India – AKP Banking & Finance Digest- September 09, 2024.
1. Regulatory Updates
1.1. India
1.1.1. FSDC sub-committee reviews financial stability and coordination
The Sub-Committee of the Financial Stability and Development Council (“FSDC-SC”) meeting focused on assessing major global and domestic macroeconomic developments and enhancing inter-regulatory coordination within India’s financial sector. Key discussions covered potential risks to financial stability, including global spillovers, cyber threats, and climate change, while reviewing the activities of various technical groups and State-level Coordination Committees. The FSDC-SC reaffirmed its commitment to strengthening financial sector resilience amidst emerging economic and financial challenges. Senior regulators and officials from key financial and governmental bodies attended the meeting. RBI
1.1.2. RBI withdraws obsolete circulars following internal review
The Reserve Bank of India (“RBI”) conducted an internal review to identify and withdraw obsolete, outdated, or superfluous instructions. As a result, several circulars listed in the Annex have been withdrawn immediately due to the issuance of updated instructions. Key updates include revised reporting formats for credit facilities to minority communities, discontinuation of the “No Frills” account nomenclature in favour of Basic Savings Bank Deposit Accounts (BSBDA), and consolidation of micro-credit guidelines under updated Master Circulars on Self Help Group (SHG)-Bank Linkage and Priority Sector Lending. RBI
1.1.3. RBI reports major return of INR 2000 banknotes
RBI announced the withdrawal of INR 2000 (Indian Rupees Two Thousand only) denomination banknotes from circulation on May 19, 2023. Since then, 97.96 per cent (ninety-seven point nine six per cent) of these banknotes, valued at INR 3.56 lakh crores (Indian Rupees Three Lakh Fifty-Six Thousand Crores only) at the time of the announcement, have been returned, reducing the total value in circulation to INR 7,261 crores (Indian Rupees Seven Thousand Two Hundred Sixty-One Crores only) as of August 30, 2024. RBI
1.1.4. Monetary Penalties
RBI imposes monetary penalties on the following financial institutions:
| Name of the Financial Institution | Penalty Imposed | Reasons |
| Godrej Housing Finance Limited | INR 5,00,000/- (Indian Rupees Five Lakh only) | Contravention of/non-adherence with directions issued by RBI on ‘Non-Banking Financial Company – Housing Finance Company (Reserve Bank) Directions, 2021’. |
| Aadhar Housing Finance Limited | INR 5,00,000/- (Indian Rupees Five Lakh only) | Contravention of/non-adherence with directions issued by RBI on ‘Non-Banking Financial Company – Housing Finance Company (Reserve Bank) Directions, 2021’. |
| Housing and Urban Development Corporation Limited | INR 3,50,000/- (Indian Rupees Three Lakh Fifty Thousand only) | Contravention of/non-adherence with directions issued by RBI on ‘Reserve Bank of India (Know Your Customer (KYC)) Direction, 2016’ and ‘Non-Banking Financial Company – Housing Finance Company (Reserve Bank) Directions, 2021’. |
| RAR Fincare Limited, Chennai, Tamil Nadu | INR 25,000/- (Indian Rupees Twenty Five Thousand only) | Contravention of/non-adherence with directions issued by RBI on ‘Master Direction- Non-Banking Financial Company–Non-Systemically Important Non-Deposit taking Company (Reserve Bank) Directions, 2016’ read with ‘Master Direction-Reserve Bank of India (Non-Banking Financial Company-Scale Based Regulation) Directions, 2023’. |
| Durgapur Mahila Co-operative Bank Limited, Kolkata | INR 1,00,000/- (Indian Rupees One Lakh only) | Contravention of/non-adherence with directions issued by RBI on ‘Master Circular on Investments by Primary (Urban) Co-operative Banks’ |
1.2. Sri Lanka
1.2.1. SBV issues plan to improve digital infrastructure and develop digital economy
Sri Lanka’s key inflation rate fell sharply to 0.5 per cent (zero point five per cent) in August from 2.4 per cent (two point four per cent) in July, driven by a significant reduction in electricity costs and lower prices for fuel, water, and cooking gas. The Colombo Consumer Price Index, which tracks inflation in Colombo, showed food and non-food categories declines. With the upcoming presidential election on September 21, demand is expected to remain muted due to political and policy uncertainty. Inflation is projected to stay below the central bank’s 5 per cent (five per cent) target, following economic stabilisation after an IMF bailout and recovery from last year’s financial crisis. Central Bank of Sri Lanka
1.2.2. Central Bank releases ‘Economic and Social Statistics of Sri Lanka – 2024
The Central Bank of Sri Lanka has released its annual publication, ‘Economic and Social Statistics of Sri Lanka – 2024’. Compiled by the bank’s Statistics Department, the publication provides a comprehensive collection of socio-economic data categorised into eight major areas: national output, infrastructure, prices, trade, and finance. Starting in 2024, the data will be available online in an easily accessible and downloadable format, catering to the needs of researchers, policymakers, and other stakeholders interested in Sri Lanka’s socio-economic landscape. Central Bank of Sri Lanka
1.3. Bangladesh
1.3.1. BB increases cash withdrawal limit to BDT 5 Lakh
Bangladesh Bank (“BB”) has increased the cash withdrawal limit to Tk 5 lakh (Bangladeshi Taka Five Lakh only) per account, up from Tk 4 lakh (Bangladeshi Taka Four Lakh only). This marks the fifth consecutive week of limit hikes since the restriction was first imposed following the deterioration of law and order after the fall of the Awami League government on August 5. The initial limit had been set at Tk 1 lakh (Bangladeshi taka One Lakh only) due to challenges in cash transfers. BB has also directed banks to closely monitor cheque transactions and block suspicious transfers to enhance security. The Daily Star
1.3.2. BB ties EDF loan rates to SOFR
BB has raised the cost of dollar loans from the Export Development Fund (“EDF”) by linking interest rates to the Secured Overnight Financing Rate (“SOFR”). As of Monday, the new rate structure adds a 0.5 per cent (zero point five per cent) margin to the SOFR rate for banks, resulting in a higher interest rate of 6.83 per cent (six point eight three per cent) for exporters than the previous 4.5 per cent (four point five per cent). This move, aligning EDF rates with global financial trends, replaces the fixed 3 per cent (three per cent) rate previously charged. Bangladesh Bank
1.3.3. BB reshuffles boards of three financial institutions
BB has restructured the boards of directors for Bangladesh Commerce Bank, Al-Arafah Islami Bank, and Aviva Finance as part of its reform efforts. The central bank has appointed new independent and regular directors for each institution, with significant roles assigned to individuals with extensive experience in finance and banking. Notably, S Alam Group, a major shareholder in all three entities, has seen its influence reduced in recent board reorganisations. The Daily Star
2. Trends
2.1. Money View seeks INR 250 crore in debt funding
Money View, the Bengaluru-based lendingtech soonicorn, is aiming to raise up to INR 250 crores (Indian Rupees Two Hundred Fifty Crores only) through private placement of redeemable Non-Convertible Debentures (NCDs). The funds will support its working capital and other general needs. Inc42
2.2. BlackSoil Capital and Caspian Debt to merge
BlackSoil Capital and Caspian Debt have announced their merger through a share swap deal, subject to regulatory approvals. This consolidation will make the combined entity one of the largest players in the alternative credit sector, enhancing value for stakeholders and expanding operational efficiency. The merger will boost BlackSoil’s footprint in major cities and create a combined Assets Under Management (AUM) of over INR 2,000 crores (Indian Rupees Two Thousand Crores only), leveraging a track record of financing over INR 10,000 crores (Indian Rupees Ten Thousand Crores only) across more than four hundred and fifty startups and companies. Money Control
3. Sector Overview
3.1. India to have 150 fintechs by 2030
India is projected to host 150 (one hundred and fifty) fintech unicorns valued at USD 500 billion (United States Dollar Five Hundred Billion only) by 2030, driven by rapid growth in payments, lending, insurtech, wealthtech, and neobanking, according to a report by JM Financial and Beams Fintech Fund. The report anticipates a surge in combined fintech revenue to USD 260 billion (United States Dollar Two Hundred and Sixty Billion only) by the decade’s end, up from USD 20 billion (United States Dollar Twenty Billion only) now. Key growth areas include a projected USD 11 trillion (United States Dollar Eleven Trillion only) in payment transactions, a 6.6 (six point six) – fold increase in lending book size, and a fourfold rise in wealthtech assets. JM Financial
3.2. External borrowings rise amid costlier domestic loans for NBFCs
With rising domestic loan costs, Non-Banking Financial Companies (“NBFCs”) are increasingly turning to External Commercial Borrowings (“ECBs”). RBI data reveals USD 11.1 billion (United States dollars eleven Billion and Ten Million only) in ECBs across 336 deals in Q1 FY25, compared to USD 21 billion (United States dollars twenty-one Billion only) in Q1 FY24. NBFCs’ share of ECBs rose to 41.5 per cent (forty-one point five per cent), driven by a 37 per cent (thirty-seven per cent) year-on-year growth in borrowings for on-lending. Experts attribute this shift to stable rupee rates and competitive global interest rates, making ECBs a viable alternative to domestic loans. Business Line
4. Business Updates
4.1. Mastercard launches Payment Passkey Service pilot in India
Mastercard is debuting its new Payment Passkey Service in India with a pilot involving major payment players like BigBasket, Axis Bank, Juspay, Razorpay, and PayU. The service aims to replace one-time passwords with passkeys and biometric authentication for secure online transactions, ensuring no financial data is shared with third parties. Mastercard selected India for the launch due to its advanced tokenisation market and expanding payment ecosystem. If successful, the service will be rolled out globally. Fintech Futures
4.2. PB Fintech allocates 75,760 shares under ESOP
PB Fintech, a leading insurtech company, has allocated 75,760 (seventy-five thousand seven hundred sixty) equity shares to employees under its Employee Stock Ownership Plan (“ESOP”) 2021 scheme, raising its equity capital to INR 91 crores (Indian Rupees Ninety-One Crores only). This follows a significant June allotment of 48.3 lakh (forty-eight lakh thirty thousand) shares. Based on current trading prices, the new shares are valued at INR 13 crores (Indian Rupees Thirteen Crores only). The update follows the company’s third consecutive profitable quarter with a notable net profit increase, reflecting robust financial performance and ongoing expansion in employee stock options across sectors. Inc42Top of Form
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.
