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AKP Banking & Finance Digest- January 29, 2024

1. Regulatory Updates


1.1. India


1.1.1. IRDAI consolidates regulations for insurance sector efficiency

On January 23, 2024, the Insurance Regulatory and Development Authority of India (“IRDAI”) introduced the IRDAI (Expenses of Management, including Commission, of Insurers) Regulations, 2024, consolidating regulations on expenses of management and commission payments. In March 2023, amendments aimed to balance flexibility and oversight, shifting to principle-based regulations. This marked a milestone in simplifying compliance, enhancing transparency, and fostering innovation. The move empowers insurers to adapt to the evolving business landscape while safeguarding policyholders' interests. Irdai encourages stakeholders to embrace this forward-thinking regulatory approach for greater innovation and competitiveness. Outlook India

 

1.2. Bangladesh


1.2.1. Bangladesh Bank considers implementing Crawling Peg system for Taka

The Bangladesh Bank is considering implementing a crawling peg system for the Taka in the first quarter of this year to address fluctuations in its value against foreign currencies. A crawling peg system involves allowing a currency with a fixed exchange rate to fluctuate within a specified band of rates, combining features of both fixed and floating exchange rate systems. The central bank, in its monetary policy for January-June 2024, announced plans to introduce the crawling peg system as part of a broader move toward a market-based exchange rate regime. The system will be linked to a carefully chosen basket of currencies with a defined band corridor, establishing a competitive equilibrium rate at the corridor's midpoint for flexible exchange rates within the set bounds. Dhaka Tribune

 

1.3. Sri Lanka


1.3.1. Sri Lanka and Bahrain explore fintech collaboration in economic diplomacy meeting

As part of the Economic Diplomacy program for 2024 by the Embassy of Sri Lanka in Bahrain, Ambassador H.M.G.R.R.K. Wijeratne Mendis met with Suzy Al Zeerah, Chief Operating Officer of Bahrain FinTech Bay, on January 08. The purpose of the meeting was to explore commonalities and synergies in the fintech sectors of Sri Lanka and Bahrain, leveraging advancements in ICT and digital economies in both countries. The discussions centred on identifying opportunities for collaboration and partnership within the fintech sector, aiming to extend beyond the conventional boundaries of bilateral trade and investment in goods and services. Daily FT

 

1.3.2. Central Bank of Sri Lanka maintains key interest rates in January 2024 meeting

The Monetary Policy Board of the Central Bank of Sri Lanka, in its meeting on January 22, 2024, has decided to maintain the current Standing Deposit Facility Rate (SDFR) at 9.00 per cent (nine per cent) and the Standing Lending Facility Rate (SLFR) at 10.00 per cent (ten per cent). This decision is based on a thorough evaluation of both domestic and international macroeconomic developments, aiming to sustain inflation at the targeted 5 per cent (five per cent) over the medium term while supporting economic potential. The Board acknowledged the impact of recent taxation changes and supply-side factors, which may exert upward pressure on inflation in the short term. Additionally, considering past monetary policy measures and reduced risk premia on government securities, the Board sees room for further lowering market lending interest rates. Central Bank of Sri Lanka

 

2. Trends


2.1. Groww to discontinue US stock offering citing complications and impact on customer experience

Groww, a stock broking platform, has decided to discontinue its offering of US stocks due to certain complications affecting customer experience. Users have been informed through emails that starting February 27, 2024, they won't be able to buy US stocks or add funds to their USD wallet. Additionally, selling these stocks and withdrawing funds from the USD wallet will be restricted after March 31, 2024, although this deadline might be extended. Notably, Groww had ceased offering US stocks to new users a year ago, and currently, only around 2,000 (two thousand) existing users are invested in these stocks. Inc 42

 

2.2. Perfios, backed by Warburg Pincus, explores USD 500 million IPO in India

Perfios Software Solutions Pvt., an Indian tech firm backed by Warburg Pincus, is considering an initial public offering (“IPO”) in India that might generate around USD 500 million (United States Dollar Five Hundred Million Only). Established in 2008, Perfios is a software-as-a-service company serving clients such as banks and insurers in India, the Middle East, and Southeast Asia. Warburg Pincus invested in the company in 2019, and in September, Perfios secured USD 229 million (United States Dollar Two Hundred Twenty Nine Million Only) in a series D funding round from Kedaara Capital to support its expansion plans in North America and Europe. Economic Times


3. Sector Overview

 


4. Business Updates

 

4.1. Razorpay launches instant refunds for failed UPI transactions on POS devices

Fintech unicorn Razorpay introduces instant refunds for unsuccessful Unifies Payments Interface (UPI) transactions on its Point of Sale (“POS”) devices, aiming to enhance the payment experience for merchants and customers. The startup emphasises that this 'industry-first solution' significantly reduces the refund processing time to just 2 (two) minutes, in contrast to the standard 5-6 (five to six) business days. Razorpay's POS portfolio, including Android Smart POS, Android Smart Mini POS, and Soundbox, has reported a robust 60 per cent (sixty per cent) growth in the fiscal year 2022-23 following the acquisition of Ezetap. Inc 42

 

4.2. Zomato's subsidiary receives RBI approval for Payment Aggregator license

Zomato announced on Thursday that its subsidiary, Zomato Payments Private Limited, has received a payment aggregator (PA) license from the Reserve Bank of India (“RBI”). This approval enables Zomato to conduct e-commerce transactions on its platform. With this authorisation, Zomato now joins the ranks of Tata Pay and Razorpay, among others, in obtaining the eagerly awaited license to function as an online payment aggregator. Live Mint

 

4.3. RBI approves LIC's acquisition of 9.99 per cent stake in HDFC Bank

RBI has granted approval to Life Insurance Corporation of India (“LIC”) for acquiring a 9.99 per cent (nine point nine nine per cent) aggregate holding of paid-up share capital in HDFC Bank. The approval is in response to LIC's application to the RBI, subject to compliance with various regulations and acts, including the Banking Regulation Act, 1949, RBI's Master Direction and Guidelines on Acquisition and Holding of Shares or Voting Rights in Banking Companies, provisions of the Foreign Exchange Management Act, 1999, and regulations by the Securities and Exchange Board of India. According to RBI regulations, LIC is required to acquire the 9.99 per cent (nine point nine nine per cent) stake within a year and maintain its holding below this threshold. Economic Times

 

4.4. CCI grants approval for Fincare SFB and AU SFB merger, RBI approval pending

The Competition Commission of India (CCI) has given its approval for the merger between Fincare Small Finance Bank (“Fincare SFB”) and AU Small Finance Bank (“AU SFB”). In October of the previous year, both AU SFB and Fincare SFB boards agreed to an all-stock merger. Under the amalgamation scheme, Fincare Business Services, the promoter of Fincare SFB, is required to inject INR 700 crore into Fincare SFB before the merger's completion. It's important to note that the scheme is still contingent on approval from RBI. Financial Express

 

4.5. SoftBank reduces stake in Paytm to 5.06 per cent by offloading additional 2 per cent

SoftBank, a major investor in Paytm with over USD 1 billion (United States Dollar One Billion Only) in investments, has disclosed a further 2 per cent (two per cent) reduction in its stake in the Noida-based fintech firm. This move brings SoftBank's shareholding down to 5.06 per cent (five point zero six per cent), compared to its 18 per cent (eighteen per cent) stake during Paytm's IPO in 2021. Notably, SoftBank has been strategically reducing its holdings in various Indian startups, including a recent complete exit from PB Fintech, the company behind PolicyBazaar and Zomato. Economic Times


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

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