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AKP Banking & Finance Digest- October 2, 2023

1. Regulatory Updates


1.1. India


1.1.1. Shri M. Rajeshwar Rao re-appointed as the RBI Deputy Governor

The Central Government has extended the tenure of Shri M. Rajeshwar Rao as Deputy Governor of the Reserve Bank of India (“RBI”). His reappointment will be effective from October 09, 2023, and will last for one year or until further notice, whichever comes first. RBI


1.1.2. RBI releases data on sectoral deployment of bank credit for the month of August 2023

RBI has released data on the sectoral deployment of bank credit for the month of August 2023, based on the data captured from 40 (Forty) select Scheduled Commercial Banks (“SCBs”) . As per the data, credit growth related to the service sector has increased by 20.7 per cent (Twenty point Seven) in August 2023 as opposed to 17.4 per cent (Seventeen point Four) in August 2022, with Non-Banking Financial Companies (“NBFCs”) sector and commercial real estate sector being the driving factors. RBI


1.1.3. RBI rolls out the lending and deposit rates of Scheduled Commercial Banks-September, 2023

The weighted average lending rate (‘WALR’) on fresh rupee loans of SCBs has witnessed an increase of 3 basis points to 9.47 per cent in August 2023. Whereas, the weighted average domestic term deposit rate (‘WADTDR) on fresh rupee term deposits of SCBs has increased by 1 (One) basis point to 6.36 per cent (Six point Three Six per cent) in August 2023. RBI


1.1.4. RBI issued an update on the withdrawal of INR 2000 denomination banknotes from circulation

In furtherance of the circular dated May 19, 2023, where RBI had announced the withdrawal of INR 2000 banknotes (Indian Rupees Two Thousand) from circulation and keeping the exchange facility until September 30, 2023, has extended the current arrangement till October 07, 2023. On the expiry of which, there shall be restrictions with regard to availing of this facility. RBI


1.1.5. RBI directs all regulated entities to display information on the secured assets in possession

As a transparency measure taken by the RBI, all regulated entities have been directed under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002, to display information with respect to borrowers whose assets have been taken into their possession on their official website. It has further prescribed the format for displaying such information and directed the implementation of the same within the next six months from the date of this circular. RBI


1.1.6. RBI cancels licenses of the following banks

RBI, under Section 56, read with Section 22 of the Banking Regulation Act (“BR Act”), has cancelled the license of the following banks:


Name of the bank

Grounds for Cancellation

​Inadequate capital and earning prospects as per Sections 11(1) and 22(3)(d) of the BR Act, non-compliance with requirements under Section 22(3)(a), 22(3)(b), 22(3)(c), 22(3)(d) and 22(3)(e) of the BR Act, prejudicial conduct affecting interest of the depositors and the public, including inability to pay to the present depositors in full.

​Inadequate capital and earning prospects as per Sections 11(1) and 22(3)(d) of the BR Act, non-compliance with requirements under Section 22(3)(a), 22(3)(b), 22(3)(c), 22(3)(d) and 22(3)(e) of the BR Act, prejudicial conduct affecting interest of the depositors and the public, including inability to pay to the present depositors in full.

Inadequate capital and earning prospects as per Sections 11(1) and 22(3)(d) of the BR Act, non-compliance with requirements under Section 22(3)(a), 22(3)(b), 22(3)(c), 22(3)(d) and 22(3)(e) of the BR Act, prejudicial conduct affecting interest of the depositors and the public, including inability to pay to the present depositors in full.

1.1.7. Monetary Penalties

RBI imposes monetary penalties on the following financial institutions:

Name of the financial institutions

Penalty Imposed

Reason

INR 1,62,00,000 (Indian Rupees One Crore Sixty-Two Thousand)

Contravention of/ non-adherence with directions issued by RBI under Know Your Customer Directions, 2016 (“KYC Directions”), Interest Rate on Deposits Directions, 2016, and Loans and Advances – Statutory and Other Restrictions.

​INR 1,00, 00,000 (Indian Rupees One Crore only)

Contravention of / non-adherence with provisions of sub-section (2) of Section 26A of the BR Act and directions issued by RBI on The Depositor Education and Awareness Fund Scheme, 2014-Section 26A of the BR Act, 1949-Operational Guidelines.

INR 8,80,000 (Indian Rupees Eight Lakh Eighty Thousand only)

Contravention of / non-adherence with directions issued by RBI on Monitoring of Frauds in NBFCs Directions, 2016.

INR 1,30,00,000 (Indian Rupees One Crore Thirty Lakh only)

Contravention of/ non-adherence with Directions by RBI on Loans and Advances – Statutory and Other Restrictions and Guidelines on Management of Intra-Group Transactions and Exposure.

INR 25,00,000 (Indian Rupees Five Lakh only)

Contravention of/ non-adherence with RBI’s direction on Exposure Norms and Statutory / Other Restrictions relating to restriction on loans and advances.

INR 13,00,000 (Indian Rupees Thirteen Lakh only)

Contravention of/ non-adherence with and Section 20 of the BR Act RBI directions on Interest Rate on Deposits.

INR 23,00,000 (Indian Rupees Twenty-Three Lakh only)

Contravention of/ non-adherence with Loans and advances to directors, their relatives, and firms/concerns in which they are interested and Section 20(1)(b)(iii) of the BR Act.

1.2. Bangladesh


1.2.1. Bangladesh Bank clears the air on deducting the source tax for the IT freelancing sector

The Bank of Bangladesh (“BB”) issued a circular dated October 01, 2023, clarifying that Authorised Dealer (AD) banks engaged in foreign exchange transactions cannot deduct source tax from the information technology freelancing sector. The Business Standard


1.2.2. Bangladesh Bank limits forward sale of forex to three months

BB has issued a new regulation limiting banks from engaging in forward sales of foreign exchange for a period exceeding three months. This forward exchange arrangement involves banks contracting with investors to exchange one currency for another at a predetermined rate on a future date. BB's recent circular clarifies that the forward premium should not exceed Smart plus 5 per cent (five per cent) per annum. Based on the six-month moving average of treasury bills, the Smart rate is utilised by the central bank to determine lending rates. As of September, the Smart rate was 7.14 per cent (seven point one four per cent), while the USD was trading at Tk 110.5 (Bangladesh Taka one hundred the point five only). Apparel Resources


1.3. Pakistan


1.3.1. Pakistan Central Bank’s reserve sinks to USD 7.64 Billion

Owing to the issue of debt repayment, Pakistan’s total liquid foreign reserves have dropped by USD 59 Million (United States Dollar Fifty-Nine Million only) on a weekly basis and reached a new low of USD 7.64 Billion (United States Dollar Seven Billion Six hundred Forty Million only) as of September 22, 2023. Geo TV


1.1.2. Pakistan witnesses drop in foreign remittances by 21.6 per cent

As per the data released by the Finance Ministry, the country has been witnessing a drop in remittances, exports and imports of the country. The remittances have dropped by 21.6 per cent (Twenty-One point Six per cent) in the first two months of FY2024. Meanwhile, the imports have dropped by 26 per cent (Twenty Six per cent), and exports have dropped by 8.3 per cent (Eighty-three per cent) respectively. Ary News


2. Trends


2.1. HDFC Bank to launch revamped mobile application and website after technical setbacks

HDFC Bank, India's largest private lender, is set to introduce a revamped mobile application and internet banking website by March. This move came more than five years after an earlier upgraded application encountered technical issues and had to be withdrawn within a week. The bank plans to initiate a closed user group trial by December and subsequently make it available to all users by the end of March. In 2018 and 2019, the bank faced technology-related challenges; RBI restricted new digital launches and halted the issuance of new credit cards in December 2020. These restrictions were only lifted in March 2022, enabling HDFC Bank to proceed with its 'Digital 2.0' initiative. Live Mint


2.2. Cred introduces vehicle management platform Cred Garage

The Fintech startup Cred is venturing into the vehicle management sector with its new platform called ‘Garage’. Through Garage, Cred aims to assist users in tasks like renewing car insurance and recharging FASTags. It offers a centralised dashboard providing round-the-clock concierge service for roadside assistance, document management (including driver's license and registration certificate), insights on vehicle expenses, maintenance records, performance data, and fuel expenditure tracking. Garage also integrates with DigiLocker, enabling users to access essential documents like driver's licenses, registration certificates, and insurance papers. Business Standard


3. Sector Overview


4. Business Updates


4.1. Bright Money raises funds for expanding financial services

Consumer fintech startup Bright Money has secured USD 12 million (United States Dollars twelve million only) in equity funding, led by its existing investors Alpha Wave, Hummingbird VC, and Peak XV Partners. Additionally, the company has raised USD 50 million (United States Dollar fifty million only) in debt from speciality finance firm Encina Lender Finance. The company focuses on debt related to credit cards, student loans, and car loans. The funds will be used to build strong teams in areas like product development, technology, analytics, compliance, and customer service. Business Standard


4.2. Indian government-led initiative, ONDC, to soon launch a range of financial services

Open Network for Digital Commerce (“ONDC”) is expanding its services beyond its initial sectors, such as food, grocery, fashion, travel, and electronics, to now include financial services like credit, insurance, investments, and gift cards. Notable companies involved in the integration include Tata Digital, India Lends, Easy Pay, DMI Finance, Aditya Birla Finance, and Karnataka Bank. ONDC is initially focusing on three insurance products—health insurance, marine insurance, and motor insurance—and plans to introduce mutual fund investment offerings, partnering with MF Utilities India for onboarding asset management companies as sellers on the platform Inc 42


4.3. Fintegration launches API discovery platform in India

Given the exponential rise in Fintech business in India, Indian-based fintech company Fintegration has launched the Fintech Application Programming Interface (“API”) discovery platform. This initiative aims to help financial institutions, fintech firms, and private banks make informed decisions regarding choosing the right API platform. The platform intends to act as a software bridge between incompatible sites and help streamline various aspects of lending, such as accounting, taxation, banking, big data analytics, etc. Business Standard


4.4. PhonePe launches Indus Appstore Developer Platform

PhonePe, a major player in the fintech industry, has introduced the Indus Appstore Developer Platform for Android application developers, positioning itself as a competitor to tech giants like Apple and Google. This platform, associated with the Indus Appstore mobile application marketplace, is now open for developers to sign up and publish their applications through a user-friendly system. These applications will be featured on the upcoming 'Made-in-India' Indus Appstore, which will provide a localised experience in 12 (twelve) different languages. Notably, there will be no charges for application listings during the first year on the Indus Appstore Developer Platform, after which a nominal annual fee will apply. Inc 42



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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