1. Regulatory Updates
1.1. India
1.1.1. Monetary Policy Committee proposes fintech initiatives and payment limit adjustments
The monetary policy committee, during its meeting held from December 06 to 08, 2023, has proposed (i) establishing a fintech repository and cloud facility for the Indian financial sector to comprehend developments and enhance the efficiency of the fintech sector. Fintech companies are encouraged to provide information voluntarily about their activities, products, offerings, financial position and technology stacks to the repository; (ii) to increase the limit for Unified Payments Interface (UPI) payments to hospitals and educational institutions from INR 1 lakh (Indian Rupees One Lakh Only) to INR 5 lakh (Indian Rupees Five Lakh Only) per transaction; (iii) to increase the limit under e-mandates for making payments of a recurring nature to INR 1 lakh (Indian Rupees One Lakh Only). RBI
1.1.2. Monetary Penalties
The Reserve Bank of India (“RBI”) imposes monetary penalties on the following financial institutions:
Name of the Financial Institution | Penalty Imposed | Reason |
INR 10,54,000 (Indian Rupees Ten Lakh Fifty-Four Thousand Only) | Contravention of/non-adherence with certain provisions of ‘Reserve Bank of India - Know Your Customer (KYC) Direction, 2016’ (“KYC Directions”). | |
INR 4,90,000 (Indian Rupees Four Lakh Ninety Thousand Only) | Contravention of/non-adherence with certain provisions of ‘KYC Directions’. | |
INR 1,00,000 (Indian Rupees One Lakh Only) | Contravention of/non-adherence with the directions issued by RBI on ‘Maintenance of Deposit Accounts - Primary (Urban) Co-operative Banks (“UCBs”)’. | |
INR 1,00,000 (Indian Rupees One Lakh Only) | Contravention of/non-adherence with the directions issued by RBI on ‘Management of Advances-UCBs’. | |
INR 1,00,000 (Indian Rupees One Lakh Only) | Contravention of/non-adherence with certain provisions of KYC Directions. | |
INR 10,000 (Indian Rupees Ten Thousand Only) | Contravention of/non-adherence with the directions issued by the National Bank for Agriculture and Rural Development (NABARD) on ‘Review of Frauds–Guidelines on Monitoring and Reporting System’ read with ‘Frauds - Guidelines for Classification, Reporting and Monitoring of Frauds’. | |
INR 4,00,000 (Indian Rupees Four Lakh Only) | Contravention of/non-adherence with certain provisions of ‘KYC Directions’ and ‘Frauds in UCBs: Changes in Monitoring and Reporting Mechanism’. | |
INR 1,00,000 (Indian Rupees One Lakh Only) | Contravention of/non-adherence with certain provisions of ‘KYC Directions’. | |
INR 1,00,000 (Indian Rupees One Lakh Only) | Contravention of/non-adherence with directions issued by RBI on ‘Maintenance of Deposit Accounts-Primary UCBs’. | |
INR 1,00,000 (Indian Rupees One Lakh Only) | Contravention of/non-adherence with directions issued by RBI on ‘Maintenance of Deposit Accounts – Primary UCBs’. |
1.1.3. RBI cancels the license of the following banks
RBI, under Section 56, read with Section 22 of the Banking Regulation Act, 1949 (“BR Act”), has cancelled the license of the following banks:
Name of the Bank | Grounds for Cancellation |
Inadequate capital and earning prospects as per Sections 11(1) and 22(3)(d) read with Section 56 of the BR Act, non-compliance with requirements under Section 22(3)(a), 22(3)(b), 22(3)(c), 22(3)(d) and 22(3)(e) of the BR Act, prejudicial conduct affecting interest of the depositors and public, including inability to pay to the present depositors in full. | |
Inadequate capital and earning prospects as per Sections 11(1) and 22(3)(d) read with Section 56 of the BR Act, non-compliance with requirements under Section 22(3)(a), 22(3)(b), 22(3)(c), 22(3)(d) and 22(3)(e) of the BR Act, prejudicial conduct affecting interest of the depositors and public, including inability to pay to the present depositors in full. |
1.2. Bangladesh
1.2.1. Bangladesh Bank introduces PCA framework to promote financial stability
The Bangladesh Bank (“BB”) has introduced a mechanism to promote financial stability and maintain public confidence in the financial system, offering both challenges and opportunities. It introduced a Prompt Corrective Action (PCA) framework by dividing the banks into four categories based on their respective financial health to identify problems early and before the problems become acute, as per a circular issued by Bangladesh Bank. The new framework will be effective from March 31, 2025, based on the annual audited financial statements for the period ending on December 31, 2024. The Daily Star
1.2.2. Bangladesh Bank increases the limit for sending remittances to mobile financial services accounts
BB through its Payments Systems Department has announced the increased limit for sending remittances to individual Mobile Financial Services (“MFS”) accounts from Taka 1.25 lakh (Bangladeshi Taka One Lakh Twenty Five Thousand Only) to Taka 2.5 lakh (Bangladeshi Taka Two Lakh Fifty Thousand Only). However, the current permitted maximum limit of deposits in MFS accounts is Taka 3 lakh (Bangladeshi Taka Three Lakh Only) and in case the deposits exceed the maximum limit no further amount can be added until it is brought down to the permissible limit. The Business Standard
1.3. Pakistan
1.3.1. The State Bank of Pakistan issues draft guidelines for ‘regulatory sandbox’
The State Bank of Pakistan (“SBP”) has issued draft guidelines for ‘regulatory sandbox’ and is seeking public comments. These draft guidelines permit entities regulated by the SBP, such as fintechs, and startups, to participate in this sandbox and test their innovations and new business models within the prescribed legal framework. These draft guidelines are expected to contribute to increasing digital inclusion in the finance sector. Arab News
2. Trends
2.1. SK Finance is set to launch its IPO in 2024
SK Finance, a Jaipur based Non-Banking Financial Company (“NBFC”) is set to launch its initial public offering (“IPO”) ranging from USD 250 Million (United States Dollar Two Hundred Fifty Million Only) to USD 300 Million (United States Dollar Three Hundred Million Only) next year. The IPO will constitute primary and secondary offerings of shares. SK Finance, incorporated in 1994 and formerly known as Ess Kay Fincorp, is supported by TPG Growth and Northwest Venture Partners. NBFC specialises in providing funding for both used and new commercial vehicles such as tractors, two-wheelers as well as business loans. Money Control
2.2. ZestMoney to cease operations following founders' departure and failed acquisition talks
ZestMoney, a Buy Now Pay Late (“BNPL”) startup is set to shut down its operations by the end of December 2023 following an unsuccessful attempt to revive the business amidst regulatory uncertainty. The management of the company has informed the employees about the decision to wind up the company’s operations, resulting in the layoff of the remaining 150 (one hundred fifty) employees, excluding the legal and finance team, which shall oversee the winding-up procedure. ZestMoney founders Lizzie Chapman, Priya Sharma, and Ashish Anantharaman also stepped down from the BNPL startup in May after failed acquisition talks with PhonePe. Money Control
3. Sector Overview
4. Business Updates
4.1. Paytm temporarily suspends BNPL service amidst RBI's risk weight hike on unsecured lending
One 97 communication’s lead, Paytm, has temporarily halted its BNPL service as lending partners have become cautious about fintech partnerships after RBI raised risk weights by 25 per cent (twenty-five per cent) against unsecured lending. Moreover, Paytm has decided to reduce loan disbursal below INR 50,000 (Indian Rupees Fifty Thousand Only). This development comes days after the RBI increased the risk weights, or the capital that banks need to set aside for every loan disbursed, for banks and NBFCs, by 25 per cent (twenty-five per cent) points to 125 per cent (one hundred twenty-five per cent) on retail loans. Economic Times
4.2. LIC ranks fourth largest insurer in the world, with India on seventh position in world life insurance 2023
Life Insurance Corporation of India (“LIC”) ranked fourth largest insurer in the world, according to a report by S&P Global Market Intelligence. According to the report, LIC’s reserves stood at USD 503.7 billion (United States Dollar Five Hundred Three Billion Seven Hundred Million Only). LIC is the only Indian company on the list. In terms of premium income, India ranks number seven in the world's life insurance rankings for 2023. Economic Times
4.3. Digivriddhi Technologies raises USD 6 Million in its Series A funding round
Digivriddhi Technologies (“DGT”), a Mumbai-based fintech start-up serving the dairy industry has successfully raised USD 6 Million (United States Dollar Six Million Only) in its Series A funding round, led by Omidyar Network India. Additionally, existing investors Omnivore and InfoEdge Ventures have also participated in this round. The raised funds shall be utilised to enhance existing technologies and expand its business in the states of Karnataka, Andhra Pradesh, Telangana, Madhya Pradesh and Maharashtra. DGT collaborates with dairy processors to facilitate easier financial access for dairy farmers. Business Standard
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