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AKP Banking & Finance Digest- August 21, 2023

Updated: Aug 26, 2023

1. Regulatory Updates


1.1. India


1.1.1. RBI launches a Public Tech Platform on a pilot basis for frictionless credit

The Reserve Bank of India (“RBI”) is set to launch a Public Tech Platform for frictionless credit, aiming to streamline lending processes through seamless digital data flow. The platform, introduced by RBI's subsidiary Reserve Bank Innovation Hub (RBIH), started as a pilot project on August 17, 2023. The program aims to enhance lending efficiency, reduce costs, and enable quick disbursement by connecting various financial sector players through open Application Programming Interfaces (APIs), allowing all financial sector participants to connect in a 'plug and play' manner. The pilot project is set to initially focus on products like Kisan credit card loans, dairy loans, home loans, personal loans and others, and may extend its scope to other areas based on learnings from the pilot phase. RBI


1.1.2. RBI introduces UDGAM for searching unclaimed deposits

RBI has launched a centralised web portal, Unclaimed Deposits- Gateway to Access Information (UDGAM), in collaboration with Reserve Bank Information Technology Pvt. Ltd. (ReBIT), Indian Financial Technology and Allied Services (IFTAS) along with participating banks. The platform shall aid in searching unclaimed deposits across multiple banks in one place and further facilitate either claiming the deposit amount or making these deposit accounts operative in respective banks. Presently 7 (Seven) banks are participating in providing their data on the portal. This facility will be made available phased-wise by October 15, 2023. RBI


1.1.3. RBI rolls out fresh guidelines for setting up loan penal charges by lending institutions

RBI has issued a notification on ‘Fair Lending Practice- Penal Charges in Loan Accounts’, giving liberty to lending institutions to implement a board-approved policy for imposing penal rates of interest over loans for defaulters. This has been introduced to bring credit discipline among lenders. The notification will be applicable to all commercial banks (including small finance banks, local area banks and regional rural banks), all primary (urban) co-operative banks, all Non-Banking Financial Companies (“NBFCs”), including housing financial companies and all India financial institutions such as EXIM bank, NABARD, NHB, SIDBI and NaBFID from January 01, 2024, for both existing and new loans.

Further, these Instructions shall not apply to payment banks. It shall also not apply to credit cards, external commercial borrowings, trade credits and structured obligations as they are covered under product-specific directions. RBI


1.1.4. RBI introduces guidelines for resetting floating rate on EMI-based loans

RBI issues guidelines instructing all Regulated Entities (“RE”) to assess borrowers' repayment capacity while granting loans, considering potential interest rate fluctuations. Borrowers should be informed about the possible effects of changing benchmark interest rates on their Equated Monthly Instalments (“EMIs") and loan duration during approval, with any subsequent alterations communicated promptly. At the time of reset of the interest rates, borrowers shall be allowed to opt for a fixed interest rate as per the RE’s policy, which should specify the allowable number of switches. Borrowers have the choice to adjust their EMIs, extend the loan tenure, or both, and can also make partial or full prepayments, with associated charges being transparently disclosed. Loan tenure extensions for floating rate loans should not result in negative amortisation. RBI


1.1.5. Monetary Penalties

RBI imposes monetary penalties on the following financial institutions:

Name of the entity

Penalty Imposed

Reason

INR 1,00,000 (Indian Rupees One Lakh only)

Contravention of/ non-adherence with directions issued by RBI under Know Your Customer Directions, 2016 (“KYC Directions”).

​INR 50,000 (Indian Rupees Fifty Thousand only)

Contravention of/ non-adherence with directions issued by RBI under KYC Directions.

INR 2,50,000 (Indian Rupees Two Lakhs Fifty Thousand only)

Contravention of / non-adherence with the specific directions under KYC Direction and directions issued by RBI on Placement of Deposits with Other Banks by Primary (Urban) Co-operative Banks (“UCBs”).

​INR 5,00,000 (Indian Rupees Five Lakh only)

​Contravention of /non-adherence with National Bank for Agriculture and Rural Development (NABARD) directions on ‘Frauds - Guidelines for Classification, reporting and Monitoring of Frauds’.

INR 10,000

(Indian Rupees Ten Thousand only)

Contravention of / non-adherence with directions issued by RBI on Exposure Norms and Statutory / Other Restrictions – UCBs.

INR 1,00,000 (Indian Rupees One Lakh only)

Contravention of / non-adherence with directions issued by RBI on Exposure Norms and Statutory / Other Restrictions – UCBs.

INR 2,00,000 (Indian Rupees Two Lakhs only)

Contravention of / non-adherence to directions issued by RBI on ‘Management of Advances’ and ‘Maintenance of Deposit Accounts.’

​INR 3,00,000 (Indian Rupees Three Lakhs only)

Contravention of/ non-adherence with Directions by RBI on Supervisory Action Framework (SAF).

1.2. Bangladesh


1.2.1. Bangladeshi Taka depreciated against United States Dollar in 2022

According to the Financial Stability Report 2022 from Bangladesh Bank ("BB”), Bangladeshi Taka experienced a 13.3 per cent (Thirteen point Three per cent) decline in value against the United States Dollar ("USD”) in 2022. The report reveals that despite Taka's depreciation, BB utilised USD 13.5 billion (United States Dollar thirteen billion five hundred million only) from its reserves to stabilise the foreign exchange market. The market's volatility emerged after the pandemic and escalated further due to the Russia-Ukraine conflict that began in February of the preceding year. Dhaka Tribune


1.3. Pakistan


1.3.1 Pakistan’s currency valuation against US Dollar hits a three-month low

As per the data released by the State Bank of Pakistan, the currency depreciated by 0.29 per cent (Zero point Two Nine per cent) or PKR 0.86 (Pakistani Rupees Zero point Eight Six) to PKR 295.78 (Pakistani Rupees Two Hundred Ninety-Five point Seven Eight only) against USD. This massive gap in currency valuation in the interbank market has been due to Pakistan’s rising import bills. On the other hand, the value of Pakistan’s currency against a bunch of currencies of its trading partners appreciated to a six-month high at 91.58 (Ninety-One point Five Eight) in July against 87.72 (Eighty-Seven point Seven Two) in June, indicating signs of slight improvement. The Express Tribune


2. Trends


2.1. RBI plans to add AI-powered 'conversational' payments on the UPI system

RBI has set out its plans to introduce Artificial Intelligence (“AI”) driven ‘conversational’ payments within the country's Unified Payments Interface (“UPI”) system. RBI recognises the potential of AI in enabling conversational payments, which will allow users to interact with an AI-powered system for initiating and completing transactions. This innovative platform will be accessible through both smartphone and feature phone-based UPI channels, initially supporting conversations in Hindi and English. This initiative aims to streamline and expedite the process for smooth and timely credit delivery. Coin Greek


2.2. Union Cabinet approves five-year extension for Digital India scheme

The Indian government's Digital India scheme has received approval for a five-year extension from FY2021-22 to FY2025-26, with a budget of INR 14,903 crore (Indian Rupees Forten Thousand Nine Hundred and Three Crore). The expansion will emphasise cybersecurity, particularly enhancing the Indian Computer Emergency Response Team (CERT-In). As part of this initiative, around 5.25 lakh (Five Lakh Twenty Five Thousand) IT professionals will undergo upskilling. The Indian Express


3. Sector Overview



4. Business Updates


4.1. Enterprises India Limited expands its fintech presence

Global fintech firm Enterprises India Limited plans to raise INR 100 Crores (Indian Rupees One Hundred Crore) through a preferential issue approved by its board. The company also intends to invest in Mumbai-based fintech startup BillMart.com, which offers digital bill discounting services for Micro, Small, and Medium Enterprises (MSMEs) and corporates. Enterprises India Ltd. currently holds a 12.5 per cent (Twelve point Five per cent) stake in BillMart.com and aims to increase its share. The company is committed to empowering traders, Small and Medium-sized Enterprises (“SMEs”), MSMEs, and trade channels, focusing on bridging the trade finance gap using financial technology. According to the board of Enterprises India Ltd., the fintech sector's potential is projected to reach USD 2.3 trillion (United States Dollar Two Trillion Three Hundred Billion only) by 2030. Outlook


4.2. Mastercard to foster financial inclusion for SMEs

Mastercard has introduced ‘Mastercard Strive India’ to empower 5,00,000 (Five Lakh) small businesses to flourish in the digital economy by 2025. This initiative will primarily target India's micro-enterprises, women-led businesses, and agri-entrepreneurs. The program's objective is to facilitate the adoption of new digital tools, enhance market access, and provide digital financial services to small businesses. This initiative aligns with other strive programs worldwide, including those in the U.S., the U.K., Mexico, Czechia, Indonesia, and Malaysia. IBS Intelligence


4.3. Vegapay raises funds to enhance digital lending and card management platform

Vegapay, a digital lending and card management platform, has successfully raised USD 1.1 million (United States One Million One Hundred Thousand only) in a pre-seed funding round. Vegapay specialises in lending technology and has developed a system that enables both regulated entities and fintech companies to expand their card issuance and lending reach across India. The platform aims to create a micro-service-driven card and lending issuance framework. This innovation empowers issuers to seamlessly integrate and introduce lending products customised for different consumer segments. Fintech Global


4.4. RBI rejects Paygate India's application due to compliance and activity concerns

RBI has rejected Paygate India Private Limited's applications to function as a payment aggregator and Bharat Bill Payment Operating Unit under the Payment and Settlement Systems Act, 2007. RBI has instructed Paygate India, the owner of payment aggregator Safexpay, to cease its operations in the country. The central bank's decision was influenced by concerns regarding the company's ownership structure, which violated the Foreign Exchange Management Act. Additionally, RBI raised the alarm over prohibited activities on the platform, including gambling, betting, forex trading, and cryptocurrency transactions. The Free Press Journal


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.


For further queries or details, you may contact:


Mr Anuroop Omkar

Partner, AK & Partners




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