1. Regulatory Updates
1.1. India
1.1.1. RBI and Bank of England sign Memorandum of Understanding for the exchange of information
The Reserve Bank of India (“RBI”) and the Bank of England (“BoE”) signed a Memorandum of Understanding (“MoU”) focused on cooperation and information exchange related to the Clearing Corporation of India Limited ("CCIL") on December 01, 2023. This MoU establishes a framework for BoE to rely on RBI's regulatory and supervisory activities in relation to CCIL while ensuring the stability of the United Kingdom's financial system. The MoU will further strengthen the mutual interests of both authorities and cooperation. RBI
1.1.2. Monetary Penalties
RBI imposes monetary penalties on the following financial institutions:
Name of the financial institution | Penalty Imposed | Reason |
INR 1,50,000 (Indian Rupees One Lakh Fifty Thousand Only) | Contravention of/non-adherence with the directions issued by RBI on ‘The Depositor Education and Awareness Fund Scheme, 2014 – Section 26A of Banking Regulation Act, 1949 - Operational Guidelines’ and ‘Reserve Bank of India – Know Your Customer (“KYC”) Directions, 2016’. | |
INR 10,000 (Indian Rupees Ten Thousand Only) | Contravention of/non-adherence with RBI’s instructions on reporting requirements under the Liberalised Remittance Scheme (LRS) of the Foreign Exchange Management Act, 1999 | |
INR 50,000 (Indian Rupees Fifty Thousand Only) | Contravention of/non-adherence with the directions issued by RBI on ‘Membership of Credit Information Companies’. | |
INR 10,000 (Indian Rupees Ten Thousand Only) | Contravention of/non-adherence with the directions issued by RBI on acceptance of deposits from non-residents. | |
INR 1,00,000 (Indian Rupees One Lakh Only) | Contravention of/non-adherence with the directions issued by RBI on‘Placement of Deposits with Other Banks by Primary (Urban) Co-operative Banks (“UCBs”)’. | |
INR 1,50,000 (Indian Rupees One Lakh Fifty Thousand Only) | Contravention of/non-adherence with directions issued by RBI on ‘Loans and advances to directors, relatives and firms/concerns in which they are Interested’ read with ‘Loans and Advances to directors etc. - directors as surety/guarantors – Clarification’ and ‘Placement of Deposits with Other Banks by Primary UCBs’. | |
INR 1,50,000 (Indian Rupees One Lakh Fifty Thousand Only) | Contravention of/non-adherence with directions issued by RBI on ‘Loans and advances to directors, relatives and firms/concerns in which they are interested’ read with ‘Loans and Advances to Directors etc. - Directors as surety/guarantors – Clarification’ and ‘Co-operative Banks - Interest Rate on Deposits’. |
1.2. Bangladesh
1.2.1. Bangladesh Bank raises key policy rate to curb inflation and boost economy
The Bangladesh Bank has raised its key policy rate by 50 basis points to 7.75 per cent (seven point seven five per cent) to curb inflation by increasing borrowing costs for commercial banks and the private sector. Additionally, the interest margin linked to the SMART (six-month moving average rate of treasury bills) reference lending rate has been raised by 25 basis points to 3.75 per cent (three point seven five per cent), resulting in a calculated lending rate of 11.18 per cent (eleven point one eight per cent). This move is expected to make loans more expensive, leading to an increase in the overall cost of doing business for the private sector. The Business Standard
1.3. Pakistan
1.3.1. Saudi Arabia extends USD 3 billion deposit to support Pakistan's economy
The Kingdom of Saudi Arabia has granted an extension to a USD 3 billion (United States Dollar Three Billion Only) deposit made to support Pakistan's economy. The Saudi Fund for Development (“SFD”) announced that the deposit, initially set to mature on December 05, 2023, has been extended for another year. The SFD, representing Saudi Arabia, highlighted that the funds were placed with the State Bank of Pakistan (SBP) and emphasised that this extension is a continuation of Saudi Arabia's ongoing support to Pakistan. The deposit extension aims to bolster Pakistan's foreign currency reserves and contribute to the nation's economic growth. CNBC TV 18
2. Trends
2.1. LIC plans to expand its business into the fintech sector
Life Insurance Corporation of India (“LIC”) is planning to boost its business expansion by launching a fintech unit. The company has initiated the DIVE (Digital Innovation and Value Enhancement) project for a complete digital transformation and has appointed a consultant to spearhead the effort. LIC aims to introduce 3 (three) to 4 (four) new products by the end of the current financial year, striving for double-digit growth in new business premiums. This strategic move follows LIC's previous announcement of developing a digital platform to counter the increasing competition from insurtech startups like Acko, Policybazaar, and Digit. Inc 42
2.2. PhonePe expanding into consumer credit with personal loans and credit products
Walmart-backed fintech PhonePe is set to become a personal loans distributor, focusing on enhancing its credit underwriting capabilities. Currently, in the final stages of integration with five lenders, including banks and non-banking finance companies (“NBFCs”), PhonePe plans to introduce various consumer credit products over the next six to seven months. This includes the potential launch of a credit line in the coming year. Drawing inspiration from its success in the insurance sector, PhonePe aims to replicate its achievements in the consumer credit domain. The Economic Times
2.3. BharatPe establishes BharatPe Money as a subsidiary for lending business vertical
BharatPe, backed by Peak XV Partners, is reportedly creating a new wholly-owned subsidiary named BharatPe Money to segregate its lending service provider (LSP) business from the main entity. This new division will exclusively handle lending for both merchants and consumers. Additionally, there are indications that BharatPe is on the verge of obtaining final approval for a payment aggregator and payment gateway license from RBI. In recent reports, the fintech unicorn is also said to be exploring a new funding round with plans to raise USD 100 million (United States Dollar One Hundred Million). Inc 42
3. Sector Overview
3.2. India’s GDP is anticipated to grow by 6.5 per cent in the financial year 2024: Finance Ministry
4. Business Updates
4.1. PayU India discontinues LazyCard amid regulatory changes for prepaid payment instruments
PayU India has suspended its LazyCard, a Prepaid Payment Instrument (“PPI”) supported by a credit line, as revealed in the half-yearly financial report of its parent company, Prosus. The decision to shut down LazyCard has contributed to a reduction in losses and an overall improvement in profitability across the fintech and payments portfolio of the Prosus group. PayU India had introduced LazyCard in 2022 following RBI’s directive last year, which prohibited loading credit lines into non-bank PPIs like prepaid cards and wallets. Inc 42
4.2. Razorpay secures SOC 3 certification, a milestone in data security and compliance
Razorpay has achieved a highly coveted acknowledgment in data security and compliance - the 'System and Organisation Control 3 (“SOC 3”) Certification.' This certification is relevant for organisations handling sensitive customer data during online transactions, encompassing financial details, health records, or personally identifiable information. SOC 3 compliance is a widely recognised global standard that underscores the effective management and protection of sensitive customer data. Notably, Razorpay is the first fintech company in India to accomplish this significant compliance milestone. Business Standard
4.3. CCPA targets deceptive E-commerce practices with guidelines on 'Dark Patterns’
The Central Consumer Protection Authority (CCPA) recently issued guidelines to curb deceptive practices by e-commerce companies, identifying certain manipulative tactics as offences under consumer protection law. The guidelines specifically target 'Dark Patterns', which involve deceptive design patterns in user interfaces or experiences aimed at misleading users into taking actions they did not originally intend. This includes tactics like falsely inflating the popularity of a product or service to influence user decisions. The move is part of efforts to protect consumers from misleading practices in the e-commerce sector. Live Mint
4.4. Paytm deploys 10,000 payment devices in rural India for digital financial inclusion
Paytm announced deploying over 10,000 (ten thousand) payment devices, including soundboxes, QR codes, and card machines, in gram panchayats across India. This strategic move aims to introduce digital payments in rural areas, allowing Paytm to expand its presence in the Indian market and gain a competitive edge in the fintech sector. The company has secured mandates from various state governments for the deployment of payment solutions and has partnered with the Andhra Pradesh government to install devices in over 7,000 (seven thousand) gram panchayats in collaboration with major banks. Paytm claims to have already digitised more than 1,200 (twelve hundred) gram panchayats in several states through its QR code and soundbox solutions. Inc 42
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