AKP Banking & Finance Digest January 19, 2026

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1. Regulatory Updates

1.1.  India

Reserve Bank of India (RBI)

1.1.1.    RBI issues Foreign Exchange Management (Guarantees) Regulations, 2026

Reserve Bank of India (“RBI”) on January 12, 2026, issued the Foreign Exchange Management (Guarantees) Regulations, 2026, introducing a principle-based framework under which guarantees that meet the prescribed principles are permitted, and expanding the universe of guarantees available under the automatic route. The framework introduces comprehensive reporting of all guarantees, issued, modified or invoked, through a GRN form to be submitted to authorised dealer banks, with the compilation and submission format for authorised dealer banks to be communicated separately. The RBI stated that the regulations incorporate stakeholder feedback received on the draft published on August 14, 2025. Consequential changes include supersession of 19 (nineteen) earlier A.P. (DIR Series) circulars (dated between August 13, 2002 and December 22, 2023), discontinuation of quarterly reporting on issuance of guarantee for trade credit from the quarter ending March 2026, and amendments to multiple Master Directions dealing with external commercial borrowings, trade credits, exports, imports, other remittance facilities and reporting under the Foreign Exchange Management Act, 1999.  

1.1.2.    RBI invites comments on Discussion Paper - Licensing of Urban Cooperative Banks

RBI published a discussion paper on licensing of Urban Co-operative Banks (“UCBs”) and invited public and stakeholder comments by February 13, 2026, through the ‘Connect 2 Regulate’ portal on the RBI website or by email. The paper notes that licensing of new UCBs was paused in 2004 after weaknesses emerged in the sector, including instances where 31 per cent (thirty-one per cent) of newly licensed UCBs became financially unsound within a short span of time. It reiterates that a co-operative society must obtain a banking licence from the RBI under Section 22 read with Section 56 of the Banking Regulation Act, 1949 to carry on banking business, and highlights that the regulatory and supervisory framework has strengthened in recent years, including through the Banking Regulation (Amendment) Act, 2020 and the RBI’s tiered regulatory framework for UCBs. The RBI is seeking views on whether licensing should be resumed and, if yes, what eligibility criteria should apply, while proposing stringent entry norms such as a minimum capital requirement of INR 3,00,00,00,000 (Indian Rupees Three Hundred Crore only), active operations for at least 10 (ten) years with a good financial track record of at least 5 (five) years, a Capital to Risk-weighted Asset Ratio not below 12 per cent (twelve per cent), and a preference for multi-state co-operative credit societies alongside possible statutory changes to strengthen governance guardrails.

1.1.3.    RBI issues Internal Ombudsman Directions for regulated entities

RBI issued category-specific Master Directions on Internal Ombudsman for regulated entities, following public feedback on the draft Master Direction issued on October 7, 2025, and incorporating suitable modifications based on feedback received. The RBI notified separate directions for commercial banks, small finance banks, payments banks, non-banking financial companies, non-bank prepaid payment instrument issuers, and credit information companies. The RBI stated that these directions are expected to strengthen the internal mechanism for resolution of customer grievances within regulated entities.

1.1.4.    RBI grants in-principle approval to SMBC to set up a wholly owned subsidiary in India

RBI granted ‘in-principle’ approval to Sumitomo Mitsui Banking Corporation (SMBC), Japan to set up a wholly owned subsidiary (WOS) in India under the Reserve Bank of India (Setting Up of Wholly Owned Subsidiaries by Foreign Banks) Guidelines, 2025. SMBC currently operates in India in branch mode through 4 (four) branches in New Delhi, Mumbai, Chennai and Bengaluru, and the approval is for establishing the WOS by converting these existing branches. The RBI stated it would consider granting a banking licence to commence operations in WOS mode under Section 22(1) of the Banking Regulation Act, 1949 after being satisfied that SMBC has complied with the conditions attached to the in-principle approval.

1.1.5.    RBI seeks public comments on the draft Amendment Directions on Net Open Position – Revised Instructions

RBI invited comments on draft amendment directions to revise the computation of Net Open Position (“NOP”) and the capital charge on foreign exchange risk for regulated entities under the Master Direction – Risk Management and Inter-Bank Dealings and the Prudential Norms on Capital Adequacy Directions, 2025. The proposals span multiple category-specific capital adequacy directions, including for commercial banks, small finance banks, regional rural banks, local area banks, urban co-operative banks, rural co-operative banks, all India financial institutions, and standalone primary dealers, with feedback due by February 3, 2026, through ‘Connect 2 Regulate’, by post, or by email with the specified subject line. The RBI stated the objective is closer alignment with Basel Committee on Banking Supervision standards and consistent implementation across regulated entities, and key proposed changes include removing separate offshore and onshore NOP calculations (where applicable), including accumulated surplus of overseas operations in NOP (where applicable), maintaining the foreign exchange risk capital charge on actual NOP, modifying the shorthand method in line with Basel guidelines by treating gold open positions separately, and allowing exemption of certain structural foreign exchange positions from NOP.

1.1.6.    FEDAI recognised as SRO for authorised dealers

RBI recognised the Foreign Exchange Dealers’ Association of India (“FEDAI”) as a Self-Regulatory Organisation (“SRO”) for all authorised dealers, after examining FEDAI’s application under the RBI’s omnibus framework for recognition of SROs for regulated entities (issued via press release dated March 21, 2024) and noting that FEDAI has been functioning akin to an SRO through rules governing the conduct of its members. The RBI has given FEDAI, 1 (one) year to align its functioning and governance framework with the omnibus SRO framework and to take steps to extend its membership to all categories of authorised dealers.

1.1.7.    RBI issues Reserve Bank-Integrated Ombudsman Scheme, 2026

RBI issued the Reserve Bank–Integrated Ombudsman Scheme, 2026 as a cost-effective, expeditious, non-adversarial alternate grievance redress mechanism for customer complaints against RBI-regulated entities. The scheme covers, among others, banks (including specified co-operative banks) with deposit size of at least INR 50,00,00,000 (Indian Rupees Fifty Crore only), eligible non-banking financial companies with deposit-taking authorisation or customer interface and assets size of at least INR 100,00,00,000 (Indian Rupees One Hundred Crore only), all non-bank prepaid payment instrument issuers, and credit information companies, and introduces a centralised receipt and processing set-up for complaint intake (including an online portal) and streamlined maintainability checks. Customers must first approach the relevant regulated entity and may approach the RBI Ombudsman if no reply is received within 30 (thirty) days (or the applicable prescribed timeline) or if dissatisfied and must file within 90 (ninety) days thereafter, subject to exclusions such as matters of commercial judgement and disputes already pending or decided in other judicial or quasi-judicial forums. While there is no cap on the dispute amount that can be brought under the scheme, compensation for consequential loss is capped at INR 30,00,000 (Indian Rupees Thirty Lakhs only) and compensation for time, expenses and harassment/mental anguish is capped at INR 3,00,000 (Indian Rupees Three Lakhs only), with provision for settlement, awards, and limited appellate remedies, and the Reserve Bank–Integrated Ombudsman Scheme, 2021 is repealed from July 1, 2026 while pending matters continue under the 2021 framework.

1.1.8.    RBI notifies Foreign Exchange Management (Export and Import of Goods and Services) Regulations, 2026

RBI notified the Foreign Exchange Management (Export and Import of Goods and Services) Regulations, 2026 under the Foreign Exchange Management Act, 1999 (FEMA), and on January 16, 2026 issued corresponding directions for authorised dealers, with both coming into force from October 1, 2026, after considering stakeholder feedback on drafts published on July 2, 2024 and April 4, 2025. The framework is principle-based and aims to improve ease of doing business, particularly for small exporters and importers, while empowering authorised dealers to handle transactions (including merchanting trade) more efficiently, route references to the RBI through the PRAVAAH portal, and report doubtful transactions to the Directorate of Enforcement. It introduces a revised Export Declaration Form for goods and services, sets key timelines such as filing service declarations within 30 (thirty) days from month-end of invoicing and realisation and repatriation of export proceeds within 15 (fifteen) months (or 18 (eighteen) months where invoiced or settled in Indian Rupees), allows authorised dealers to permit extensions, set-off of export receivables against import payables, and third-party receipts and payments subject to due diligence, and enables simplified closure of export/import monitoring entries for transactions up to INR 10,00,000 (Indian Rupees Ten Lakhs only) per shipping bill, bill of entry, or invoice based on customer declarations. The regulations also restrict advance remittances for import of gold and silver, prescribe consequences for prolonged unrealised exports (including requiring full advance or irrevocable letter of credit in specified cases), and require authorised dealers to publish a comprehensive internal policy and standard operating procedure with clear delegation, reasonable charges, and an internal grievance escalation and appeal mechanism, while superseding the existing Master Directions and listed circulars from the effective date.

1.1.9.    RBI seeks public feedback on draft clarifications for owned fund and Tier 1 capital computations for NBFCs and ARCs

RBI released draft amendment directions to clarify the computation of owned fund and Tier 1 capital for non-banking financial companies and asset reconstruction companies, and to revise how these measures apply to credit and investment concentration norms across multiple frameworks, including the Reserve Bank of India (Non-Banking Financial Companies – Prudential Norms on Capital Adequacy) Directions, 2025, the Reserve Bank of India (Non-Banking Financial Companies - Concentration Risk Management) Directions, 2025, Reserve Bank of India (Housing Finance Companies) Directions, 2025 vide Reserve Bank of India (Housing Finance Companies) Amendment Directions, 2026, Reserve Bank of India (Core Investment Companies) Directions, 2025 vide Reserve Bank of India (Core Investment Companies) Amendment Directions, 2026, Reserve Bank of India (Mortgage Guarantee Companies) Directions, 2025 vide Reserve Bank of India (Mortgage Guarantee Companies) Amendment Directions, 2026, Reserve Bank of India (Asset Reconstruction Companies) Directions, 2025 vide Reserve Bank of India (Asset Reconstruction Companies) Amendment Directions, 2026 and the Reserve Bank of India (Standalone Primary Dealers) Directions, 2025 vide Reserve Bank of India (Standalone Primary Dealers) Amendment Directions, 2026. The RBI noted that, at present, eligible non-banking financial companies (other than NBFC-UL) and asset reconstruction companies determine Tier 1 capital as of March 31 of the previous year for concentration compliance, and it has received industry requests to review these provisions and clarify certain aspects, following which it has proposed revisions. Stakeholders may submit comments by January 28, 2026, through the ‘Connect 2 Regulate’ portal on the RBI website or by email with the specified subject line.

Securities and Exchange Board of India (SEBI)

1.1.10.  SEBI issues Consultation paper for simplification of client on-boarding and rationalisation of risk management framework at KRAs

Securities and Exchange Board of India (“SEBI”) issued a consultation paper proposing amendments to its Know Your Customer (“KYC”) Master Circular to simplify client onboarding and strengthen risk management at KYC Registration Agencies (“KRAs”) by centralising and making portable certain supplementary Client Due Diligence information (beyond Client Identification Process data) across intermediaries. Key proposals include requiring intermediaries to upload additional Part II information, such as income range (with standardised slabs), net worth (optional), place and country of birth, Foreign Account Tax Compliance Act details, Politically Exposed Person status, occupation, Central KYC ID (if available), and Officially Valid Document expiry date, within 3 (three) working days of KYC completion, with KRAs tagging information they independently verify as “validated” and enabling sharing across intermediaries. SEBI also proposes a mandatory KYC review cycle of once every 5 (five) years, with KRAs sending automated pre-alerts (including where an Officially Valid Document has expired or a minor has attained 18 (eighteen) years), permitting alternate mobile number and email (optional), making mobile verification optional for intermediaries if the number is Aadhaar-seeded and KRA-verified, introducing a delinking process upon account closure (intermediary to inform within 3 (three) working days and KRA to update within 2 (two) working days), relaxing overseas address proof for resident Overseas Citizen of India cardholders (subject to 182 (one hundred eighty-two) days’ residence proof), easing name-change documentation where updated in Permanent Account Number and Aadhaar, and allowing “validated” tagging even without source verification of current address if other attributes are source-verified, with comments due by February 6, 2026.

1.1.11.  SEBI streamlines SWAGAT-FI access for FPIs and FVCIs

SEBI issued a circular updating operational guidelines for the Single Window Automatic and Generalised Access for Trusted Foreign Investors (“SWAGAT-FI”) framework for Foreign Portfolio Investors (“FPIs”) and Foreign Venture Capital Investors (“FVCIs”), following the SEBI (Foreign Venture Capital Investors) (Amendment) Regulations, 2025 notified on December 3, 2025. The circular enables a SWAGAT-FI FVCI applicant to seek FVCI registration alongside an FPI application without filing a separate form or submitting additional documents, provided the applicant appoints the same custodian and Designated Depository Participant (“DDP”) for both registrations, and it also permits eligible FVCIs to convert into SWAGAT-FI FVCIs through an application to their DDP on the same custodian and DDP condition. It revises renewal and information-update timelines, including introducing 10 (ten) year blocks for SWAGAT-FI (instead of 5 (five) years generally) and requiring renewal fee payment and change intimation at least 15 (fifteen) days before completion of the relevant block, and it sets the periodicity of KYC review for SWAGAT-FI FVCIs at 10 (ten) years. Depositories, custodians and DDPs have been advised to update systems, and the circular comes into force from June 1, 2026.

1.1.12.  SEBI notifies Mutual Funds Regulations, 2026

SEBI has notified the Securities and Exchange Board of India (Mutual Funds) Regulations, 2026, which will come into force on April 1, 2026, and will repeal the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996, while saving prior actions, ongoing proceedings and certain legacy schemes (including infrastructure debt fund schemes launched before notification) until wound up. The regulations consolidate registration and governance requirements for mutual funds, including a minimum sponsor contribution of 40 per cent (forty per cent) to the net worth of an asset management company and restrictions on crossholdings and board representation in other mutual funds where holdings are 10 per cent (ten per cent) or more. They also introduce a “mutual fund lite” framework for eligible passive schemes, including a mechanism to transfer such passive schemes from an existing mutual fund to a mutual fund lite in a sponsor’s group entity, registration of the mutual fund lite trust deed under the Registration Act, 1908, and sponsor lock-in requirements (including, in specified cases, at least INR 75,00,00,000 (Indian Rupees Seventy-Five Crore only) for 3 (three) years). SEBI may also grant approval to a registered mutual fund to establish a “Specialized Investment Fund”, subject to additional criteria as may be specified. The framework restates key investor-protection mechanics, including limiting scheme borrowing to 20 per cent (twenty per cent) of net assets for up to 6 (six) months, and an updated advertisement code that prohibits celebrity endorsements.

1.1.13.  SEBI introduces Closing Auction Session for equity cash market closing prices

SEBI has introduced a Closing Auction Session (“CAS”) in the equity cash segment to determine closing prices through an auction-based equilibrium price mechanism, replacing the current approach of using the volume weighted average price (“VWAP”) of trades in the last 30 (thirty) minutes of the Continuous Trading Session (“CTS”) for stocks where equity derivatives are available, while other cash-market securities will continue to use VWAP for the last 30 (thirty) minutes. CAS will run for 20 (twenty) minutes from 3:15 p.m. to 3:35 p.m., with the reference price set using VWAP of trades between 3:00 p.m. and 3:15 p.m. (or fallback to last traded price, or previous day’s closing price where no trades occur), and will apply a price band of plus or minus 3 per cent (three per cent) from the reference price; only limit and market orders are permitted (no iceberg or stop loss orders), and unexecuted eligible CTS limit orders will carry forward with higher time priority. SEBI has also aligned the pre-open auction session with CAS by revising its structure to a 15 (fifteen) minute session from 9:00 a.m. to 9:15 a.m., including a system-driven random close in the last 2 (two) minutes of order entry, and has directed stock exchanges and clearing corporations to jointly finalise standard operating procedures within 30 (thirty) days, strengthen surveillance for CAS, and amend relevant bye-laws and rules, with CAS to be implemented from August 3, 2026 and the pre-open changes from September 7, 2026.

1.1.14.  SEBI issues Consultation Paper on proposal to permit netting of funds for transactions done by FPIs

SEBI issued a consultation paper proposing to permit netting of funds for transactions by FPIs in the cash market, to enhance operational efficiency and reduce funding and foreign exchange conversion costs arising from the current practice where FPI trades are settled on a gross basis at the custodian level (including restrictions on intra-day square-off), even though custodians settle net obligations with clearing corporations. SEBI noted stakeholder feedback that gross funding can leave FPIs underinvested for at least 1 (one) day and create additional liquidity demand (for example, where an FPI buys and sells securities of the same value, such as INR 100,00,00,000 (Indian Rupees One Hundred Crore only) each), with the impact amplified on index rebalancing days. Under the proposed model, netting would apply only to ‘outright’ transactions (where there is either a purchase or a sale, but not both, in a security in a settlement cycle), while transactions involving both buy and sell in the same security in the same settlement cycle would be excluded and continue on a gross basis, and any excess outright sell value would not be adjusted towards non-outright buy obligations. SEBI also clarified that securities settlement between FPIs and custodians would remain on a gross delivery basis (with Securities Transaction Tax (STT) and stamp duty continuing on delivery basis), flagged potential operational and clearing risks (including higher rejections and risk allocation concerns), and indicated possible mitigants and the need for amendments across regulatory frameworks issued by SEBI and the Reserve Bank of India, with public comments invited by February 6, 2026.

International Financial Services Centres Authority (IFSCA)

1.1.15.  IFSCA clarifies scheme-filing process for third-party fund management arrangements

International Financial Services Centres Authority (“IFSCA”) issued a circular prescribing the procedure and additional disclosure requirements for Fund Management Entities (“FMEs”) authorised to provide Third-Party Fund Management Services under the International Financial Services Centres Authority (Fund Management) Regulations, 2025. Registered FMEs launching schemes on behalf of third-party fund managers must file scheme applications through the IFSCA Single Window IT System and follow the format and documents under IFSCA’s April 5, 2024 “ease of doing business” circular, along with additional information such as the third-party fund manager’s legal name, registered office and home-jurisdiction registration proof, an ultimate beneficial owner look-through chart, profiles of board/designated partners and key managerial personnel, assets under management details and track record of comparable strategies, a declaration-cum-undertaking for compliance with Regulations 107H and 107K, evidence of the third-party fund management arrangement, and disclosures on deal execution, conflicts of interest and remuneration policies, including details on appointment or change of key managerial personnel, with the circular taking immediate effect under the IFSCA Act, 2019.

1.1.16.  IFSCA issues IFSCA (Capital Market Intermediaries) (Amendment) Regulations, 2026

IFSCA notified the International Financial Services Centres Authority (Capital Market Intermediaries) (Amendment) Regulations, 2026 to amend the International Financial Services Centres Authority (Capital Market Intermediaries) Regulations, 2026, introducing a unified registration option for an entity in an International Financial Services Centre undertaking multiple regulated activities, and revising eligibility and governance requirements for registered intermediaries. The amendments expand the eligible educational streams for certain key personnel to include actuarial science, fintech and STEM disciplines, remove the “recognised” qualifier for foreign universities, and reduce a specified threshold from 10 (ten) to 5 (five) under the relevant proviso. The changes also permit a single principal officer to be common across multiple registrations (including broker dealer, clearing member, depository participant, investment adviser, research entity, custodian and registered distributor), while requiring a separate vertical head for distribution business activities where multiple activities are undertaken. In addition, the IFSCA circular on recognition as custodian of assets/securities dated February 24, 2021, is superseded, and the Schedule I net worth requirement for custodians is updated to USD 1 million (United States Dollar One Million only), with existing custodians given time until June 30, 2026, to meet revised net worth requirements where additional funds are required.

2.             Key Asian Markets - Philippines and Indonesia

2.1.         Philippines

2.2.1.     Philippines reports rise in net FDI inflows

Bangko Sentral ng Pilipinas (BSP) reported that foreign direct investments (FDIs) into the Philippines recorded net inflows of USD 642,000,000 (United States Dollar Six Hundred Forty-Two Million only) in October 2025, with Japan as the largest source and corporations engaged in financial and insurance activities as the biggest recipients during the month. The BSP stated that cumulative net FDI inflows for January to October 2025 reached USD 6,200,000,000 (United States Dollar Six Billion Two Hundred Million only), with equity capital placements mainly coming from Japan, the United States and Singapore, and flowing largely into manufacturing, wholesale and retail trade, and real estate. The BSP also clarified that its FDI statistics reflect actual inflows compiled under the Balance of Payments and International Investment Position Manual, 6th (sixth) edition, and treat an investment as FDI where the foreign investor holds at least 10 per cent (ten per cent) equity, which differs from other government datasets that report investment commitments and use different coverage and presentation methodologies.

2.2.2.     BSP extends sustainable finance incentives for banks

BSP announced that its Monetary Board has approved a two-year extension of regulatory incentives (originally introduced in 2023 under BSP Circular No. 1185) to encourage bank lending to eligible green and sustainable projects and activities. The incentives permit banks to exceed the 25 per cent (twenty-five per cent) Single Borrower’s Limit by up to an additional 15 per cent (fifteen per cent) for eligible sustainable projects and allow banks to lend all funds raised from sustainable bond offerings while exempting those funds from the usual 3 per cent (three per cent) reserve requirement. The extended incentive window will remain available for another 2 (two) years from January 6, 2026 and is expected to support financing for renewable energy, water and wastewater systems, clean transportation and climate-resilient infrastructure aligned with national climate and development plans, while the BSP also evaluates recalibration of risk weights for climate resilience-focused financing and explores blended finance mechanisms to de-risk such projects ahead of a comprehensive review before the extended period ends.

2.3.         Indonesia

2.3.1.     Indonesia’s external debt declines marginally in November 2025, with public and private debt easing

Bank Indonesia (“BI”) reported that Indonesia’s external debt stood at USD 423,800,000,000 (United States Dollar Four Hundred Twenty-Three Billion Eight Hundred Million only) in November 2025, down from USD 424,900,000,000 (United States Dollar Four Hundred Twenty-Four Billion Nine Hundred Million only) in October 2025, while year-on-year growth moderated to 0.2 per cent (zero point two per cent) from 0.5 per cent (zero point five per cent), reflecting slower growth in public sector external debt. Government external debt declined to USD 209,800,000,000 (United States Dollar Two Hundred Nine Billion Eight Hundred Million only) from USD 210,500,000,000 (United States Dollar Two Hundred Ten Billion Five Hundred Million only), with annual growth easing to 3.3 per cent (three point three per cent) from 4.7 per cent (four point seven per cent), attributed mainly to securities ownership rebalancing amid high global financial market uncertainty, and with 99.99 per cent (ninety-nine point nine nine per cent) of government external debt remaining long-term. Private external debt also edged down to USD 191,200,000,000 (United States Dollar One Hundred Ninety-One Billion Two Hundred Million only) from USD 191,700,000,000 (United States Dollar One Hundred Ninety-One Billion Seven Hundred Million only), recording a 1.3 per cent (one point three per cent) year-on-year contraction, while the external debt-to-GDP ratio improved to 29.3 per cent (twenty-nine point three per cent) from 29.4 per cent (twenty-nine point four per cent) and long-term debt continued to dominate at 86.1 per cent (eighty-six point one per cent), with Bank Indonesia stating it will continue coordination with the Government to monitor external debt and optimise its role in development financing while minimising risks to economic stability.

3.             Trends

3.1.         NSE moves towards long-awaited public listing

National Stock Exchange of India (“NSE”) is aiming to file its draft prospectus for an initial public offering (IPO) by end-March 2026 and is already in discussions with investment bankers and law firms to finalise the prospectus and gauge investor appetite. The listing process is expected to require a no-objection certificate from the SEBI, and the regulator’s chairperson indicated approval could “possibly” be granted in January 2026. Unlisted NSE shares were reported to be trading at over INR 2,000 (Indian Rupees Two Thousand only) per share, implying a valuation of around INR 5,00,00,00,00,00,000 (Indian Rupees Five Trillion only). If the filing goes ahead, it could unlock liquidity for long-held shareholders and materially deepen India’s capital-markets ecosystem in 2026.

3.2.         Bond index deferral fuels expectations of extended RBI bond buying

The deferral of Indian bonds’ inclusion in Bloomberg Index Services’ Global Aggregate Index has increased expectations that the RBI will extend its government bond purchases to support liquidity and manage yields. Reuters reported that the RBI had bought about INR 2,54,00,00,00,00,000 (Indian Rupees Two Trillion Five Hundred Forty Billion only) of bonds since December 2025 and was set to buy another INR 5,00,00,00,00,000 (Indian Rupees Five Hundred Billion only) on January 22, 2026. Market participants cited in the report said further purchases of around INR 1,50,00,00,00,00,000 (Indian Rupees One Trillion Five Hundred Billion only) to INR 2,00,00,00,00,00,000 (Indian Rupees Two Trillion only) could follow in February–March 2026. If this plays out, it could materially influence bond-market liquidity, funding conditions and mark-to-market outcomes across banks, primary dealers and fixed-income investors.

4.             Sector Overview

4.1.         India’s retail inflation stays far below central bank comfort zone

India’s annual retail inflation rose to 1.33 per cent (one point three three per cent) in December 2025, up from 0.71 per cent (zero point seven one per cent) in November 2025, and below the Reuters poll estimate of 1.5 per cent (one point five per cent). Inflation remained below the RBI target band of 2 (two) per cent to 6 (six) per cent for the fourth straight month, keeping the near-term inflation backdrop benign. Food inflation remained in deflation at negative 2.71 per cent (negative two point seven one per cent) year-on-year in December 2025, while core inflation was reported by economists in the range of about 4.6 per cent (four point six per cent) to 4.63 per cent (four point six three per cent).

4.2.         India’s trade deficit widens as imports rise

India’s merchandise trade deficit widened to USD 25.04 billion (United States Dollar Twenty-Five Billion and Four Hundred Million only) in December 2025 from USD 24.53 billion (United States Dollar Twenty-Four Billion and Five Hundred Thirty Million only) in November 2025, as imports rose faster than exports. Merchandise exports increased to USD 38.51 billion (United States Dollar Thirty-Eight Billion and Five Hundred Ten Million only) in December 2025 from USD 38.13 billion (United States Dollar Thirty-Eight Billion and One Hundred Thirty Million only) in November 2025, while imports rose to USD 63.55 billion (United States Dollar Sixty-Three Billion and Five Hundred Fifty Million only) from USD 62.66 billion (United States Dollar Sixty-Two Billion and Six Hundred Sixty Million only). Reuters also reported that December 2025 services exports were estimated at USD 35.50 billion (United States Dollar Thirty-Five Billion and Five Hundred Million only) and services imports at USD 17.38 billion (United States Dollar Seventeen Billion and Three Hundred Eighty Million only), implying a services trade surplus of USD 18.12 billion (United States Dollar Eighteen Billion and One Hundred Twenty Million only).

5.             Business Updates

5.1.         Bajaj Finserv buys Allianz’s remaining stake in Bajaj Financial Distributors

Bajaj Finserv bought Allianz SE’s remaining 50 per cent (fifty per cent) stake in Bajaj Financial Distributors, ending their distribution joint venture and giving Bajaj Finserv full ownership of the business as part of its broader unwinding of long-standing arrangements with Allianz.

5.2.         Shriram Finance shareholders approve Mitsubishi UFJ Financial Group investment proposals

Shriram Finance shareholders approved key proposals linked to an investment by Mitsubishi UFJ Financial Group, under which the Japanese bank would acquire a 20 per cent (twenty per cent) stake in Shriram Finance for USD 4.4 billion (United States Dollar Four Billion and Four Hundred Million only), alongside governance-related approvals and a one-time payment of USD 200 million (United States Dollar Two Hundred Million only) to Shriram Finance’s ownership trust.

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