1. Regulatory Updates
1.1. India
1.1.1. RBI directs Visa and Mastercard to halt unauthorised card-based commercial payments
Following regulatory action against Paytm, the Reserve Bank of India (“RBI”) has instructed card networks Visa and Mastercard to prohibit card-based commercial payments through payment service providers and companies. While the RBI has not officially disclosed the reasons for the directive, fintech companies report that unauthorised outlets are conducting such transactions. It appears that some fintech firms are allowing card payments for tuition fees and rentals without proper authorisation, potentially violating the Payment and Settlement Systems Act, 2007. In response, Visa has communicated to fintechs, directing them to suspend Business Payment Service Provider (BPSP) transactions until further notice. Non-compliance could lead to regulatory sanctions and assessments under Visa rules. Indian Express
1.1.2. India launches digital payment connectivity with Mauritius and Sri Lanka
The virtual launch ceremony marked the commencement of RuPay cards and Unified Payments Interface (“UPI”) connectivity between India and Mauritius, as well as UPI connectivity between India and Sri Lanka. The connectivity allows Indian travellers in Mauritius to make UPI payments to local merchants and vice versa, using the Instant Payment System (IPS) app of Mauritius. Additionally, the adoption of RuPay technology enables banks in Mauritius to issue RuPay cards domestically, which can be used at local ATMs and Point of Sale (PoS) terminals, as well as in India. Further, for digital payment connectivity with Sri Lanka, Indian travellers can utilise UPI apps for QR code-based payments at merchant locations. Developed by NPCI International Payments Limited, these initiatives aim to deepen financial integration and strengthen historical ties among the nations. RBI
1.1.3. RBI and Nepal Rastra Bank forge cross-border payment integration for instant remittances
RBI and Nepal Rastra Bank (“NRB”) have officially agreed to integrate their fast payment systems, namely UPI of India and National Payments Interface (NPI) of Nepal. This collaboration aims to facilitate seamless and cost-effective cross-border remittances between the two countries, allowing users of both systems to make instant fund transfers. The integration is seen as a step to enhance financial connectivity and strengthen the historical, cultural, and economic bonds between India and Nepal. The formal launch of this linkage will take place at a later date, following the establishment of necessary systems based on the exchanged Terms of Reference between RBI and NRB. RBI
1.1.4. Monetary Penalties
RBI imposes monetary penalties on the following financial institutions:
Name of the financial institution | Penalty Imposed | Reason |
INR 50,000 (Indian Rupees Fifty Thousand Only) | Contravention of Directives and specific directions issued by RBI under sections 35(A)(1) and 36(1) read with section 56 of the Banking Regulation Act, 1949 (BR Act). | |
INR 75,000 (Indian Rupees Seventy Five Thousand Only) | Contravention of/non-adherence with directions issued by RBI on ‘Exposure Norms & Statutory/Other Restrictions - Urban Cooperative Banks ("UCBs")’. | |
INR 2,50,000 (Indian Rupees Two Lakh Fifty Thousand Only) | Contravention of/non-adherence with certain provisions of the directions issued by RBI on ‘Income Recognition, Asset Classification, Provisioning and Other Related Matters – UCBs’. | |
INR 1,00,000 (Indian Rupees One Lakh Only) | Contravention of/non-adherence with certain provisions of the directions issued by RBI on ‘Know Your Customer (KYC) Directions, 2016’. |
1.2. Bangladesh
1.2.1. Bangladesh Bank introduces stricter eligibility criteria for bank directors
According to Bangladesh Bank data, the short-term foreign debt of the private sector declined by 1.43 per cent (one point four three per cent) to USD 11.79 billion (United States Dollar Eleven Billion Seven Hundred Ninety Million Only) in December compared to the previous month. This decrease is attributed to the preference for domestic borrowing, which has proven to be more appealing than acquiring loans from abroad. Over the course of 2023, private-sector borrowing has consistently decreased each month due to the rising interest rates in the international market, which has dissuaded private-sector borrowers. In January 2023, the debt level was recorded at USD 15.58 billion (United States Dollar Fifteen Billion Five Hundred Eighty Million Only). The Daily Star
1.3. Sri Lanka
1.3.1. Sri Lanka's FIU and Excise Department sign MOU to combat money laundering and terrorism financing
Under the Financial Transactions Reporting Act, Sri Lanka's Financial Intelligence Unit (“FIU”) has signed a Memorandum of Understanding (“MoU”) with the Excise Department on January 09, 2024. The MoU facilitates the exchange of information between the two entities regarding investigations and prosecutions related to money laundering, terrorist financing, and associated crimes. The agreement, signed by the Commissioner General of Excise and the Director of the FIU, aims to address global financial crimes that pose threats to economic and financial systems. The MoU allows both institutions to share vital information for the prevention, detection, and prosecution of such offenses. CBSL
2. Trends
2.1. Navi Finserv plans INR 600 crore fundraise through NCDs for business growth
Navi Finserv is looking to raise up to INR 600 crore (Indian Rupees Six Hundred Crore Only) through the issuance of Non-Convertible Debentures (“NCDs”) to support its business expansion. The total issue size includes a green shoe option of INR 300 crore (Indian Rupees Three Hundred Crore Only), as mentioned in a company statement. Navi Finserv plans to offer NCDs with varying tenors, offering effective yields ranging from 10.47 per cent (ten point four seven per cent) to 11.19 per cent (eleven point one nine per cent) per annum. The subsidiary of Navi Technologies, Navi Finserv, reported a net profit of INR 172 crore (Indian Rupees One Hundred Seventy-Two Crore Only) in the financial year 2022-23 (FY23), a significant improvement from the loss incurred in the previous fiscal year. Inc 42
2.2. NPCI in advanced talks for real-time payment linkage between US and India
The National Payments Corporation of India (“NPCI”) is in advanced discussions with banks in the US and India to establish a real-time payment linkage between the two countries. The initiative aims to leverage NPCI's expertise in cross-country payment systems. Within the UPI ecosystem, NPCI is collaborating with Indian and foreign banks to develop use-case models and conduct testing pilots. The process involves direct communication with entities like FedNow or their UPI equivalent for connectivity and the engagement of large US banks for partnership in use-case scenarios and testing. As the US lacks a nationwide system similar to India's UPI, the initial focus will be on small consumer payments. BFSI
2.3. Paymart partners with banks for innovative virtual ATM service in India
Fintech startup Paymart has announced a partnership with five major Indian banks, including IDBI Bank, Indian Bank, Jammu & Kashmir Bank, and Karur Vyasa Bank, to introduce an innovative virtual, cardless, and hardware-less cash withdrawal service. Paymart is currently in advanced discussions with four additional banks for further collaboration. The startup plans to initiate pilot programs with its partner banks in February/March, aiming for a phased nationwide rollout in April/May 2024. After successfully piloting the virtual ATM service with IDBI Bank for over six months, Paymart aims to empower local shopkeepers, making them essential hubs for cash withdrawals without the need for traditional ATMs or other hardware. Additionally, Paymart has partnered with CSC e-Governance Services India Ltd to expand the reach of its virtual ATM service. Zee Business
3. Sector Overview
3.1. Global fintech investment hit a five-year low in 2023, India and Singapore witness decline: KPMG
4. Business Updates
4.1. Mastercard launches MDES token connect platform for card tokenisation in India
Mastercard has launched the Mastercard Digital Enablement Service (MDES) Token Connect platform in India, allowing users to tokenize their cards through internet and mobile banking channels. This service, available for both debit and credit cards, facilitates card-on-file (CoF) and device-based tokenization at the issuer bank level. The platform offers a unified integration for issuer banks, eliminating the necessity for multiple proprietary Application Programming Interface (APIs). The move follows the recent expansion by RBI to include internet and mobile banking channels in the scope of card tokenization for debit and credit cards. Inc 42
4.2. Mizuho Bank acquires 15 per cent stake in Credit Saison India
On Credit Saison (“CS”) India, a digital Non-Banking Finance Company (“NBFC”), has announced that Mizuho Bank from Japan has acquired a 15 per cent (fifteen per cent) stake in the company for INR 1,200 crore (Indian Crore Twelve Hundred Crore Only). This marks CS's first investment from an external investor. The strategic investment is expected to support CS India in becoming a diversified and resilient lending franchise, emphasising growth and profitability. CS India, which obtained its NBFC license from the RBI in September 2019, initially focused on wholesale lending and tech-integrated partnerships with other NBFCs and fintechs. Financial Express
4.3. PayU partners with NPCI to enable digital payments via credit lines for merchants
PayU, a fintech platform, announced its collaboration with NPCI to facilitate merchants in accepting digital payments through credit lines. The 'Credit Lines on UPI' feature is seamlessly integrated into the PayU application, empowering merchants to receive digital payments using credit lines. This new functionality enhances financial security and growth opportunities for PayU's merchants. PayU will provide details about the specific identifiers associated with the consumer's credit type, such as pay-later or personal loans. This strategic move by PayU is geared towards offering customers increased financial flexibility. Inc 42
4.4. Policybazaar gains approval for reinsurance entry to boost innovation and profitability
PB Fintech's subsidiary, Policybazaar Insurance Brokers, has received in-principle approval from the insurance regulator to upgrade its license, enabling entry into the reinsurance sector, as stated in an exchange filing. This approval is expected to enhance insurance penetration in the country by incorporating additional technology, process control, and data analytics-based innovations into reinsurance capacity. Notably, PB Fintech achieved profitability for the first time in the December quarter. 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