AKP Banking & Finance Digest October 06, 2025

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1. Regulatory Updates

1.1. India

Reserve Bank of India (RBI)

1.1.1. RBI eases loan-spread rule; fixed-rate switch becomes optional at reset

RBI issued the Reserve Bank of India (Interest Rate on Advances) (Amendment Directions), 2025, effective October 1, 2025, permitting Scheduled Commercial Banks (SCBs) to reduce non-credit-risk spread components for a loan category earlier than 3 (three) years for customer retention on justifiable, non-discriminatory grounds per policy, and amending the August 18, 2023 reset circular so regulated entities may, at their option, offer borrowers a switch to fixed rate at reset with Board-approved limits on the number of switches; related Frequently Asked Questions (“FAQs”) are modified and FAQs 4 (four) and 5 (five) are deleted.

1.1.2. RBI issues Draft Large Exposures Framework (Amendment Circular), 2025  

RBI issued draft amendments to the Large Exposures Framework (“LEF”) and the Guidelines on Management of Intra-Group Transactions and Exposures (“ITE”) for comments, clarifying that exposures of Indian branches of foreign banks to their Head Office (“HO”) and its branches/subsidiaries will be reckoned only under LEF, not ITE, and that such exposures cleared via a central counterparty must be computed on a gross basis. The Credit Risk Mitigation (“CRM”) benefit, earlier limited to non-centrally-cleared derivative exposures backed by funds parked, is proposed to extend to any exposure of a foreign bank branch to its HO; ITE exposure computation will be aligned with LEF by permitting credit-conversion factors for off-balance-sheet items and CRM offsets. The ITE threshold will shift from Paid-up Capital and Reserves to Tier 1 (one) capital, with a proposed effective date of April 1, 2026.

1.1.3. RBI issues Draft Reserve Bank of India (Credit Information Reporting) (1st Amendment) Directions, 2025

RBI proposed the Reserve Bank of India (Credit Information Reporting) (1st Amendment) Directions, 2025 to shift Credit Institution (“CI”) submissions to Credit Information Companies (“CICs”) to weekly cycles as on 7 (seven), 14 (fourteen), 21 (twenty-one), 28 (twenty-eight) and month-end, with incremental data due within 2 (two) days and full files by the 3 (three) of the next month; CICs must adopt uniform data-acceptance and online-maintenance rules, share rejection reports within 3 (three) days for monthly full files and 2 (two) days for weekly files, and issue monthly Data Quality Index (DQI) scores by the 7 (seven) including CI and file-level metrics for Commercial and Microfinance; consumer-segment formats will capture Central Know Your Customer (CKYC) number; effective April 1, 2026, with comments invited by October 20, 2025.

1.1.4. RBI sets overseas - Perpetual Debt Instruments in Additional Tier 1 cap at 1.5 per cent of Risk Weighted Assets

RBI issued the Reserve Bank of India (Basel III Capital Regulations - Perpetual Debt Instruments (“PDI”) in Additional Tier 1 (“AT1”) Capital – Eligible Limit for Instruments Denominated in Foreign Currency/Rupee Denominated Bonds Overseas) Directions, 2025, effective October 01, 2025, fixing that PDIs issued in foreign currency or rupee-denominated bonds overseas may be included in AT1 capital up to 1.5 per cent (one point five per cent) of Risk Weighted Assets (RWAs) based on the latest audited or limited-review statements, applicable to Scheduled Commercial Banks excluding Small Finance Banks, Payments Banks and Regional Rural Banks, and superseding the October 04, 2021 circular.

1.1.5. RBI issues draft transaction-account norms, BSBDA rules, and repeal of large-borrower guideline

RBI sought comments on 3 (three) drafts: Reserve Bank of India (Transaction Accounts) Directions, 2025 for commercial, small finance, regional rural, local area, urban and rural co-operative, and payments banks; Guidelines on Enhancing Credit Supply for Large Borrowers through Market (Repeal Circular), 2025; and Reserve Bank of India (Basic Savings Bank Deposit Account) Directions, 2025, with feedback due by October 24, 2025 via Connect 2 Regulate.

1.1.6. RBI issues Draft Foreign Exchange Management (Borrowing and Lending) (Fourth Amendment) Regulations, 2025

RBI has issued draft amendment on Foreign Exchange Management (Borrowing and Lending) (Fourth Amendment) Regulations, 2025 to revamp External Commercial Borrowing (“ECB”): limits tied to borrower strength with a cap at the higher of USD 1 Billion (United States Dollars One Billion only) or 300 per cent (three hundred per cent) of net worth, minimum average maturity of 3 (three) years with a 1–3 (one to three) year window for manufacturing up to USD 50 Million (United States Dollars Fifty Million only), market-determined interest costs, a broader lender and borrower base including International Financial Services Centre (“IFSC”) units, clearer end-use restrictions, and streamlined reporting via a Loan Registration Number (LRN), Form ECB and ECB-2 within 30 (thirty) days; refinancing and equity conversion are eased, and comments are due by October 24, 2025.

1.1.7. RBI issues Draft Foreign Exchange Management (Establishment in India of a branch or office) Regulations, 2025

RBI issued draft Foreign Exchange Management (Establishment in India of a branch or office) Regulations, 2025 under the Foreign Exchange Management Act (FEMA), replacing the 2016 regime with a principle-based framework; proposals let AD Category-I banks approve Form FNC applications and report for a Unique Identification Number (UIN), keep prior Government of India approval for specified countries and sensitive sectors, bar legal-consultancy entities, restrict “offices” other than Project Offices (“POs”) from commercial activity, allow non-interest-bearing Indian Rupee current accounts and foreign-currency accounts for POs, require Annual Activity Certificates (AACs) within 6 (six) months with account freeze after 30 (thirty) days of default, mandate police registration for entities from certain neighbouring countries, and set time-bound closure and appeal processes; comments are due by October 24, 2025 via Connect2Regulate.

1.1.8. RBI recognises FIDC as SRO for NBFCs

RBI recognised Finance Industry Development Council (FIDC) as a Self-Regulatory Organisation (SRO) for NBFCs under the Omnibus Framework.

1.1.9. RBI invites comments on the Draft Reserve Bank of India (Lending to Related Parties) Directions, 2025

RBI issued draft Reserve Bank of India (Lending to Related Parties) Directions, 2025 for public comment, proposing a harmonised, principle-based framework for 8 (eight) classes of regulated entities (REs), commercial banks, small finance banks, regional rural banks, local area banks, urban co-operative banks, rural co-operative banks, NBFCs and All India Financial Institutions (AIFIs); key proposals introduce scale-based materiality thresholds requiring Board or Board-committee approval for related-party lending, exclude independent directors of other banks from “related persons,” provide a principle-based exemption for specified loans, and mandate supervisory reporting and disclosures, with comments due by October 31, 2025 via Connect2Regulate or email.

1.1.10. RBI constitutes Payments Regulatory Board under amended PSS Act

RBI announced the constitution of the Payments Regulatory Board (“PRB”) under the Payment and Settlement Systems (PSS) Act, 2007, effective after the May 9, 2025 notification that replaced the Board for Regulation and Supervision of Payment and Settlement Systems (“BPSS”); the PRB comprises the RBI Governor as Chairperson, the Deputy Governor and Executive Director in charge of payment and settlement systems, the Secretaries of the Department of Financial Services and the Ministry of Electronics and Information Technology, and Aruna Sundararajan, IAS (Retd.), with the RBI Principal Legal Adviser as a permanent invitee under the Payments Regulatory Board Regulations, 2025.

Securities and Exchange Board of India (SEBI)

1.1.11.  SEBI staggers retail algo rollout with milestones to April 1, 2026

Securities and Exchange Board of India (“SEBI”) on extended implementation of its February 4, 2025 retail algorithmic trading framework: brokers ready may go live from October 1, 2025; others must meet a glide path, apply at least one strategy for exchange registration and route retail algos only via Application Programming Interface (“API”) by October 31, 2025; complete registration of retail algo products and some strategies by November 30, 2025; and participate in at least 1 (one) full mock session by January 3, 2026, failing which onboarding of new retail clients for API-based algos will be barred from January 5, 2026; exchanges will monitor compliance, and the full framework with exchange modalities applies to all brokers from April 1, 2026. 

1.1.12. SEBI rolls out ‘@valid’ UPI handles and SEBI Check for safer investor payments

SEBI announced that validated Unified Payments Interface (“UPI”) handles are live for investor-facing intermediaries, using an exclusive “@valid” handle issued by National Payments Corporation of India (“NPCI”) with category suffixes (.brk for brokers, .mf for mutual funds), a “thumbs-up” confirmation icon, and a distinctive Quick Response (QR) code; SEBI also launched the “SEBI Check” tool so investors can verify bank account details and UPI IDs using an account number and Indian Financial System Code or an “@valid” ID via web or the Saarthi app, with major brokers covering over 90 per cent (ninety per cent) of investors and all mutual funds already onboard.

International Financial Services Centres Authority (IFSCA)

1.1.13. IFSCA forms Payments Regulatory Board; clears CCIL IFSC foreign-currency RTGS

International Financial Services Centres Authority (“IFSCA”) said amendments to the Payment and Settlement Systems Act, 2007 (PSS Act) replaced the Board for Regulation and Supervision of Payment and Settlement Systems (BPSS) with a PRB; the PRB comprises the IFSCA Chairperson, a Whole-Time Member, the Head of Department for Banking Regulation and Development, a Department of Financial Services nominee, and the chiefs of Unique Identification Authority of India (UIDAI) and National Payments Corporation of India (NPCI); in its first meeting the PRB authorised the Clearing Corporation of India Limited (“CCIL”) IFSC to operate a real time gross settlement (RTGS) Foreign Currency Settlement System in the IFSC.

1.1.14. IFSCA notifies CCIL-IFSC Foreign Currency Settlement System byelaws

IFSCA authorised CCIL IFSC to operate the Foreign Currency Settlement System (FCSS) at the IFSC in GIFT City and formally notified the FCSS bye-laws, rules, and regulations; the framework covers membership eligibility, principally IFSC Banking Units, settlement procedures, connectivity through the International Financial Services Centre Network (IFSCNET), default and disciplinary actions, and a Panel for Resolution of Disputes with appeal to IFSCA, with the legal texts hosted on CCIL-IFSC’s website.

1.1.15. IFSCA proposes Master Circular for IFSC exchanges and clearing corporations

IFSCA released a consultation paper with a draft Master Circular for Stock Exchanges and Clearing Corporations in the IFSC, seeking comments by October 22, 2025, and aiming to consolidate and supersede earlier circulars of SEBI and IFSCA. Key provisions span recognition and fees, trading and market integrity, risk management, and settlement. Trading hours may be set by exchanges up to 23 (twenty-three) hours and 30 (thirty) minutes a day, with at least daily settlement; recognised clearing corporations may offer T+0 (T plus zero), T+1 (T plus one) or T+2 (T plus two) cycles. Co-location access and connectivity must be fair, transparent and permit inter-exchange links, and data feeds must follow clear, equitable policies with precise clock synchronisation. Risk controls reference the Principles for Financial Market Infrastructures (PFMI) of the Committee on Payments and Market Infrastructures (CPMI) and International Organisation of Securities Commissions (IOSCO); Settlement Guarantee Fund (SGF) rules set corpus, management and a default waterfall. The draft also outlines margin trading and market-maker frameworks, uniform security-specific actions across exchanges, and alignment of circuit breakers for dual-listed scrips.

Miscellaneous

Ministry of Corporate Affairs (MCA)

1.1.16. MCA grants extension of time for filing e-form DIR-3-KYC & web-form DIR-3-KYC-WEB

The Ministry of Corporate Affairs (“MCA”) extended the deadline for filing of e-form DIR-3-KYC (first-time KYC filers or when any personal details have changed) and web-form DIR-3-KYC-WEB (who filed KYC in a prior year and have no changes) under annual “know-your-director” filings without payment of the filing fee up to October 15, 2025.

Ministry of Electronics and Information Technology (MeitY)

1.1.17. MEITY releases Draft Promotion and Regulation of Online Gaming Rules, 2025

Ministry of Electronics and Information Technology (MeitY) released draft Promotion and Regulation of Online Gaming Rules, 2025 under the Promotion and Regulation of Online Gaming Act, 2025 (PROG Act), inviting public comments by October 31, 2025. The draft creates an Online Gaming Authority of India (“OGAI”) with civil-court powers to determine whether a title is an online money game, register and list compliant e-sports and online social games, direct takedowns, and impose penalties. Registration of online social games is voluntary, while e-sports require prior recognition under the National Sports Governance Act, 2025, with certificates valid for up to 5 (five) years and mandatory notification of any material change. A 3 (three)-tier grievance path provider, Grievance Appellate Committee, then OGAI, and a 180 (one hundred and eighty)-day transition window to return pre-Act user funds round out the framework.

Monetary Penalties

1.1.18.  RBI imposes penalties on twelve banks for regulatory non-compliance

RBI has imposed monetary penalties on the following institutions -

Sr. No.	Name of Bank	Amount of Penalty	Grounds for Penalty
1.	Kamaraj Co-operative Town Bank Ltd., Tamil Nadu	INR 1,00,000 (Indian Rupees One Lakh only)	Non-compliance with specific directions issued by RBI under ‘Supervisory Action Framework (SAF)’. This penalty has been imposed in exercise of powers conferred on RBI under the provisions of Section 47A(1)(c) read with Sections 46(4)(i) and 56 of the Banking Regulation Act, 1949.
2.	The Nilambur Co-operative Urban Bank Limited, Kerala	INR 50,000 (Indian Rupees Fifty Thousand only)	Non-compliance with certain directions issued by RBI on ‘Co-operative Banks - Interest Rate on Deposits’. This penalty has been imposed in exercise of powers conferred on RBI under the provisions of Section 47A(1)(c) read with Sections 46(4)(i) and 56 of the Banking Regulation Act, 1949.
3.	The Sultan’s Battery Co-operative Urban Bank Limited, Wayanad, Kerala	INR 1,00,000 (Indian Rupees One Lakh only)	Non-compliance with certain directions issued by RBI on ‘Loans and advances to directors, their relatives, and firms /concerns in which they are interested’. This penalty has been imposed in exercise of powers conferred on RBI under the provisions of Section 47A(1)(c) read with Sections 46(4)(i) and 56 of the Banking Regulation Act, 1949.
4.	The Panchsheel Mercantile Co-operative Bank Ltd., Surat, Gujarat	INR 1,00,000 (Indian Rupees One Lakh only)	Non-compliance with certain directions issued by RBI on ‘Customer Protection - Limiting Liability of Customers of Co-operative Banks in Unauthorised Electronic Banking Transactions’. This penalty has been imposed in exercise of powers conferred on RBI under the provisions of Section 47A(1)(c) read with Sections 46(4)(i) and 56 of the Banking Regulation Act, 1949.
5.	Beed District Central Co-operative Bank Ltd., Maharashtra	INR 2,20,000 (Indian Rupees Two Lakh Twenty-Five Thousand only)	Contravention of provisions of Section 26A read with Section 56 of the Banking Regulation Act, 1949 and non-compliance with certain directions issued by RBI on ‘Membership of Credit Information Companies (CICs) by Co-operative Banks’ and ‘Know Your Customer (KYC)’. This penalty has been imposed in exercise of powers conferred on RBI under the provisions of section 47A(1)(c) read with Sections 46(4)(i) and 56 of the Banking Regulation Act, 1949 and Section 25 of the Credit Information Companies (Regulation) Act, 2005.
6.	Indian Overseas Bank	INR 31,80,000 (Indian Rupees Thirty One Lakh Eighty Thousand only)	Non-compliance with certain directions issued by RBI on ‘Priority Sector Lending (PSL) – Targets and Classification’. This penalty has been imposed in exercise of powers conferred on RBI under the provisions of Section 47A(1)(c) read with Sections 46(4)(i) and 51(1) of the Banking Regulation Act, 1949.
7.	The Hassan District Co-operative Central Bank Ltd, Karnataka	INR 1,00,000 (Indian Rupees One Lakh only)	Contravention of provisions of Section 19 read with Section 56 of the Banking Regulation Act, 1949 and non-compliance with certain directions issued by RBI on ‘Know Your Customer (KYC)’. This penalty has been imposed in exercise of powers conferred on RBI under the provisions of Section 47A(1)(c) read with Sections 46(4)(i) and 56 of the Banking Regulation Act, 1949.
8.	The Vaniyambadi Town Co-operative Bank Limited, Tamil Nadu	INR 1,00,000 (Indian Rupees One Lakh only)	Non-compliance with specific directions issued by RBI under ‘Supervisory Action Framework (SAF)’ and certain directions issued by RBI on ‘Know Your Customer (KYC)’. This penalty has been imposed in exercise of powers conferred on RBI under the provisions of Section 47A(1)(c) read with Sections 46(4)(i) and 56 of the Banking Regulation Act, 1949.
9.	The Bagalkot District Central Co-operative Bank Limited, Bagalkot, Karnataka	INR 5,50,000 (Indian Rupees Five Lakh Fifty Thousand only)	Contravention of provisions of Sections 20 read with Section 56 of the Banking Regulation Act, 1949 and non-compliance with certain directions issued by National Bank for Agriculture and Rural Development (NABARD) on ‘Offsite Surveillance System – Revision of Due dates for submission of OSS/FMS Returns’. This penalty has been imposed in exercise of powers conferred on RBI under the provisions of Section 47A(1)(c) read with Sections 46(4)(i) and 56 of the Banking Regulation Act, 1949.
10.	American Express Banking Corp	INR 31,80,000 (Indian Rupees Thirty One Lakh Eighty Thousand only)	Non-compliance with certain directions of Reserve Bank of India (Credit Card and Debit Card - Issuance and Conduct) Directions, 2022 issued by RBI. This penalty has been imposed in exercise of powers conferred on RBI under the provisions of section 47A(1)(c) read with section 46(4)(i) of the Banking Regulation Act, 1949.
11.	The Ranuj Nagrik Sahakari Bank Ltd., Dist. Patan, Gujarat	INR 3,00,000 (Indian Rupees Three Lakh only)	Non-compliance with the certain directions issued by RBI on ‘Management of Advances - UCBs’ and ‘Customer Protection - Limiting Liability of Customers of Co-operative Banks in Unauthorized Electronic Banking Transactions’. This penalty has been imposed in exercise of powers conferred on RBI under the provisions of Section 47A(1)(c) read with Sections 46(4)(i) and 56 of the Banking Regulation Act, 1949.
12.	HDB Financial Services Ltd	INR 4,20,000 (Indian Rupees Four lakh twenty thousand only)	Non-compliance with certain provisions of the ‘Reserve Bank of India (Know Your Customer (KYC)) Directions, 2016’ issued by RBI. This penalty has been imposed in exercise of powers conferred on RBI under clause (b) of sub-section (1) of Section 58G read with clause (aa) of sub-section (5) of Section 58B of the Reserve Bank of India Act, 1934.

2. Key Asian Markets - Philippines and Indonesia

2.1. Philippines

2.1.1. PH net external liabilities rise in Q1 2025; households remain top net creditor

Bangko Sentral ng Pilipinas (“BSP”) said under its Balance Sheet Approach (BSA) that the economy’s net external liability rose 5.4 per cent (five point four per cent) to PHP 5.7 trillion (Philippine Pesos Five Trillion and Seven Hundred Billion only) from PHP 5.3 Trillion (Philippine Pesos Five Trillion and Three Hundred Billion only) in the first quarter (Q1) 2025, driven by higher non-resident holdings of government securities and increased foreign borrowing by the general government, with other depository corporations also adding external debt; households stayed the largest net creditor sector, holding gross financial assets nearly 3 (three) times their obligations despite lower deposits and higher loans.

2.1.2. BSP projects BOP deficit through 2026 amid weak external demand

BSP said the Balance of Payments (BOP) will remain in deficit over the next 2 (two) years, with the current account shortfall around 3 per cent (three per cent) of Gross Domestic Product (GDP) in 2025 and 2026 due to a wider goods trade gap, subdued services receipts, and restrained capital inflows; goods exports and imports are expected to stay sluggish despite cushioning from infrastructure investment and market diversification, services export growth in Business Process Outsourcing (BPO) and tourism is set to moderate, overseas Filipino remittances should remain resilient despite the impending United States tax on remittances, foreign direct and portfolio inflows are seen softer amid volatility though recent reforms may aid sentiment, and gross international reserves are expected to stay adequate.

2.1.3. BSP projects September 2025 inflation at 1.5–2.3 per cent

BSP projected month-ahead inflation for September 2025 at 1.5–2.3 per cent (one point five to two point three per cent), citing upward pressures from rice and fish prices and higher domestic fuel costs, partly offset by lower vegetable and meat prices and reduced electricity rates; the central bank said it will continue a data-dependent approach to policy while monitoring domestic and external developments.

2.1.4. FCDU loans up 0.9 per cent to USD 15.93 billion in Q2 2025

BSP said Foreign Currency Deposit Unit (“FCDU”) loans rose 0.9 per cent (zero point nine per cent) quarter-on-quarter in Q2 2025 to USD 15.93 Billion (United States Dollars Fifteen Billion Nine Hundred and Thirty Million only); 63.5 per cent (sixty-three point five per cent) or USD 10.12 billion (United States Dollars Ten Billion One Hundred and Twenty Million only) went to Philippine-based borrowers, led by merchandise and service exporters at USD 2.52 Billion (United States Dollars Two Billion Five Hundred and Twenty Million only).

2.2. Indonesia

2.2.1. Indonesia CPI stays within target in September 2025 at 2.65 per cent

Bank Indonesia (“BI”) reported Consumer Price Index (CPI) inflation of 0.11 per cent (zero point one one per cent) month-on-month (“m-o-m”) in September 2025, putting annual CPI at 2.65 per cent (two point six five per cent) within the 2.5 (two point five) ± 1 (one) per cent target; core inflation rose 0.18 per cent (zero point one eight per cent) m-o-m, volatile food posted an uptick on rice and other staples, and administered prices saw a small m-o-m decline, with BI expecting inflation to remain inside target for 2025 and 2026.

3. Trends

3.1. RBI mulls risk-based deposit insurance premiums

RBI proposed moving from a flat to a risk-based structure for deposit insurance premiums, with the current flat rate acting as a ceiling; stronger banks would pay less while weaker banks would pay more, and the plan is out for comments before final rules are issued.

3.2. RBI eyes steps to boost international rupee use

RBI outlined proposals to promote global use of the rupee, including permitting authorised Indian banks to extend rupee-denominated loans to non-residents in neighbouring countries, publishing official reference exchange rates for more partner currencies, and allowing investment of surplus rupee balances in vostro accounts into Indian corporate bonds and commercial paper; these measures await finalisation.

4. Sector Overview

4.1. RBI keeps repo at 5.50%, stance neutral

RBI kept the policy repo rate at 5.50 per cent (five point five zero per cent) with a neutral stance and revised its projections to 6.8 per cent (six point eight per cent) for Financial Year (FY) 2025–26 growth and 2.6 per cent (two point six per cent) for inflation; the RBI communicated these changes in its Monetary Policy and accompanying statements.

4.2. September GST rises 9.1%, hits INR 1.89 lakh crore

India’s gross Goods and Services Tax (“GST”) revenue for September 2025 totalled INR 1,89,017 crore (Indian Rupees One Lakh Eighty-Nine Thousand and Seventeen Crore only), up 9.1 per cent (nine point one per cent) year-on-year, per official data released on October 1, 2025; the GST print also exceeded August’s tally.

5. Business Updates

5.1. RBL Bank gets INR 92 crore GST SCN

RBL Bank received a show-cause notice (SCN) dated September 30, 2025, under the Maharashtra GST Act seeking INR 92 crore (Indian Rupees Ninety-Two Crore only), including interest and penalty; the bank indicated no material financial impact.

5.2.  Axis takes control of Sammaan Capital; open offer to follow

International Holding Company (IHC) agreed to acquire a 41.2 per cent (forty-one point two per cent) controlling stake in Sammaan Capital (formerly Indiabulls Housing Finance), via a preferential issue of about INR 8,850 Crore (Indian Rupees Eight Thousand Eight Hundred Fifty Crore only), triggering a mandatory open offer for up to 26 per cent (twenty-six per cent), subject to approvals.

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

Founding Partner, AK & Partners

info@akandpartners.in