India – AKP Banking & Finance Digest- October 14, 2024.
1. Regulatory Updates
1.1. India
1.1.1 RBI signs currency swap agreement with MMA
The Reserve Bank of India (“RBI”) has entered into a currency swap agreement with the Maldives Monetary Authority (“MMA”) under the South Asian Association for Regional Cooperation (SAARC) Currency Swap Framework 2024-27. Signed on October 7, 2024, in New Delhi, the agreement provides the MMA with access to USD 400 million (United States Dollar Four Hundred Million only) through the United States Dollar/Euro Swap Window and INR 30 billion (Indian Rupees Thirty Billion only) through the Indian Rupees (INR) Swap Window. This arrangement, valid until June 18, 2027, aims to support short-term foreign exchange liquidity needs or balance of payments challenges for the Maldives. RBI
1.1.2. RBI holds repo rate at 6.50 per cent and shifts stance to ‘neutral’
RBI’s Monetary Policy Committee (“MPC”), decided to keep the policy repo rate unchanged at 6.50 per cent (six point five zero per cent). The Standing Deposit Facility (SDF) rate remains at 6.25 per cent (six point two five per cent), while the Marginal Standing Facility (MSF) rate and the bank rate stay at 6.75 per cent (six point seven five per cent). The MPC shifted its monetary policy stance to ‘neutral’ to focus on aligning inflation with the 4 per cent (four per cent) target, while continuing to support economic growth. RBI
1.1.3. RBI issues new internal risk assessment guidelines
RBI released comprehensive guidelines for internal risk assessments focused on combating money laundering, terrorist financing, and proliferation financing. The framework encourages regulated entities like banks and Non-Bank Financial Company (“NBFCs”) to adopt a risk-based approach to effectively identify and mitigate risks associated with customers, products, services, and delivery channels. The guidelines stress a dynamic, data-driven approach, incorporating both internal and external risk factors, while aligning with international standards set by Financial Action Task Force (FATF) and Basel Committee on Banking Supervision (BCBS). RBI
1.1.4. RBI unveils key regulatory updates and UPI enhancements
RBI announces key regulatory and payment system measures aimed at enhancing transparency and customer-centricity. These include broadening regulations on foreclosure charges for loans to Micro and Small Enterprises (MSE) and initiating a discussion paper on capital-raising avenues for Urban Co-operative Banks (UCBs). Additionally, RBI proposes the creation of the Climate Risk Information System (RB-CRIS) to strengthen climate-related financial risk assessments. Payment systems see improvements, including enhanced limits for UPI123Pay and Unfied Payment Instrument (“UPI”) Lite, and the introduction of a beneficiary account name look-up facility for Real Time Gross Settlement (RTGS) and National Electronic Funds Transfer (NEFT) systems to reduce transaction errors and fraud. RBI
1.1.5. RBI appoints Shri Aviral Jain as Executive Director
RBI has appointed Shri Aviral Jain as Executive Director starting October 1, 2024. With over 30 (thirty) years of experience in supervision, currency management, foreign exchange regulation, and human resources, Jain will now oversee the Legal Department, Premises Department, and Right to Information Act (First Appellate Authority) matters. Prior to this, he served as Regional Director for Maharashtra. RBI
1.1.6. M. Rajeshwar Rao re-appointed as RBI Deputy Governor
RBI has extended M. Rajeshwar Rao’s tenure as Deputy Governor of the RBI for another year, effective October 9, 2024. Rao, first appointed in 2020, previously held senior roles within the RBI, including heading the Risk Monitoring Department and serving as Banking Ombudsman. RBI
1.1.7. Monetary Penalties
RBI imposes monetary penalties on the following financial institutions:
| Name of the Financial Institution | Penalty Imposed | Reasons |
| Koyana Sahakari Bank Ltd., Karad, Maharashtra | INR 2,00,000/- (Indian Rupees Two Lakh only) | Contravention of/non-adherence with directions issued by RBI on ‘Income Recognition, Asset Classification, Provisioning and Other Related Matters- UCBs’. |
| The Muslim Co-operative Bank Limited, Pune, Maharashtra | INR 3,00,000/- (Indian Rupees Three Lakh only) | Contravention of/non-adherence with directions issued by RBI on ‘Maintenance of Deposit Accounts –Primary (Urban) Co-operative Banks’. |
| The Kolhapur Urban Co-operative Bank Limited, Kolhapur, Maharashtra | INR 2,00,000/- (Indian Rupees One Lakh Fifty Thousand only) | Contravention of/non-adherence with directions issued by RBI on ‘Loans and advances to directors, their relatives, and firms/concerns in which they are interested’. |
| Sindhudurg District Central Co-operative Bank Limited, Maharashtra | INR 2,00,000/- (Indian Rupees One Lakh Fifty Thousand only) | Contravention of/non-adherence with Section 20 of Banking Regulation Act, 1949 (“BR Act”) read with Section 56 of the BR Act. |
| Nabapalli Co-operative Bank Limited | INR 1,10,000/- (Indian Rupees One Lakh Ten Thousand only) | Contravention of/non-adherence with directions issued by RBI on making contribution to Micro and Small Enterprises (MSE) Refinance Fund due to shortfall in achievement of Priority Sector Lending (PSL). |
| The Parwanoo Urban Co-operative Bank Limited, Parwanoo, Himachal Pradesh | INR 5,00,000/- (Indian Rupees Five Lakh only) | Contravention of/non-adherence with directions issued by RBI on under Supervisory Action Framework (SAF). |
| Sonbhadra Nagar Sahkari Bank Limited, Sonbhadra, Uttar Pradesh | INR 2,50,000/- (Indian Rupees Two Lakh Fifty Thousand only) | Contravention of/non-adherence with section 26A read with section 56 of the BR Act. |
| Jaihind Urban Co-operative Bank Limited, Pune, Maharashtra | INR 50,000/- (Indian Rupees Fifty Thousand only) | Contravention of/non-adherence with directions issued by RBI on ‘Maintenance of Deposit Accounts – Primary (Urban) Co-operative Banks’. |
| Mansing Co-operative Bank Limited, Dudhondi, Maharashtra | INR 1,00,000/- (Indian Rupees One Lakh only) | Contravention of/non-adherence with directions issued by RBI on ‘Income Recognition, Asset Classification, Provisioning and Other Related Matters- UCBs’. |
1.2. Philippines
1.2.1. FISC launches financial inclusion website for national awareness
The Financial Inclusion Steering Committee (“FISC”), chaired by the Bangko Sentral ng Pilipinas (BSP), has launched a new website to promote financial inclusion across the Philippines. The platform serves as a one-stop resource for the National Strategy for Financial Inclusion (NSFI), providing the latest regulations, news, and testimonials on financial services and accessibility. Bangko Sentral Ng Pilipinas
1.3. Indonesia
1.3.1. Bank Indonesia intervenes to stabilize rupiah amid longest losing streak
Bank Indonesia (“BI”) has intervened in the currency, bond, and domestic forward markets to support the rupiah as it faces its longest losing streak since last year. The currency’s decline, driven by external factors like a resilient United States economy and rising tensions in the Middle East, has put pressure on emerging market currencies. The rupiah weakened by 1.3 per cent (one point three per cent) to IDR 15,693 (Indonesian Rupiah Fifteen Thousand Six Hundred Ninety Three only) per United States dollar. BI aims to maintain market confidence and balance currency supply and demand. Despite the depreciation, Indonesia’s foreign exchange reserves remain strong, providing a buffer for further interventions if needed. Taipei Times
2. Trends
2.1. Jupiter seeks RBI nod for 26 per cent stake in SBM Bank India
Neobanking startup Jupiter, backed by Tiger Global and other investors, is in discussions to acquire a 26 per cent (twenty-six per cent) stake in SBM Bank India. The deal, pending approval from the RBI, may be executed in tranches, with the possibility of increasing the stake. This development follows reports of Jupiter’s earlier talks to acquire a smaller stake. Inc42
3. Sector Overview
3.1. Q2 FY25 sees strong deposit growth for Indian banks
Indian banks reported increased year-on-year deposit growth in the second quarter (“Q2”) of Financial Year 2025 (“FY25”), with four out of five banks achieving 2-3 per cent (two to three per cent) higher growth than the first quarter. Punjab National Bank led with a 10.98 per cent (ten point nine eight per cent) rise in deposits, while CSB Bank recorded a 25.17 per cent (twenty-five point one seven per cent) increase. However, Yes Bank’s growth moderated to 18.3 per cent (eighteen point three per cent). IBEF
3.2. RBI cautions NBFCs against risky growth strategies
RBI governor Shri Shaktikanta Das has warned NBFCs, particularly microfinance institutions and housing finance companies, against pursuing growth without strong risk management frameworks. RBI governor has highlighted the dangers of the “push effect,” where business targets drive retail credit growth rather than genuine demand. This approach, combined with high interest rates and frivolous penalties, could lead to financial instability. RBI stressed the need for NBFCs to adhere to the fair practices code and ensure transparent loan terms, while addressing customer grievances promptly. RBI is monitoring these areas and has warned that regulatory action may follow if self-correction does not occur. The Economic Times
4. Business Updates
4.1. Appreciate launches INR 100 mutual fund investments on ONDC
Appreciate has become the first fintech company to facilitate mutual fund investments on the Open Network for Digital Commerce (“ONDC”), completing a low-ticket transaction of just INR 100 (Indian Rupees One Hundred only). Partnering with Nippon India Asset Management Company (AMC), Appreciate aims to democratise financial services by making investments more accessible, especially in underserved regions. The Economic Times
4.2. ZenStatement secures USD 1.6 million seed funding
ZenStatement, an Artificial Intelligence (AI) driven finance automation platform, has raised USD 1.6 million (United States Dollar One Million Six Hundred Thousand only) in seed funding led by 3One4 Capital and Boldcap VC, with support from Dynamis Ventures and Atrium Angels. Founded in 2023 by Sourabh Nolkha and Ankit Narsaria, the company aims to enhance its product offerings and build a strong sales and marketing team to grow its presence in India and international markets. Fintech GlobalTop of Form
4.3. PhonePe partners with ICICI bank to offer credit line on UPI
PhonePe has partnered with ICICI Bank to introduce a credit-on-UPI service for pre-approved customers, allowing them to access a credit line of up to INR 2 lakh (Indian Rupees Two Lakh only) with a 45 (forty-five) day repayment period. This initiative enables seamless high-value purchases and enhances digital payment options. The service aims to expand both companies’ customer base and revenue streams through interest payments. Inc42
4.4. Jio Financial expands JioFinance app with new loan offerings
Jio Financial Services has launched an upgraded version of its JioFinance app, adding new financial products such as loans on mutual funds, home loans, and loans against property. Since the app’s beta launch in May, over 6 (six) million users have used its features, which include digital banking, UPI transactions, and insurance advisory. The company has incorporated user feedback to improve the app and aims to be a trusted financial partner in India. Additionally, Jio Financial Services and BlackRock recently received Securities and Exchange Board of India (SEBI) approval to establish a mutual fund business, further expanding its presence in the fintech sector. The Economic Times
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.
