AKP Banking & Finance Digest December 15, 2025

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1. Regulatory Updates

1.1.  India

Reserve Bank of India (RBI)

1.1.1.    RBI to inject liquidity via three-year USD/INR buy/sell swap auction

The Reserve Bank of India (“RBI”) will conduct a USD/INR buy/sell swap auction for USD 5 billion (United States Dollars Five Billion only) with a tenor of 36 (thirty-six) months to inject long-term liquidity into the banking system. The auction, scheduled for December 16, 2025, will have the near leg or spot date on December 18, 2025, and the far leg on December 18, 2028. Authorised Dealer Category–I (“AD Category–I”) banks will be eligible to participate and must submit bids in terms of the swap premium, quoted in paisa up to two decimal places, in a multiple-price auction where successful bids are accepted at their respective premiums and pro-rata allocation may apply at the cut-off. The operational guidelines in the annex set a minimum bid size of USD 10 million (United States Dollars Ten Million only), permit multiple bids up to the notified amount, provide that the first leg will be transacted at the Financial Benchmarks India Private Limited (FBIL) reference rate on the auction date, clarify that swaps once undertaken cannot be cancelled or modified and reserve for RBI the discretion to accept less than or marginally more than the notified amount or to reject bids without assigning reasons.

1.1.2.    RBI releases Draft Circular on Disclosure of Transaction Cost for Foreign Exchange Transactions

RBI has issued a draft circular proposing that Authorised Dealers disclose the transaction cost components associated with foreign exchange cash, foreign exchange tomorrow (tom) and foreign exchange spot contracts offered to retail users, including items such as remittance fees, foreign exchange rate and currency conversion charges, to enhance transparency in the foreign exchange market.  The RBI released the draft for public comments on December 9, 2025, and has invited feedback from banks, market participants and other interested parties by January 9, 2026.  The proposal builds on the January 2024 requirement for Authorised Dealers to provide retail users the mid-market mark or bid and ask price for foreign exchange derivative and foreign currency interest rate derivative contracts before entering into the contract and to include it in the deal confirmation or term sheet.

1.1.3.    Four NBFCs surrender their Certificate of Registration to RBI

i) Cancellation of Certificate of Registration (“CoR”) due to exit from Non-Banking Financial Institution (NBFI) business:

Name of the Company	CoR Issued on	Date of Cancellation of CoR
YG CAPITAL LIMITED	April 10, 2018	November 28, 2025

ii) Due to meeting the criteria prescribed for unregistered Core Investment Company (CIC) that do not require registration

Name of the Company	CoR Issued on	Date of Cancellation of CoR
Intell Invofin India Private Limited	April 11, 2003	November 10, 2025

iii) Due to Non-Banking Financial Company (“NBFC”) ceasing to be a legal entity due to amalgamation/ merger/dissolution/ voluntary strike-off, etc.

Name of the Company	CoR Issued on	Date of Cancellation of CoR
Gangotri Commodities & Finvest Pvt Ltd	June 19, 2003	November 25, 2025
Perkin Dealers Pvt Ltd	April 07, 2003	November 25, 2025

1.1.4.    RBI cancels Certificate of Registration of four NBFCs

The RBI, in exercise of powers conferred on it under Section 45-IA (6) of the Reserve Bank of India Act, 1934, has cancelled the Certificate of Registration ofthe following companies:

Name of the Company	CoR Issued on	Date of Cancellation of CoR
Gem Investments & Trading Co Pvt Ltd	August 25, 1998	November 04, 2025
Zenlabs Ethica Limited	August 05, 1998	November 07, 2025
Vistar Financiers Pvt Ltd	September 28, 2001	November 10, 2025
Ambica Barter Pvt Ltd	July 11, 2005	November 10, 2025

1.1.5.    RBI issues Amendment Directions on Maintenance of Cash Credit Accounts, Current Accounts and Overdraft Accounts by Banks

On December 11, 2025, the Reserve Bank of India (RBI) issued 7 (seven) Amendment Directions to rationalise the existing rules and give banks greater flexibility in opening and maintaining cash credit accounts, current accounts and overdraft accounts, after considering stakeholder feedback on the 7 (seven) draft Transaction Accounts Directions issued on October 1, 2025. The amendments apply across multiple regulated entities through updates to the relevant RBI directions for commercial banks, small finance banks, payments banks, local area banks, regional rural banks, urban co-operative banks and rural co-operative banks, with RBI noting that the modifications will be updated as and when they become effective and that a statement of feedback has been provided in an annex.

1.1.6.    RBI Issues Master Direction – Reserve Bank of India (Rupee Interest Rate Derivatives) Directions, 2025

RBI has issued the Master Direction – Reserve Bank of India (Rupee Interest Rate Derivatives) Directions, 2025, updating the earlier framework to reflect market developments, support broader risk-management needs and foster greater transparency in the rupee interest rate derivatives market. These Directions, issued under section 45W of the Reserve Bank of India Act, 1934, apply to rupee interest rate derivative transactions undertaken in the over-the-counter market and on recognised stock exchanges in India, and will come into force on March 1, 2026.   For exchange-traded interest rate futures, the aggregate long position of all Foreign Portfolio Investors with net long positions is capped at INR 5,000 crore (Indian Rupees Five Thousand Crore only), aggregated across all interest rate futures instruments.  For non-residents transacting with market-makers for purposes other than hedging, the Price Value of a Basis Point of all outstanding positions is capped at INR 1,000 crore (Indian Rupees One Thousand Crore only), with Clearing Corporation of India Limited (“CCIL”) required to monitor and publish daily utilisation and the calculation methodology. The Directions also require market-makers to report offshore rupee interest rate derivative transactions undertaken by their offshore related parties to CCIL’s trade repository, permit an option not to report contracts with gross notional not exceeding USD 1 million (United States Dollars One Million only), and set minimum reporting coverage targets of 80 per cent (eighty per cent) from January 1, 2027 and 90 per cent (ninety per cent) from January 1, 2028.

Securities and Exchange Board of India (SEBI)

1.1.7.     SEBI relaxes India geo-tagging requirement for NRIs undertaking re-KYC

SEBI issued a circular to SEBI-registered intermediaries and stock exchanges, modifying paragraph 51 of SEBI’s Master Circular on KYC dated October 12, 2023, to ease digital re-KYC for Non-Resident Indians (NRIs). SEBI clarified that, for existing NRI clients undertaking re-KYC through digital mode, the requirement that the client’s physical location be in India during digital onboarding will be relaxed; however, the application must still include safeguards such as random action initiation and time-stamping, capturing GPS latitude/longitude and ensuring it matches the country in the Proof of Address, and preventing connections from spoofed IP addresses.

1.1.8.     SEBI issues SEBI (Infrastructure Investment Trusts) (Fourth Amendment) Regulations, 2025

SEBI notified the Securities and Exchange Board of India (Infrastructure Investment Trusts) (Fourth Amendment) Regulations, 2025, amending the Securities and Exchange Board of India (Infrastructure Investment Trusts) Regulations, 2014, with effect from the date of publication in the Official Gazette. The amendments (i) revise regulation 2(1)(ya)(ii) to include a family trust or an intermediary registered with SEBI having a net worth of more than INR 5,00,00,00,000 (Indian Rupees Five Hundred Crore only), as per the latest audited financial statements,  (ii) align the definition of “qualified institutional buyer” (QIB) with the meaning under regulation 2(1)(ss) of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018 (ICDR Regulations), and (iii) substitute the definition of “strategic investor” to cover institutional investors, certain foreign portfolio investors (FPIs), and middle/upper/top layer Non-Banking Finance Companies (NBFCs) registered with the RBI, as well as other SEBI-specified entities, provided they invest at least 5 per cent (five per cent) of the total offer size of the Infrastructure Investment Trust (InvIT) (or such amount as SEBI may specify), subject to compliance with the Foreign Exchange Management Act, 1999 (FEMA) framework and consultation with the relevant financial sector regulator where applicable.

1.1.9.     SEBI issues SEBI (Real Estate Investment Trusts) (Third Amendment) Regulations, 2025

SEBI notified the Securities and Exchange Board of India (Real Estate Investment Trusts) (Third Amendment) Regulations, 2025, amending the Securities and Exchange Board of India (Real Estate Investment Trusts) Regulations, 2014, with effect from the date of publication in the Official Gazette. The amendment inserts a definition of “institutional investor” to include (i) a qualified institutional buyer (QIB) and (ii) a family trust or a SEBI-registered intermediary having a net worth of more than INR 5,00,00,00,000 (Indian Rupees Five Hundred Crore only) as per the latest audited financial statements. It also aligns “QIB” by adopting the meaning assigned under regulation 2(1)(ss) of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018, and revises “strategic investor” to cover institutional investors, foreign portfolio investors (FPIs) not covered as institutional investors, and middle/upper/top layer Non-Banking Finance Companies (NBFCs) registered with the Reserve Bank of India, as well as other entities specified by SEBI (with consultation where the entity is regulated by another financial sector regulator), subject to the investor(s) investing at least 5 per cent (five per cent) of the total offer size of the Real Estate Investment Trust (REIT) (or such amount as SEBI may specify) and compliance with the Foreign Exchange Management Act, 1999 framework.

1.1.10.  SEBI defers Phase III implementation timeline for nomination reforms in securities market

SEBI issued a circular to mutual fund Asset Management Companies (AMCs), Registrars and Transfer Agents (RTAs), depositories and depository participants, deferring the implementation timeline for Phase III of the “Revise and Revamp Nomination Facilities in the Indian Securities Market” framework. SEBI noted that Phase-wise implementation had earlier been adopted and then extended (including deferring Phase III to December 15, 2025), but stakeholders subsequently sought re-examination of structural implications and additional time for system/process changes; accordingly, SEBI has now deferred the Phase III implementation date from December 15, 2025 to a further date to be notified separately, while keeping all other provisions of the January 10, 2025, February 28, 2025 and July 30, 2025 circulars unchanged. The circular is effective immediately and is issued under the Securities and Exchange Board of India Act, 1992 read with the SEBI (Depositories and Participants) Regulations, 2018 and the SEBI (Mutual Funds) Regulations, 1996.

1.1.11.  SEBI prescribes migration process for AI-only AIF schemes and grants further operational relaxations for LVFs

SEBI issued a circular dated December 8, 2025, to all Alternative Investment Funds (“AIFs”) setting out modalities for (i) converting/migrating eligible existing AIF schemes into “accredited investor only” schemes (AI-only schemes) and (ii) extending further relaxations to Large Value Funds (“LVFs”) for accredited investors, following amendments notified on November 19, 2025.  Any new scheme launched as an AI-only scheme or an LVF must add the words “AI only fund” or “LVF” (as applicable) at the end of the scheme name.  Existing eligible schemes launched prior to the Securities and Exchange Board of India (Alternative Investment Funds) (Third Amendment) Regulations, 2025 may convert to an AI-only scheme/LVF scheme subject to conditions specified by SEBI, including obtaining positive consent from all investors, and the manager must (a) change the scheme name accordingly and (b) report the conversion to SEBI (by emailing within 15 (fifteen) days) and to depositories (within 15 (fifteen) days). SEBI also clarified that if an investor is an accredited investor at the time of onboarding, they will be treated as an accredited investor for the life of the scheme even if that status is lost later, and the maximum extension permissible for AI-only schemes is 5 (five) years (inclusive of any extension granted prior to conversion).  Further, LVFs are exempted from following the standard template for placement memorandum and the annual audit of placement memorandum terms (without needing specific investor waivers), and the trustee/sponsor must ensure the AIF’s Compliance Test Report captures compliance with this circular; the circular is effective immediately and is issued under the Securities and Exchange Board of India Act, 1992 read with the SEBI (Alternative Investment Funds) Regulations, 2012.

International Financial Services Centres Authority (IFSCA)

1.1.12.  IFSCA clarifies registration and transition requirements for TechFin and Ancillary Service Providers in IFSC

The International Financial Services Centres Authority (“IFSCA”) has issued FAQs under the IFSCA (TechFin and Ancillary Services) Regulations, 2025 (“TAS Regulations”), stating that any entity intending to provide TechFin Services and/or Ancillary Services from an International Financial Services Centre (“IFSC”) must obtain a CoR before commencing operations. Eligible applicants include IFSC-incorporated companies and limited liability partnerships, branches of entities incorporated outside IFSC, and partnership firms registered under the Indian Partnership Act, 1932 (subject to specified partner and jurisdiction conditions).  After in-principle approval, an applicant must complete compliance within 180 (one hundred eighty) days (unless extended), and a TAS provider must appoint/designate a principal officer and a compliance officer who are full-time and based in IFSC (with limited flexibility for certain group-only models and eligible professionals). Existing entities authorised under earlier ancillary services or fintech frameworks may transition under IFSCA’s circular dated July 31, 2025, but must obtain a CoR within 12 (twelve) months from commencement of the TAS Regulations or their prior approvals/authorisations will be treated as invalid; specified legacy framework provisions (including those dated February 10, 2021 and April 27, 2022) are scheduled for repeal after 24 (twenty-four) months. The FAQs also address operational and reporting currency expectations, fee references and payment timelines (including payment within 15 (fifteen) days of in-principle approval and conditional fees within 30 (thirty) days after the relevant financial year), and clarify that certain technology platforms used for accounting, taxation and financial crime compliance services can fall within scope, subject to stated conditions.

1.1.13.  IFSCA amends IFSC Banking Handbook credit module for IFSC Banking Units

IFSCA issued a circular dated December 8, 2025 to all International Financial Services Centre (IFSC) Banking Units (IBUs), amending Module no. 16 (sixteen) (Providing Credit) of the IFSCA Banking Handbook: Conduct of Business (COB) Directions v6.0. It clarified that restrictions on loans or advances under section 20(1) of the Banking Regulation Act, 1949 will not apply to an IBU of a foreign bank, although such lending will remain subject to IFSCA’s “Restrictions by the Authority” conditions under the module. It also tightened governance requirements where an IBU grants loans or advances to a director of its parent bank or any related party of such director, including adopting a policy, ensuring conflict-free decision-making, maintaining arm’s-length terms, excluding beneficiaries from approval processes, adhering to home-regulator thresholds, conducting periodic audits, and intimating the Department of Banking Supervision within 15 (fifteen) working days of the transaction. Further, it permitted IBUs to provide loans to companies for buy-back of their securities, provided the applicable law in the company’s jurisdiction of incorporation allows such borrowing. The circular was issued under sections 12 (twelve) and 13 (thirteen) of the International Financial Services Centres Authority Act, 2019 and took effect immediately.

1.1.14.  IFSCA directs IBUs to comply with Banking Laws Amendment Act provisions

IFSCA has issued a circular directing all International Banking Units (IBUs) to ensure compliance with the Banking Laws (Amendment) Act, 2025, which came into force on November 1, 2025, pursuant to a Department of Financial Services notification dated October 22, 2025. The circular states that the directions are issued under the International Financial Services Centres Authority Act, 2019 read with section 35A of the Banking Regulation Act, 1949.

Miscellaneous

Unique Identification Authority of India (UIDAI)

1.1.15.  UIDAI amends Aadhaar authentication and offline verification rules

Unique Identification Authority of India (“UIDAI”) notified the Aadhaar (Authentication and Offline Verification) Amendment Regulations, 2025 under the Aadhaar (Targeted Delivery of Financial and Other Subsidies, Benefits and Services) Act, 2016, effective from the date of publication in the Official Gazette. The amendments introduce “Aadhaar Application” and “Aadhaar Verifiable Credential” (a digitally signed document that may include the last 4 (four) digits of the Aadhaar number and other demographic particulars) and add “Offline Face Verification”, while also recognising Aadhaar Verifiable Credential verification as a type of offline verification that may be carried out with or without offline face verification. The framework also creates a registration process for an Offline Verification Seeking Entity (“OVSE”) undertaking Aadhaar paperless offline e-KYC or Aadhaar Verifiable Credential verification through Aadhaar Application, including timelines for communicating rejection within 15 (fifteen) days and permitting reconsideration requests within 30 (thirty) days, and it allows UIDAI to determine fees and charges for OVSE registration and transactions. It further permits an OVSE to surrender access to the offline verification facility (subject to closure requirements such as preservation of logs and grievance records), removes certain references to “(XML)” and “m-Aadhaar”, and strengthens enforcement by enabling penalties for OVSE non-compliance or misuse and requiring cessation of Aadhaar name and logo use upon termination of registration.

1.1.16.  UIDAI updates Aadhaar enrolment and update document requirements

UIDAI notified the Aadhaar (Enrolment and Update) Third Amendment Regulations, 2025 under the Aadhaar (Targeted Delivery of Financial and Other Subsidies, Benefits and Services) Act, 2016, with effect from the date of publication in the Official Gazette. The amendment substitutes Schedule II of the Aadhaar (Enrolment and Update) Regulations, 2016 with revised lists of acceptable documents for Aadhaar enrolment and for updates and sets baseline acceptability criteria (documents must be currently valid, issued to the person concerned, verifiable from source, and not disclaimed by the issuer). It clarifies that Head of the Family (“HoF”)-based enrolment is mandatory for children below 5 (five) years of age (subject to specified exceptions) and encourages HoF-based enrolment for individuals aged 5 (five) years and above and less than 18 (eighteen) years of age (with a document-based route where HoF or Proof of Relationship is unavailable).   For eligible foreign nationals, including Overseas Citizen of India (“OCI”) cardholders, Nepal and Bhutan nationals and Long Term Visa (“LTV”) holders, it specifies Aadhaar validity periods, including 10 (ten) years for OCI cardholders and Nepal/Bhutan nationals, and validity linked to visa or LTV for others.  For updates, it details processes such as date of birth changes where the date of birth was earlier recorded as “declared” or “approximate”, including mandatory birth certificate submission for resident Indians below 18 (eighteen) years and birth certificate or Indian passport for Non-Resident Indians (NRI) below 18 (eighteen) years.  

Monetary Penalties

1.1.17.  RBI imposes penalties on four banks for regulatory non-compliance

RBI has imposed monetary penalties on the following institutions:

Sr. No.	Name of Bank	Amount of Penalty	Grounds for Penalty
1.	The Pattukottai Co-operative Urban Bank Limited, Tamil Nadu	(Indian Rupees One Lakh Fifty Thousand only)	Contravention of provisions of Section 17 of the Banking Regulation Act, 1949 and non-compliance with certain directions issued by RBI on ‘Exposure Norms and Statutory / Other Restrictions – UCBs’ and ‘Know Your Customer (KYC)’. This penalty has been imposed in exercise of powers conferred on RBI under the provisions of Section 47A(1)(c) read with Sections 46(4)(i) and 56 of the Banking Regulation Act, 1949.
2.	The Assam Co-operative Apex Bank Limited, Guwahati	(Indian Rupees Fifty Thousand only)	Non-compliance with certain directions issued by RBI on ‘Know Your Customer (KYC)’. This penalty has been imposed in exercise of powers conferred on RBI under the provisions of Section 47A(1)(c) read with Sections 46(4)(i) and 56 of the Banking Regulation Act, 1949.
3.	The Yavatmal Urban Co-operative Bank Ltd., Yavatmal, Maharashtra	Indian Rupees Two Lakh Twenty Five Thousand only	Non-compliance with certain directions issued by RBI on ‘Concentration Risk Management’, ‘Treatment of Wilful Defaulters and Large Defaulters’ and ‘Credit Information Reporting’. This penalty has been imposed in exercise of powers conferred on RBI under the provisions of Section 47A(1)(c) read with Sections 46(4)(i) and 56 of the Banking Regulation Act, 1949, and Section 25(1)(iii) read with Section 23(4) of the Credit Information Companies (Regulation) Act, 2005.
4.	The Co-operative Urban Bank Limited – Parlakhemundi, Odisha	Indian Rupees Thirteen Thousand Only	Non-compliance with specific directions issued by RBI under ‘Supervisory Action Framework (SAF)’ and certain directions issued by RBI on ‘Membership of Credit Information Companies by Co-operative Banks’. This penalty has been imposed in exercise of powers conferred on RBI under the provisions of Section 47A(1)(c) read with Sections 46(4)(i) and 56 of the Banking Regulation Act, 1949 and Section 25 read with Section 23 of the Credit Information Companies (Regulation) Act, 2005.

2.             Key Asian Markets - Philippines and Indonesia

2.1.         Philippines

2.2.1.     BSP revises Discount Window Facility interest rates

The Monetary Board reduced the Bangko Sentral ng Pilipinas (“BSP”) Target Reverse Repurchase Rate by 25 (twenty-five) basis points to 4.50 per cent (four point five zero per cent). It also set the overnight deposit and lending facility rates at 4.00 per cent (four point zero zero per cent) and 5.00 per cent (five point zero zero per cent), respectively. Using the new overnight lending rate as reference, the applicable peso Discount Window Facility (“DWF”) interest rates effective December 15, 2025, are 5.6433 per cent (five point six four three three per cent) for 1–90 (one to ninety) days and 5.7866 per cent (five point seven eight six six per cent) for 91–180 (ninety-one to one hundred eighty) days. The United States dollar DWF interest rate remains 6.27852 per cent (six point two seven eight five two per cent) across 1–90 (one to ninety) days, 91–180 (ninety-one to one hundred eighty) days and 181–360 (one hundred eighty-one to three hundred sixty) days, while Japanese yen DWF rates range from 2.72400 per cent (two point seven two four zero zero per cent) to 2.87875 per cent (two point eight seven eight seven five per cent) depending on tenor, and BSP noted that DWF spreads may be adjusted periodically to reflect monetary policy objectives and market movements.

2.2.2.     Philippines’ external debt remains broadly stable and sustainable

BSP reported that the Philippines’ outstanding external debt was broadly stable in the third quarter of 2025, rising by 0.1 per cent (zero point one per cent) quarter-on-quarter to USD 149.09 Billion (United States Dollars One Hundred Forty-Nine Billion and Nine Billion only) as of end-September 2025, driven by non-residents’ net acquisition of Philippine debt securities of USD 1.47 billion (United States Dollars One Billion Four Hundred Seventy Million only) and partly offset by net repayments of USD 764.56 Million (United States Dollars Seven Hundred Sixty-Four Million Five Hundred Sixty Thousand only) and valuation adjustments of USD 442.50 Million (United States Dollars Four Hundred Forty-Two Million Five Hundred Thousand only) due to US dollar appreciation. External debt was equivalent to 30.9 per cent (thirty point nine per cent) of gross domestic product, improving from 31.2 per cent (thirty-one point two per cent) in the previous quarter. The debt service ratio improved to 8.5 per cent (eight point five per cent) from 11.5 per cent (eleven point five per cent) a year earlier, and year-on-year external debt grew by 6.8 per cent (six point eight per cent), largely reflecting new borrowings including National Government bond issuances of USD 3.33 Billion (United States Dollars Three Billion Three Hundred Thirty Million only) and external financing by local banks of USD1.58 Billion (United States Dollar One Billion Five Hundred Eighty Million only).

2.3.         Indonesia

2.3.1.     Bank Indonesia reports higher net liability position in Indonesia’s IIP in Q3 2025

Bank Indonesia reported that Indonesia’s International Investment Position (“IIP”) recorded a higher net liability in the third quarter of 2025, with net liability IIP rising to USD 262.9 Billion (United States Dollars Two Hundred Sixty-Two Billion Nine Hundred only) from USD 244.5 Billion (United States Dollars Two Hundred Forty-Four Billion Five Hundred only) in the previous quarter, mainly because Foreign Financial Liabilities (FFL) grew faster than Foreign Financial Assets (FFA). Indonesia’s FFA increased by 0.7 per cent (zero point seven per cent) quarter-on-quarter to USD 541.1 Billion (United States Dollars Five Hundred Forty-One Billion One Hundred Million only) from USD 537.3 Billion (United States Dollars Five Hundred Thirty-Seven Billion Three Hundred Million only), supported by higher market valuations linked to rising gold prices, global equity prices, and asset price increases in placement countries. Bank Indonesia said it will remain vigilant to global developments, strengthen the policy mix with close coordination with the Government and relevant authorities, and monitor risks associated with a net liability IIP for the domestic economy.

3.             Trends

3.1.         Speculation intensifies over a second phase of public sector bank mergers

Recent reporting on bank consolidation has revived speculation that the government could eventually reduce the number of public sector banks (“PSBs”) from 12 (twelve) to 4 (four) by the financial year ending March 31, 2027, even though the Ministry of Finance has formally told Parliament that no merger or consolidation proposal is currently under consideration. Articles drawing on unnamed official and banking sources describe a potential blueprint in which larger lenders such as State Bank of India, Punjab National Bank, Bank of Baroda, Canara Bank and Union Bank of India would absorb smaller banks including Indian Overseas Bank, Bank of Maharashtra, Bank of India, Central Bank of India, UCO Bank and Punjab and Sind Bank in a new consolidation round. Comments from the Finance Minister at a State Bank of India conclave, stressing the need for “a lot of big, world-class banks” and indicating that merger-related work has begun, have added to the perception that such ideas are being actively explored. However, with no official scheme, timetable or cabinet approval disclosed, this consolidation story remains a policy trend under discussion rather than a confirmed restructuring plan for the PSB landscape.

4.             Sector Overview

4.1.         ADB upgrades India’s FY26 growth outlook, reinforcing positive macro sentiment

The Asian Development Bank (ADB) raised its gross domestic product (GDP) growth forecast for India for financial year 2025–26 to 7.2 per cent (seven point two per cent), up from 6.5 per cent (six point five per cent), citing stronger-than-expected momentum after July–September quarter growth of 8.2 per cent (eight point two per cent). The latest Asian Development Outlook update highlights that robust domestic consumption, resilient services and industrial activity, and ongoing reforms are making India the largest single contributor to the upgraded 5.1 per cent (five point one per cent) growth projection for developing Asia, compared to 4.8 per cent (four point eight per cent) earlier. The report also notes that inflation in India has remained subdued and is expected to stay near the 4 per cent (four per cent) range over the medium term.

4.2.         Rupee sinks to fresh record low near 90.5 per USD amid trade-related stress

The Indian rupee fell to a new all-time low of about 90.55 (ninety point five five) against the United States dollar (USD) on December 12, 2025, breaching its previous record near 90.5 (ninety point five) per USD set a day earlier, as markets reacted to the continued lack of progress on an India–United States trade deal and persistent foreign portfolio outflows. Reports note that the rupee has weakened by nearly 6 per cent (six per cent) against the USD so far in 2025, making it one of Asia’s worst-performing currencies this year, even as the RBI is believed to have intermittently sold dollars to slow the pace of depreciation. The move reflects strong dollar demand from importers, higher global precious metal prices and tariff-related uncertainty weighing on export and capital-flow expectations. For banks, non-bank lenders and markets, the sharper currency depreciation heightens focus on managing open foreign-exchange positions, monitoring external commercial borrowings and repricing risk on dollar-linked assets, even as it marginally improves export competitiveness for parts of the corporate loan book.

5.             Business Updates

5.1.         Fino Payments Bank gets in-principle RBI nod to convert into small finance bank

Fino Payments Bank Limited received in-principle approval from the Reserve Bank of India (RBI) to transition into a Small Finance Bank, making it the first payments bank in India to secure such an upgrade. The approval will allow Fino, once it satisfies additional capital, governance and technology conditions and receives the final licence, to move beyond its current deposit and payments-only model into full-fledged asset-side lending, including micro and small-ticket credit to underserved customers. The bank is permitted to continue existing operations during the transition, and management has indicated that the shift is intended to strengthen its liability franchise and improve profitability by adding higher-yielding loan products. Equity markets initially reacted cautiously, with Fino’s share price declining on the day of the announcement even as analysts highlighted the long-term growth opportunity from the move.

5.2.         UGRO Capital completes acquisition of Profectus Capital in all-cash deal

UGRO Capital Limited, a listed NBFC focused on micro, small and medium enterprise (MSME) lending, announced that it had completed its INR 1,400 Crore (Indian Rupees One Thousand Four Hundred Crores only) all-cash acquisition of Profectus Capital, making Profectus a wholly owned subsidiary with effect from December 8, 2025. With the addition of Profectus’ assets under management (AUM) of about INR 3,468 Crore (Indian Rupees Three Thousand Four Hundred Sixty-Eight Crores only), UGRO’s consolidated AUM is expected to rise by around 29 per cent (twenty-nine per cent) to roughly INR 15,471 Crore (Indian Rupees Fifteen Thousand Four Hundred Seventy-One Crores only), alongside management guidance of immediate annualised profit accretion of approximately INR 150 Crore (Indian Rupees One Hundred Fifty Crores only). The company has indicated that Profectus will, for now, operate as a separate subsidiary while it initiates a merger into UGRO, subject to board and shareholder approvals, positioning the combined platform as a larger secured MSME lender and signalling continued consolidation among mid-sized NBFCs in India’s BFSI sector.

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

info@akandpartners.in