India – AKP Banking & Finance Digest- October 21, 2024.
1. Regulatory Updates
1.1. India
1.1.1. RBI imposes loan sanction restrictions on certain NBFCs
The Reserve Bank of India (“RBI”) has directed four Non-Banking Financial Companies (“NBFCs”), including two Microfinance Institutions (MFIs), to cease loan sanction and disbursement activities starting October 21, 2024. This action, based on supervisory concerns, highlights violations related to excessive lending rates, improper household income assessments, and deviations from regulatory guidelines. The affected NBFCs—Asirvad Micro Finance Limited, Arohan Financial Services Limited, DMI Finance Private Limited, and Navi Finserv Limited—are required to address these issues to resume normal operations. RBI
1.1.2. RBI central board reviews economy and marks vigilance week
RBI held its 611th (six hundred and eleven) central board meeting in Bhubaneswar, chaired by Governor Shri Shaktikanta Das. The board passed a condolence resolution for former Director Shri Ratan N. Tata and observed vigilance awareness week by taking the integrity pledge. Key discussions focused on the current economic and financial landscape, including challenges from geopolitical conflicts. The board also reviewed the functioning of its Sub-Committees, the Ombudsman Scheme, and various Central Office Departments. RBI
1.1.3. RBI cancels registration of two NBFCs
RBI has cancelled the Certificates of Registration (“CoR”) for Heewan Finance Limited, based in Jammu, and High Growth Credit Services Limited, located in Noida. The cancellations, effective September 2024, were executed under Section 45-IA (6) of the Reserve Bank of India Act, 1934, due to regulatory concerns. These companies are no longer permitted to conduct NBFC business. RBI
1.1.4. Seven NBFCs surrender registration to RBI
Seven NBFCs have surrendered their CoR to the RBI, which subsequently cancelled their CoRs. The NBFCs include Saluja Hire Purchase Limited, Vaya Finserv Private Limited, Jewelrock Commodeal Pvt. Ltd., V A M Commercial Co Ltd, Kanak Packaging Products Pvt Ltd, Revathi Holdings Private Limited, and Ashwamedh Properties Pvt Ltd. Reasons for cancellation include business exit, meeting unregistered Core Investment Company (CIC) criteria, and corporate restructuring. RBI
1.1.5. RBI updates access criteria for NDS-OM platform
RBI has issued new guidelines, effective October 18, 2024, revising access criteria for the Negotiated Dealing System-Order Matching (“NDS-OM”) platform. The changes expand direct access to a broader range of regulated entities, such as banks, financial institutions, and mutual funds, while streamlining the application process. These updates replace previous circulars from 2008 and 2011 and aim to enhance participation in the government securities market. RBI
1.1.6. Hizb-Ut-Tahrir declared a terrorist organisation Under UAPA, 1967
RBI has notified regulated entities of the recent designation of Hizb-Ut-Tahrir (HuT) as a terrorist organisation under the Unlawful Activities (Prevention) Act (“UAPA”), 1967. The organisation and its affiliates are listed in Schedule I of the Act. Entities are advised to ensure compliance with this update, following procedures outlined in the RBI’s Master Direction on Know Your Customer (“KYC”). RBI
1.1.7. Monetary Penalties
RBI imposes monetary penalties on the following financial institutions:
| Name of the Financial Institution | Penalty Imposed | Reasons |
| SG Finserve limited | INR 28,30,000/- (Indian Rupees Twenty Eight Lakh Thirty Thousand only) | Contravention of/non-adherence with specific conditions under which the company was issued the Certificate of Registration (CoR) by RBI under section 45IA(5) of Reserve Bank of India Act, 1934 (RBI Act). |
| Sri Kalahasti Co-operative Town Bank Limited, Andhra Pradesh | INR 50,000/- (Indian Rupees Fifty Thousand only) | Contravention of/non-adherence with provisions of Section 31 of the Banking Regulation Act, 1949 (“BR Act”). |
| Arunachal Pradesh Rural Bank | INR 14,00,000/- (Indian Rupees Fourteen Thousand only) | Contravention of/non-adherence with certain directions issued by RBI on ‘Strengthening of Prudential Norms- Provisioning Asset Classification and Exposure Limit’ and ‘KYC’. |
| The Urban Co-operative Bank Limited, Dharangaon, Maharashtra | INR 50,000/- (Indian Rupees Fifty Thousand only) | Contravention of/non-adherence with the specific directions issued by RBI under Supervisory Action Framework (“SAF”). |
| Jilla Sahakari Kendriya Bank Maryadit, Bhind, Madhya Pradesh | INR 2,75,000/- (Indian Rupees One Lakh Ten Thousand only) | Contravention of/non-adherence with certain directions issued by RBI on ‘Membership of Credit Information Companies (CICs) by Co-operative Banks’. |
| The Catholic Co-operative Urban Bank Limited, Telangana | INR 3,00,000/- (Indian Rupees Three Lakh only) | Contravention of/non-adherence with certain directions issued by RBI on ‘Maintenance of Deposit Accounts – Primary (Urban) Co-operative Banks’, ‘Management of advances-UCBs’ and ‘Loans and advances to directors, their relatives, and firms /concerns in which they are interested’. |
| The Kottarakara Co-operative Urban Bank Limited, Kerala | INR 50,000/- (Indian Rupees Fifty Thousand only) | Contravention of/non-adherence with specific directions issued by RBI under SAF. |
| Jila Sahakari Kendriya Bank Maryadit, Mandsaur, Madhya Pradesh | INR 2,50,000/- (Indian Rupees Two Lakh and Fifty Thousand only) | Contravention of/non-adherence with provisions of section 26A read with section 56 of the BR Act. |
| GoCapital Finance Limited, Chennai, Tamil Nadu | INR 1,00,000/- (Indian Rupees One Lakh only) | Contravention of/non-adherence with directions issued by RBI on certain provisions of ‘Master Direction-Reserve Bank of India (Non-Banking Financial Company-Scale Based Regulation) Directions, 2023’. |
| Andhra Pragathi Grameena Bank, Andhra Pradesh | INR 1,00,000/- (Indian Rupees One Lakh only) | Contravention of/non-adherence with certain directions issued by RBI on ‘Strengthening of Prudential Norms- Provisioning Asset Classification and Exposure Limit’ read with ‘Income Recognition, Asset Classification and Provisioning Norms-Guidelines (IRAC norms)’. |
1.2. Bangladesh
1.2.1. BB permits foreign bank accounts for visa applicants
Bangladesh Bank’s (“BB”) foreign exchange policy department issues circular, permitting Authorised Dealers (“ADs”) to allow applicants for professional or skilled employment visas to maintain bank accounts abroad before obtaining their visas. ADs must collect necessary documentation, ensure the remittable amount does not exceed limits set by authorities, confirm accounts remain inactive until applicants proceed abroad, and guarantee fund repatriation in case of visa denial. Bangladesh Bank
1.3. Indonesia
1.3.1. Bank Indonesia maintains BI Rate at 6 per cent
Bank Indonesia’s (“BI”) board of governors has decided to keep the BI rate at 6 per cent (six per cent), alongside the deposit facility and lending facility rates at 5.25 per cent (five point two five per cent) and 6.75 per cent (six point seven five per cent), respectively. This decision aims to control inflation within the target corridor of 2.5 (two point five) ±1 per cent (one per cent) while ensuring sustainable economic growth amid global uncertainties. Bank Indonesia
2. Trends
2.1. Temasek to invest in Lendingkart for Controlling Stake
Temasek’s Fullerton Financial Holdings (FFH) is set to invest INR 252 crore (Indian Rupees Two Hundred and Fifty Two Crore only) in Lendingkart, aiming for a controlling stake. This investment will enhance Lendingkart’s efforts to expand into underserved Micro, Small, and Medium Enterprises (MSME) markets, focusing on improving technology and outreach. Pending regulatory approval, this strategic move is expected to demonstrate confidence in Lendingkart’s future growth and its potential to support small businesses across India. Rediff Moneywiz
3. Sector Overview
3.1. Indian fintech funding surges 66 per cent
The Indian fintech sector shows recovery signs, with funding increasing by 66 per cent (sixty-six per cent) year-on-year to USD 778 million (United States Dollar Seven Hundred and Seventy-Eight Million only) in the third quarter in Calendar Year (“CY”) 2024, compared to USD 471 million (United States Dollar Four Hundred Seventy-One Million only) in the third quarter of CY 2023. Business Standard
4. Business Updates
4.1. Slice secures board approval to raise funds via partly paid shares
Fintech startup slice has received board approval to raise INR 71.73 crore (Indian Rupees Seventy-One Crore Seventy-Three Lakh only) through the issuance of 22,000 (twenty-two thousand) equity shares at an issue price of INR 32,606 (Indian Rupees Thirty-Two Thousand Six Hundred and Six only) each. The shares will be issued on a preferential basis through private placement. Inc42
4.2. BharatPe FY24 revenue grows 39 per cent
BharatPe reports a 39 per cent (thirty-nine per cent) increase in consolidated revenue, reaching INR 1,426 crore (Indian Rupees One Thousand Four Hundred Twenty-Six Crore only) for Financial Year 2024 (“FY24”), up from INR 1,029 crore (Indian Rupees One Thousand Twenty-Nine Crore only) in FY23. The fintech company also narrowed its Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) loss by 75 per cent (seventy-five per cent), from INR 826 crore (Indian Rupees Eight Hundred Twenty-Six Crore only) to INR 209 crore (Indian Rupees Two Hundred and Nine only). Money Control
4.3. Navi surpasses Axis Bank in UPI transactions
Navi Technologies, led by Sachin Bansal, has ascended to the fifth position in Unified Payment Instrument (“UPI”) transactions for September, processing 120.41 (one hundred twenty point four one) million transactions, a 35.74 per cent (thirty-five point seven four per cent) increase from August’s 88.7 (eighty-eight point seven) million. This marks a significant achievement as Navi surpassed Axis Bank, which recorded 120.3 (one hundred twenty point three) million transactions. Inc42Top of Form
4.4. Zodius Capital exits OfBusiness with USD 100 million secondary share sale
Zodius Capital has fully exited its investment in OfBusiness through a secondary share sale, generating over USD 100 million (United States Dollar One Hundred Million only) from its initial USD 8 million (United States Dollar Eight Million only) investment. The sale primarily involved high-net-worth individuals and family offices. Zodius, an early investor in OfBusiness, had previously participated in its INR 200 crore (Indian Rupees Two Hundred Crore only) Series C funding round in 2018. 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.
