India – AKP Banking & Finance Digest- September 16, 2024.
1. Regulatory Updates
1.1. India
1.1.1. Financial markets closed on September 18 due to holiday change
The Government of Maharashtra has declared September 18, 2024, a public holiday under the Negotiable Instruments Act, 1881, replacing the previously declared holiday of September 16, 2024. Consequently, there will be no transactions or settlements in Government securities, foreign exchange, money markets, and rupee interest rate derivatives on September 18. All outstanding transactions due on this date will be postponed to September 19, 2024. As usual, financial markets will operate on September 16, 2024, and settlements scheduled for September 17, 2024, remain unchanged. Adjustments have been made for settlements of auctions and liquidity facilities during this period. RBI
1.1.2. MCA announces new rules for reverse flipping startups
Starting September 17, 2024, Indian startups planning to reverse flip into their Indian subsidiaries will be exempt from National Company Law Tribunal (NCLT) approval, according to new rules from the Ministry of Corporate Affairs (“MCA”). Instead, these companies will need to secure approvals from RBI and the government. This change aims to simplify and accelerate the reverse flipping process, which is expected to facilitate the return of startups like Pine Labs, Flipkart, Zepto, and Eruditus to India as they prepare for Initial Public Offer (IPOs). MCA
1.1.3. Monetary Penalties
RBI imposes monetary penalties on the following financial institutions:
| Name of the Financial Institution | Penalty Imposed | Reasons |
| Jila Sahakari Kendriya Bank Maryadit, Vidisha, Madhya Pradesh | INR 1,00,000/- (Indian Rupees One Lakh only) | Contravention of non-adherence with the provisions of section 26A read with section 56 of the Banking Regulation Act, 1949 (“BR Act”). |
| Nagrik Sahakari Bank Maryadit, Raipur, Chhattisgarh | INR 3,50,000/- (Indian Rupees Three Lakh Fifty Thousand only) | Contravention of/non-adherence with directions issued by RBI on ‘Exposure Norms & Statutory/Other Restrictions – UCBs’ and ‘Investments by Primary (Urban) Co-operative Banks’. |
| Jila Sahakari Kendriya Bank Maryadit, Raipur, Chhattisgarh | INR 1,50,000/- (Indian Rupees One Lakh Fifty Thousand only) | Contravention of non-adherence with the provisions of the BR Act. |
| Samarth Sahakari Bank Limited, Solapur, Maharashtra | INR 4,50,000/- (Indian Rupees Four Lakh Fifty Thousand only) | Contravention of the BR Act and non-adherence with directions issued by RBI on ‘Exposure Norms and Statutory/Other Restrictions – UCBs’ and operational instructions issued by RBI under ‘Supervisory Action Framework for Primary (Urban) Co-operative Banks (UCBs)’. |
| HDFC Bank Limited | INR 1,00,00,000/- (Indian Rupees One Crore only) | Contravention of/non-adherence with directions issued by RBI on ‘Interest Rate on Deposits’, ‘Recovery Agents engaged by Banks’ and ‘Customer Service in Banks’ read with the BCSBI Code and ‘Guidelines on Managing Risks and Code of Conduct in Outsourcing of Financial Services by banks’. |
| Axis Bank Limited | INR 1,91,00,000/- (Indian Rupees One Crore and Ninety-One Lakh only) | Contravention of provisions of the BR Act, and non-adherence with directions issued by and non-compliance with certain directions issued by RBI on ‘Interest Rate on Deposits’, ‘Know Your Customer (KYC)’ and ‘Credit Flow to Agriculture- Collateral free agricultural loans’. |
| BNP Paribas | INR 31,80,000/- (Indian Rupees Thirty One Lakh Eighty Thousand only) | Contravention of/non-adherence with directions issued by RBI on ‘Interest Rate on Advances’. |
| SMFG India Credit Company Limited | INR 23,10,000/- (Indian Rupees Twenty Three Lakh Ten Thousand only) | Non-compliance with certain provisions of the ‘Master Direction – Information Technology Framework for the NBFC Sector’ and certain directions relating to cyber security measures issued by RBI. |
| Muthoot Vehicle & Asset Finance Limited | INR 7,90,000/- (Indian Rupees Seven Lakh Ninety Thousand only) | Contravention of/non-adherence with directions issued by RBI on ‘Liquidity Risk Management Framework for Non-Banking Financial Companies and Core Investment Companies’ and ‘Non-Banking Financial Company – Systemically Important Non-Deposit taking Company and Deposit taking Company (Reserve Bank) Directions, 2016’. |
| Hewlett Packard Financial Services (India) Private Limited | INR 10,40,000/- (Indian Rupees Ten Lakh Forty Thousand only) | Contravention of/non-adherence with directions issued by RBI on ‘Reserve Bank of India [Know Your Customer (KYC)] Directions, 2016’, ‘Non-Banking Financial Company – Systemically Important Non-Deposit taking Company and Deposit taking Company (Reserve Bank) Directions, 2016’ and ‘Master Direction – Information Technology Framework for the NBFC Sector’. |
1.2. Vietnam
1.2.1. SBV introduces special lending policy for credit institutions
The State Bank of Vietnam (“SBV”) will provide special loans to credit institutions facing mass withdrawals or undergoing recovery plans. These loans, which must be collateralised and not interest-free, will assist institutions such as commercial banks and microfinance entities in managing liquidity issues and restructuring efforts. SBV will determine loan amounts and terms based on each institution’s solvency, with terms of up to 12 (twelve) months and potential extensions. Vietnam News
1.3. Bangladesh
1.3.1. BB forms task force to reform troubled banking sector
The Bangladesh Bank (“BB”) has established a six-member task force to address issues in the country’s struggling banking sector and ensure financial stability. The task force will evaluate the current financial situation, estimate distressed assets, and identify significant risks within the sector. It will also review key financial indicators of underperforming banks, including loans, provision deficits, net capital, asset values, and liquidity conditions. This move comes as a result of the fact that at least 10 (ten) commercial banks in Bangladesh are reportedly close to bankruptcy. The Financial Express
2. Trends
2.1. Paytm to reapply for RBI payment aggregator licence
Paytm’s CEO, Vijay Shekhar Sharma, announced plans to reapply for a Payment Aggregator (“PA”) licence to the RBI. This follows the approval from the Ministry of Finance for Paytm Payments Services Limited (“PPSL”), a Paytm subsidiary, to further invest in its payment services. PPSL’s initial PA licence application was rejected in November 2022 due to non-compliance with Foreign Direct Investment (FDI) norms. Business Standard
2.2. Flipkart’s Super.money eyes expansion with new products and funding
Super.money, a Flipkart-backed fintech venture, plans to expand its offerings to include fixed deposits and credit lines via Unified Payments Interface (UPI). Led by Prakash Sikaria, the company aims to target young professionals and differentiate itself from competitors like PhonePe with a credit-first approach. Super.money is also preparing for external fundraising in December 2024 to bolster its position in India’s competitive fintech landscape. Inc42
3. Sector Overview
3.1. Fintechs capture 52 per cent market share in personal loans
A report by Experian India reveals that fintech companies now hold a 52 per cent (fifty-two per cent) market share in personal loans, disbursing over INR 2 trillion (Indian Rupees Two Trillion only) in personal loans and INR 28 crore (Indian Rupees Twenty-Eight Crores only) in business loans as of March 2024. These loans are primarily directed toward New-to-Credit (NTC) individuals and underserved segments like women and sub-prime borrowers. Fintechs have seen rapid growth in rural and semi-urban areas, with significant increases in loan penetration in states like Bihar, Tamil Nadu, and Uttar Pradesh. The Financial Express
4. Business Updates
4.1. FlexiLoans secures INR 290 crore funding
FlexiLoans, a fintech startup, has raised INR 290 crore (Indian Rupees Two Hundred and Ninety Crores only) in a Series C funding round. The investment came from Accion, Maj Invest, Nuveen, and Fundamentum. The new funding will accelerate growth, expand its product offerings, and venture into supply chain financing and partnerships with corporate finance platforms. Since its inception in 2016, FlexiLoans claims to have disbursed over INR 7,000 crore (Indian Rupees Seven Thousand Crores only) in loans across more than 2,100 (two thousand one hundred) towns and cities in India. Inc42
4.2. Worldline launches ‘One Commerce’ omnichannel payments platform
Worldline, a global payment service provider, has introduced its new omnichannel payments platform, ‘One Commerce,’ at the Global FinTech Fest 2024 in Mumbai. The platform is designed to help businesses deliver consistent, convenient, and customised payment experiences across both offline and online channels. By unifying in-store and online payments, One Commerce addresses common challenges like managing multiple integrations and ensuring a seamless customer journey. It offers businesses extensive coverage of various payment options, domestic and international acceptance, risk management, and value-added services through a single, modular platform. IBS IntelligenceTop of Form
4.3. Annapurna Finance partners with British International Investment
Annapurna Finance Private Limited, a leading NBFC-Micro Finance Institution (“MFI”) in India, has partnered with British International Investment (“BII”) and FinReach Solutions to enhance credit access for Micro and Small Enterprises (“MSEs”) in underserved regions of India. This partnership is groundbreaking as it marks the first instance of a Development Finance Institution (DFI) providing a credit guarantee to an NBFC-MFI in India. BII’s credit guarantee is expected to increase Annapurna Finance’s loan portfolio by INR 100 crore (Indian Rupees One Hundred Crore only), enabling it to serve over 4,000 (four thousand) underserved MSEs. The initiative aims to promote financial inclusion, support job creation, and drive sustainable economic growth by reducing lending risks and providing crucial financial services to businesses that lack access to traditional financial institutions. SMEStreet Edit Desk
4.4. AKARA Capital issues NCDs at INR 10,000 face value
AKARA Capital, Stashfin’s parent company, has introduced Non-Convertible Debentures (NCDs) with a face value of INR 10,000 (Indian Rupees Ten Thousand only) on the Bombay Stock Exchange (BSE), aiming to raise INR 100 crore (Indian Rupees One Hundred Crores only). This move follows a Securities Exchange Board of India (SEBI) rule from July 2024 that lowered the minimum face value of debt securities from INR 1,00,000 (Indian Rupees One Lakh only) to INR 10,000 (Indian Rupees Ten Thousand only). The first tranche of INR 6.5 crore (Indian Rupees Six Crores and Fifty Lakhs only) was fully subscribed. Money Control
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.
