundred Crore Only) by the end of 2024. Money Control
4.2. InCred Finance attains unicorn status, raises funds in Series D funding
Bizongo, a digitisation platform backed by Tiger Global, has announced the acquisition of FactoryPlus, a factory digitisation app for MSMEs, backed by Titan Capital. This strategic move aims to digitise MSME businesses through a mobile solution. While the financial details were not disclosed, it marks Bizongo’s third acquisition, following the integration of Clean Slate Technologies and Hexa last year. The acquisition is expected to empower local manufacturers with an AI-powered solution for sourcing raw materials and facilitate embedded financing options. Live Mint
4.3. Fedbank Financial Services raises INR 329.99 crore through pre-placement IPO
Fedbank Financial Services, a subsidiary of Federal Bank, has raised INR 329.99 crore (Indian Rupees Three Hundred Twenty-Nine Crore Ninety-Nine Lakh Only) from investors including SBI Life Insurance, Star Union, Yasya Investments and Nuvama, ahead of its initial public offer (“IPO”). The IPO with a price bank of INR 133-140 (Indian Rupees One Hundred and Thirty Three to Indian Rupees One Hundred and Forty Rupees) per share, is a combination of fresh issue and offer for sale shares. The NBFC has informed to utilise the net proceeds of the first issue towards increasing its Tier- I capital base to meet its future capital requirements and offer expenses. Live Mint
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.
