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  • Writer's pictureAK & Partners

AKP Banking & Finance Digest- January 08, 2024

1. Regulatory Updates

1.1. India

1.1.1. RBI issues master direction for internal ombudsman in banks and NBFCs

The Reserve Bank of India (“RBI”) has issued a master direction concerning the Internal Ombudsman (“IO”) norms for banks and big Non-Banking Financial Companies (“NBFCs”). This initiative aims to streamline and standardise the regulations governing the IO mechanism across various regulated entities. The objective is to enhance the effectiveness of the IO mechanism and subsequently improve the internal grievance redress system in these entities. The directions focus on ensuring consistency in areas such as the timeline for escalating complaints to the IO, specific exclusions from this escalation process, minimum qualifications for appointing an IO, and updating reporting formats. These guidelines are applicable to banks and NBFCs, including deposit-taking NBFCs with 10 (ten) or more branches, non-deposit-taking NBFCs with an asset size exceeding INR 5,000 crore (Indian Rupees Five Thousand Crore Only), and those with a public customer interface. RBI


1.1.2. RBI releases draft circular on declaration of dividend by banks

The recently released draft circular provides detailed eligibility criteria and guidelines on board oversight for banks aiming to declare dividends or remit profits. Prudential requirements include meeting regulatory capital standards for the past three financial years, with a specific focus on the financial year for which the dividend is proposed. Additionally, banks must maintain a net Non-Performing Asset (NPA) ratio below six per cent for the relevant financial year. The revision of guidelines takes into account the implementation of Basel III standards, updates to the prompt corrective action (PCA) framework, and the introduction of differentiated banks. RBI


1.1.3. RBI addresses concerns with Credit Information Companies to enhance customer protection

RBI recently conducted a meeting with the Credit Information Companies (“CICs”) to discuss key issues. The meeting addressed the growing number of customer complaints and concerns identified during the RBI's supervisory assessment. The Deputy Governor emphasised six crucial areas for CICs to focus on, including improving data quality, addressing customer complaints promptly, enhancing the internal ombudsman framework, streamlining data correction processes, strengthening cybersecurity, and addressing concerns related to data usage for consulting and analytics. RBI

1.1.4. RBI extends implementation timeline for Fair Lending Practice- Penal Charges in Loan Accounts

RBI, referring to its circular on penal charges in loan accounts, initially set the implementation date as January 01, 2024, as per paragraph 3 (viii). However, due to requests from regulated entities (REs) seeking clarifications and additional time for system reconfiguration, the timeline has been extended by three months. Regulated entities are now required to implement the instructions for fresh loans available from April 01, 2024, onwards. For existing loans, the transition to the new penal charges regime must occur on the next review/renewal date falling on or after April 01, 2024, but no later than June 30, 2024. RBI


1.1.5. Monetary Penalties

RBI imposes monetary penalties on the following financial institutions:

Name of the financial institution

Penalty imposed


INR 1,50,000 (Indian Rupees One Lakh Fifty Thousand Only)

Contravention of/non-adherence with certain provisions of the directions issued by RBI on ‘Know Your Customer (KYC) Direction, 2016’ and ‘Reserve Bank of India (Co-operative Banks - Interest Rate on Deposits) Directions, 2016’.

INR 5,00,000 (Indian Rupees Five Lakh Only)

Contravention of/non-adherence with certain provisions of the directions issued by RBI on ‘Loans and advances to directors, relatives and firms/concerns in which they are interested’ read with RBI directions on ‘Loans and Advances to directors etc. - directors as surety/guarantors – Clarification’ and ‘Placement of Deposits with Other Banks by Primary Urban Co-operative Banks (“UCBs”)’.

INR 50,000 (Indian Rupees Fifty Thousand Only)

Contravention of/non-adherence with certain provisions of the directions issued by RBI on ‘Reserve Bank of India (Co-operative Banks - Interest Rate on Deposits) Directions, 2016’.

INR 5,00,000 (Indian Rupees Five Lakh Only)

Contravention of/non-adherence with certain provisions of the directions issued by RBI on ‘Placement of Deposits with Other Banks by Primary UCBs’ and ‘Reserve Bank of India (Co-operative Banks - Interest Rate on Deposits) Directions, 2016’.

INR 1,50,000 (Indian Rupees One Lakh Fifty Thousand Only)

Contravention of/non-adherence with certain provisions of the directions issued by RBI on ‘Membership of Credit Information Companies (CICs)’ and ‘Exposure Norms and Statutory/Other Restrictions - UCBs’.

1.2. Bangladesh

1.2.1. Brac Bank and MetLife forge historic bancassurance collaboration

Brac Bank and MetLife have partnered to offer Bancassurance services. This partnership aims to provide Brac Bank customers in Bangladesh with easy access to MetLife's diverse life insurance products. The initiative, focused on enhancing accessibility to insurance, will enable the availability of MetLife's innovative offerings through Brac Bank's extensive network, including branches, sub-branches, and Small and Medium Enterprises (SME) Units. The strategic alliance between two prominent brands in Bangladesh's banking and insurance sectors is anticipated to significantly elevate the financial services landscape, providing customers with comprehensive solutions for both banking and insurance needs. Dhaka Tribune


1.3. Vietnam

1.3.1. State Bank of Vietnam focuses on credit quality and key sectors for economic growth in 2024

The State Bank of Vietnam (“SBV”) is set to enhance credit quality and allocate capital to pivotal sectors driving economic growth in 2024. The SBV plans to maintain a flexible and proactive approach in its open market operations while ensuring readiness to support liquidity for the credit institution system. KB Security Vietnam Company (KBSV) anticipates a credit growth of 13-14 per cent (thirteen to fourteen per cent) in 2024, driven by improved economic conditions and the resolution of bottlenecks in the real estate market and enterprise bonds. Despite global economic challenges in 2023, Vietnam's credit growth fell below expectations due to difficult circumstances faced by enterprises, despite the SBV's implementation of various support measures. Vietnam Plus


2. Trends

2.1. Muthoot Finance plans INR 1,000 crore NCD public issue for gold loan expansion

Muthoot Finance, a non-banking lender with a focus on gold loans, has announced its intention to generate up to INR 1,000 crore (Indian Rupees One Thousand Crore Only) through a public issue of secured, redeemable non-convertible debentures (NCDs). The NCDs, rated AA+ (stable) by Crisil and Icra, come with a base issue size of INR 100 crore (Indian Rupees One Hundred Crore Only) and an option to retain oversubscription up to INR 900 crore (Indian Rupees Nine Hundred Crore Only). Post allotment, these NCDs will be listed on the Bombay Stock Exchange. Muthoot Finance is providing seven investment options for the NCDs, offering varying interest rates between 8.75 per cent (eight point seven five per cent) and 9 per cent (nine per cent) per annum, with options for monthly or annual interest payments or maturity redemption. Financial Express


2.2. SBI plans to raise up to INR 5,000 crore through AT-1 bonds in January

State Bank of India (“SBI”) is considering raising funds of up to INR 5,000 crore (Indian Rupees Five Thousand Crore Only) through the issuance of additional tier-1 (“AT-1”) bonds in the third week of January. The AT-1 issuance includes a base size of INR 2,000 crore (Indian Rupees Two Thousand Crore Only) and a greenshoe option of INR 3,000 crore (Indian Rupees Three Thousand Crore Only). SBI's bonds carry an AA+ rating from CRISIL, Care, and ICRA. In light of current market conditions, the coupon for SBI's AT-1 bonds is expected to be set around 8.25 per cent (eight point two five per cent). SBI, as the largest lender in the country with government ownership, typically offers lower coupon rates in the banking sector. The Economic Times

3. Sector Overview


4. Business Updates


4.1. Tata Payments and DigiO secure RBI approval for payment aggregator licences

Tata Payments, the digital payments arm of Tata Group, and DigiO, an identity verification startup backed by Groww, have been granted payment aggregator (“PA”) licences by RBI. Tata Payments is the second payments arm of Tata Group to receive the PA licence, following Tata Communications Payment Solutions. While DigiO's specific use case remains unclear, reports suggest that the PA licence will allow the fintech SaaS startup to integrate in-payment services with its existing offerings. According to recent RBI data, a total of 9 (nine) companies have received final approval to operate as online PAs, with an additional 32 (thirty-two) applicants granted in-principle authorisation, including Zomato, Infibeam Avenues, and EaseMyTrip. Inc 42


4.2. Jio Financial Services applies for a mutual fund license with SEBI

Jio Financial Services, the fintech arm of Reliance Industries, has submitted an application to the Securities and Exchange Board of India (“SEBI”) for a mutual fund license. The application, filed in collaboration with BlackRock, is currently under consideration by SEBI, as per the regulator's December 31 update. Jio Financial Services and BlackRock have allocated an initial investment of USD 150 million (United States Dollar One Hundred Fifty Million Only) each for the launch of Jio BlackRock, a venture aimed at disrupting the Indian Asset Management Company (AMC) sector. Instead of acquisition, the entities have opted for a new license to enter the domestic mutual fund industry. Inc 42


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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