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AKP Banking & Finance Digest- July 3, 2023

Updated: Jul 4, 2023

Weekly Round-up | Updates

1. Regulatory Updates


1.1. India


1.1.1. Reserve Bank of India (RBI) issues Master Directions on Minimum Capital Requirements for Operational Risk

In exercise of the powers conferred by Section 35A of the Banking Regulation Act, 1949, RBI being satisfied that it is necessary and expedient in the public interest to do so, issued directions which shall be called ‘Reserve Bank of India (Minimum Capital Requirements for Operational Risk) Directions, 2023'. These Directions require a specified Commercial Bank to hold sufficient regulatory capital against its exposures arising from operational risk. RBI


1.1.2. Government of India appoints Shri Swaminathan J. as RBI Deputy Governor

The Government of India has appointed Shri Swaminathan Janakiraman as the Deputy Governor of RBI, for a period of three years from the date of joining the post or until further orders, whichever is earlier. Shri Swaminathan was the Managing Director (Corporate Banking and Subsidiaries) of the State Bank of India (SBI) before being appointed as Deputy Governor. RBI


1.1.3. RBI releases updated portfolios of Deputy Governors

Consequent to the appointment of Shri Swaminathan Janakiraman as Deputy Governor, the following will be the portfolios of the Deputy Governors with effect from June 26, 2023. RBI

Name

Departments

Dr. M.D. Patra

  1. ​Co-ordination

  2. Corporate Strategy and Budget Department

  3. Department of Economic and Policy Research

  4. Department of Statistics and Information Management

  5. Deposit Insurance and Credit Guarantee Corporation

  6. Financial Markets Operations Department

  7. Financial Markets Regulation Department

  8. Financial Stability Department

  9. International Department

  10. Monetary Policy Department

  11. Secretary’s Department

Shri M. Rajeshwar Rao

  1. Department of Regulation

  2. Department of Communication

  3. Enforcement Department

  4. Legal Department

  5. Risk Monitoring Department

Shri T Rabi Sankar

  1. Central Security Cell

  2. Department of Currency Management

  3. Department of External Investments & Operations

  4. Department of Government and Bank Accounts

  5. Department of Information Technology

  6. Department of Payment and Settlement Systems

  7. Fintech Department

  8. Foreign Exchange Department

  9. Human Resource Management Department

  10. Internal Debt Management Department

  11. Right to Information (RIA) Division

Shri Swaminathan J.

  1. Consumer Education and Protection Department

  2. Department of Supervision

  3. Financial Inclusion and Development Department

  4. Inspection Department

  5. Premise Department

  6. Rajbhasha Department

1.1.4. RBI cancels the license granted to Mahalaxmi Cooperative Bank Ltd., Dharwad, Karnataka and allows it to function as a non-banking institution

RBI is satisfied to notify Mahalaxmi Cooperative Bank Ltd., Dharwad, Karnataka as a non-banking institution under Section 36A(2) read with Section 56 of the Banking Regulation Act, 1949. Accordingly, RBI has cancelled the license dated March 23, 1994, granted to Mahalaxmi Cooperative Bank Ltd., Dharwad, Karnataka to carry on banking business in India under Section 22 read with Section 56 of the Banking Regulation Act, 1949 with effect from the close of business on June 27, 2023. This makes it obligatory on the part of Mahalaxmi Cooperative Bank Ltd., Dharwad, Karnataka to stop conducting the business of ‘banking’ within the meaning of Section 5(b) of the Banking Regulation Act, 1949, including acceptance of deposits from non-members with immediate effect. RBI


1.2. Monetary Penalties

1.2.1. RBI imposed monetary penalties on several financial institutions

​Name of the Entity

Penalty Imposed

Reason

INR 4.50 lakh (Rupees Four Lakh Fifty Thousand only)

Contravention of directions issued by RBI on ‘Co-operative Banks - Interest Rate on Deposits’, ‘Customer Protection – Limiting Liability of Customers of Co-operative Banks in Unauthorized Electronic Banking Transactions’, and ‘Know Your Customer (KYC)’.

INR 2.50 lakh (Rupees Two Lakh Fifty Thousand only)

Contravention of/ non-adherence with the directions issued by RBI on “Exposure Norms and Statutory / Other Restrictions – UCBs” and “Know Your Customer (KYC)”.

INR 1.50 lakh (Rupees One Lakh Fifty Thousand only)

Contravention of/ non-adherence with the directions issued by RBI on Know Your Customer (KYC).

INR 1 lakh (Rupees One lakh only)

Contravention of directions issued by RBI on (i) ‘Exposure Norms and Statutory/Other Restrictions - UCBs’ and (ii) ‘Know Your Customer (KYC)’.

INR 2.50 lakh (Rupees Two Lakh Fifty Thousand only)

Contravention of directions issued by RBI on (i) ‘Exposure Norms and Statutory/Other Restrictions - UCBs’ and (ii) ‘Know Your Customer (KYC)’.

INR 1 lakh (Rupees One Lakh only)

Contravention of/ non-adherence with the directions issued by RBI on ‘Exposure Norms & Statutory/Other Restrictions - UCBs’ and ‘Investments by Primary (Urban) Co-operative Banks’.

INR 28 lakh (Rupees Twenty-Eight Lakh only)

Non-compliance with the Reserve Bank of India (Know Your Customer (KYC)) Directions, 2016 and the directions of RBI on “Customer Service in State / District Central Co-operative Banks (StCBs / DCCBs)”.

INR 25.75 lakh (Rupees Twenty-five lakh seventy-five thousand only)

Non-compliance with certain provisions of the Credit Information Companies (Regulation) Act, 2005 [CIC (R) Act] read with the Credit Information Companies Rules, 2006 [CIC Rules].

INR 24.25 lakh (Rupees Twenty-four lakh twenty-five thousand only)

Non-compliance with certain provisions of the Credit Information Companies (Regulation) Act, 2005 [CIC (R) Act] read with the Credit Information Companies Rules, 2006 [CIC Rules].

INR 30 lakh (Rupees Thirty Lakh Only)

Non-compliance with certain provisions of the ‘Reserve Bank of India (Know Your Customer (KYC)) Directions, 2016’.

INR 26 lakh (Rupees Twenty-six lakh only)

Non-compliance with certain provisions of the Credit Information Companies (Regulation) Act, 2005 [CIC (R) Act] read with the Credit Information Companies Rules, 2006 [CIC Rules].

INR 24.75 lakh (Rupees Twenty-four lakh seventy-five thousand only)

Non-compliance with certain provisions of the Credit Information Companies (Regulation) Act, 2005 [CIC (R) Act] read with the Credit Information Companies Rules, 2006 [CIC Rules].


2. Trends


2.1. PhonePe launches Merchant Lending Market Place

PhonePe, a major fintech player, has made a strategic move to enter the merchant lending sector, aiming to compete directly with Paytm. The company has introduced a merchant lending marketplace that connects banks and non-banking financial companies (“NBFCs”) with its extensive base of 35 million (thirty-five million) merchants. Leveraging its distribution network and technological capabilities, PhonePe aims to expand its lending vertical.

To facilitate this expansion, PhonePe has launched a mobile app called ‘PhonePe for Business’ through which it claims to disburse loans quickly, in a matter of minutes. Additionally, the company is developing its own credit scoring system based on data science-driven models to enhance the efficiency of the merchant lending process. INC42

2.2. Bank loans to NBFCs under RBI scanner

RBI has started its annual inspection of banks and is especially giving attention to the loans that are being handed out by banks to NBFCs. Considering the share of bank loans to NBFCs and the percentage of loan book increasing to 13%-16% (thirteen to sixteen per cent) for the top 20 (twenty) players — a jump of 200-250 basis points, RBI is ascertaining the implication of these loans to the balance sheets of banks from an asset quality perspective. Hindu Business Line


2.3. Tata Motors Finance partners with Finserv to elevate and simplify digital lending capabilities

Tata Motors Finance Limited (TMFL), has partnered with Finserv, a leading global provider of payments and financial services technology solutions, to fortify its digital lending capabilities and enable top-notch customer experience. Tata Motors Finance has used FirstVisionTM from Fiserv to progress its digital strategy and stay up with quickly changing consumer expectations. Banking & Finance

3. Sector Overview



4. Business Updates


4.1. L&T Finance likely to sell its existing wholesale loan book

According to a media report, L&T Finance Holdings is looking to sell its wholesale loan book to interested banks, NBFCs and funds. The Company is also planning to repay or refinance its existing wholesale loan book. The sale of the wholesale loan book is expected to help the company achieve its target of becoming an over 80 per cent retail finance firm. Mint


4.2. Google to set up global fintech centre in Gujarat under its India Digitization Program

Google CEO Sundar Pichai has announced that the company shall open its global fintech operations centre at GIFT City in Gujarat through its existing USD 10 billion (United States Dollar Ten Billion Only) India Digitization Fund. According to Mr Pichai, the fintech centre shall cement India’s fintech leadership. BFSI.com


4.3. Apple in talks with NPCI, plans to launch UPI-based Apple Pay service in India

Apple is planning to launch a localized version of Apple Pay digital payment service in India. The tech giant is reportedly in talks with the National Payments Corporation of India (NPCI). According to the reports, preliminary talks have taken place, and Apple is moving forward with the plans. BFSI.com


4.4. Gold loan NBFCs can fuel MSMEs’ financing needs

Micro, Small and Medium Enterprises (MSMEs) have been monumental in accelerating growth through huge employment generation and fostering entrepreneurship. Despite being a significant contributor to India’s GDP, the MSME sector faces challenges in accessing adequate financial support. According to an MSME Lending Report by Aventus Capital, out of over 6.3 crore MSMEs in India, only 14 per cent have access to formal credit. NBFCs play a crucial role in addressing the challenges faced by underserved sectors. Unlike traditional institutions, NBFCs provide quick and efficient credit access for MSMEs. Hindu Business Line


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 & Partner

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