AKP Banking & Finance Digest October 27, 2025

We are delighted to share this week's AKP Banking & Finance Weekly Digest. Please feel free to write to us with your feedback at info@akandpartners.in.

1. Regulatory Updates

1.1. India

Reserve Bank of India (RBI)

1.1.1.  RBI publishes Payment System Report, June 2025

Reserve Bank of India (“RBI”) released its bi-annual Payment Systems Report for the half-year ended June 2025. Digital payments formed 99.8 per cent (ninety-nine point eight per cent) of transaction volume. Unified Payments Interface (“UPI”) contributed 85 per cent (eighty-five per cent) of volume but 9 per cent (nine per cent) of value, while Real Time Gross Settlement (“RTGS”) handled 69 per cent (sixty-nine per cent) of value. Amendments to the Payment and Settlement Systems Act, 2007 (PSS Act, 2007) created the Payments Regulatory Board (PRB), replacing the Board for Regulation and Supervision of Payment and Settlement Systems (BPSS). Key measures include permitting National Payments Corporation of India (NPCI) to set merchant limits on UPI, due-diligence directions for Aadhaar-enabled Payment System (AePS) touchpoint operators effective January 01, 2026, and enabling the Credit Guarantee Fund Scheme for Factoring (CGFSF) on Trade Receivables e-Discounting System (TReDS). The report also reviews RTGS’s 24x7x365 operations.

1.1.2.  RBI exempts SWAMIH Investment Fund-I under AIF investment directions

RBI amended the Reserve Bank of India (Investment in Alternative Investment Funds) Directions, 2025 by enlisting the Special Window for Affordable and Mid-Income Housing (SWAMIH) Investment Fund-I in the exemption category under paragraph 7(b). The fund is exempt from the Directions and the earlier RBI circulars dated December 19, 2023, and March 27, 2024, except for paragraph 5 on “General Requirement”. An annex listing exempt Alternative Investment Funds (“AIFs”) has been added and will be updated in consultation with the Government of India (GoI).

1.1.3. RBI issues Draft Reserve Bank of India (Commercial Banks - Capital Market Exposure) Directions, 2025

RBI has issued the Draft Reserve Bank of India (Commercial Banks - Capital Market Exposure) Directions, 2025 for public comments due by November 21, 2025. The draft applies to capital market exposures (“CME”) of commercial banks and will take effect from April 1, 2026, or an earlier date if a bank adopts the framework in full.   It prescribes prudential ceilings: aggregate CME not above 40 per cent (forty per cent) of Tier 1 Capital on both solo and consolidated bases, and direct CME not above 20 per cent (twenty per cent) of Tier 1 Capital. Exclusions include investments such as units of debt mutual funds, non-convertible debentures, and specified critical financial infrastructure, among others. Banks may extend acquisition finance within these limits, subject to an additional cap of 10 per cent (ten per cent) of Tier 1 Capital. Irrevocable Payment Commitments (IPCs) issued by custodian banks are treated as financial guarantees, with exposure recognised at 30 per cent (thirty per cent) for intraday and 50 per cent (fifty per cent) for overnight, net of prescribed margins.

1.1.4. RBI issues Draft Reserve Bank of India (Small Finance Banks – Capital Market Exposure) Directions, 2025

RBI issued the Draft Reserve Bank of India (Small Finance Banks – Capital Market Exposure) Directions, 2025 for public comments by November 21, 2025. The draft, effective from April 1, 2026, or earlier on full adoption, consolidates CME rules for Small Finance Banks (SFBs). Key limits: aggregate CME capped at 40 per cent (forty per cent) of Tier 1 capital on solo and consolidated basis, with direct CME capped at 20 per cent (twenty per cent). Lending against securities to individuals must observe Loan-to-Value (LTV) ceilings, including 60 per cent (sixty per cent) for listed shares and listed convertible debt, and 75 per cent (seventy-five per cent) for mutual funds, exchange-traded funds, Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (“InvITs”), with ongoing monitoring and rectification within seven working days of any breach. Loans to individuals are capped at INR 1 Crore (Indian Rupees One Crore only), with a sub-limit of INR 25,00,000 (Indian Rupees Twenty-Five Lakhs only) for secondary-market purchases; Initial Public Offer (IPO), Follow-on Public Offer (FPO) and Employee Stock Option Plan (ESOP) financing is capped at INR 25,00,000 (Indian Rupees Twenty-Five Lakhs only) with a minimum 25 per cent (twenty-five per cent) borrower margin and mandatory lien/pledge on allotment. Need-based facilities to Capital Market Intermediaries (CMIs) are permitted with specified collateral haircuts and guarantees to exchanges require at least 50 per cent (fifty per cent) collateral with 25 per cent (twenty-five per cent) in cash.

1.1.5. RBI issues draft Reserve Bank of India (Non-Banking Financial Company – Scale Based Regulation) Amendment Directions, 2025

RBI issued the draft Reserve Bank of India (Non-Banking Financial Company (NBFC) – Scale Based Regulation (SBR)) Amendment Directions, 2025 to revise risk weights on infrastructure exposures. It creates a “high-quality infrastructure project” class requiring, among other tests, at least 1 (one) year of post-commercial operations date performance, standard-asset status, predictable revenues from a Central Government or Public Sector Entity counterparty, strong creditor protections, adequate funding arrangements, and limits on additional leverage. Loans to such projects attract a 50 per cent (fifty per cent) risk weight once at least 10 per cent (ten per cent) of the sanctioned amount is repaid, and 75 per cent (seventy-five per cent) where repayment is at least 5 per cent (five per cent) but less than 10 per cent (ten per cent), with reversion to higher weights if conditions cease to hold. The draft takes effect on April 1, 2026, or earlier on full adoption, and comments are open until November 21, 2025.

1.1.6. RBI releases draft circular on Unique Transaction Identifier for OTC Derivative Transactions in India

RBI issued a draft circular to mandate the Unique Transaction Identifier (“UTI”) for all Over-the-Counter (OTC) derivative transactions, with comments due by November 14, 2025.  The instructions will take effect on April 1, 2026, and cover rupee interest rate derivatives, forward contracts in Government securities, foreign currency derivatives, foreign currency interest rate derivatives, and credit derivatives. The UTI will follow the Committee on Payments and Market Infrastructures (CPMI), International Organisation of Securities Commissions (IOSCO) guidance, be up to 52 (fifty-two) characters with a Legal Entity Identifier (LEI) prefix, and be generated via a waterfall that prioritises the Central Counterparty (CCP), Electronic Trading Platform (ETP), and the Clearing Corporation of India Limited – Trade Repository (“CCIL-TR”), with CCIL-TR issuing interim UTIs where needed. Reporting obligations to CCIL-TR remain unchanged and participants must align systems accordingly.

Securities and Exchange Board of India (SEBI)

1.1.7.   SEBI issues consultation paper on Standardisation of process for Opening of Mutual Fund Folios and Execution of First Investment

Securities and Exchange Board of India (“SEBI”) issued a consultation proposing a standardised process for opening Mutual Fund (MF) folios and executing the first investment, with public comments due by November 14, 2025. The proposal requires Asset Management Companies (AMCs) to create folios after checks under KYC norms, send documents to a KYC Registration Agency (KRA) for verification, and permit the first investment only once the KRA marks the folio KYC-compliant, while informing investors at each stage. It aims to fix gaps from sequential verification that led to KYC non-compliant folios and related impediments.  The annexed draft circular states it will take effect on issuance.

1.1.8. SEBI issues draft circular on relaxation of India geo-tagging for NRI clients re-KYCKYC modification through digital on-boarding video client Identification process (V-CIP)

SEBI released a draft circular to relax the requirement that Non-Resident Indian (NRI) clients be physically in India during re-verification or modification under KYC when done through the video Client Identification Process (V-CIP). The proposal amends paragraph 51 of the Master Circular on KYC dated October 12, 2023. Intermediary applications must include random action prompts, time-stamping and geo-location tagging, ensure Global Positioning System (GPS) coordinates match the country in the client’s Proof of Address, and block spoofed Internet Protocol (IP) connections. The relaxation applies only to existing clients for re-KYC or KYC modification, and public comments are due by November 13, 2025.

1.1.9.  SEBI permits transfer of PMS business with prior approval

SEBI allowed transfer of Portfolio Management Services (“PMS”) business by Portfolio Managers subject to prior approval. Transfers within the same group may cover select Investment Approaches or the entire PMS business. If the entire business is transferred, the transferor must surrender its PMS registration within 45 (forty-five) working days of completion. Transfers outside the group need a joint application, must shift the complete PMS business, bar onboarding of new clients during the process, and finish within 2 (two) months from approval, with liabilities moving to the transferee and undertakings as per Annexures I and II.

1.1.10. SEBI proposes LODR amendment to align unclaimed debt timelines with Companies Act

SEBI proposed amending the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (LODR) to substitute regulation 61A(3) so that unclaimed amounts move to the Investor Education and Protection Fund (IEPF) strictly “in the manner” under Section 125 of the Companies Act, 2013 and the Investor Education and Protection Fund Authority Rules, including transfer of unclaimed interest together with the matured debenture after 7 (seven) years from its maturity date; for entities outside the Companies Act, transfer would be to the Investor Protection and Education Fund (IPEF) after 7 (seven) years from maturity. The change resolves a mismatch in the present LODR framework, which requires escrow after 30 (thirty) days of non-claim and transfer after 7 (seven) years irrespective of maturity, by aligning to the Companies Act timeline and enabling a single transfer post-maturity, aiding ease of doing business and investor refunds. Public comments are invited until November 14, 2025.  

International Financial Services Centres Authority (IFSCA)

1.1.11.  IFSCA issues Stewardship Code framework for IFSC fund managers and investors

International Financial Services Centres Authority (“IFSCA”) issued a circular specifying a Framework on Stewardship Code for Fund Management Entities and institutional investors in the International Financial Services Centre (“IFSC”), effective immediately. The Authority encourages adoption and permits use of a comparable code of a home regulator or an Indian regulator such as the SEBI, Insurance Regulatory and Development Authority of India (IRDAI), Pension Fund Regulatory and Development Authority (PFRDA), or a statutory body such as the Institute of Company Secretaries of India (ICSI), provided core principles are reflected. The principles cover policy formulation and disclosure, monitoring and engagement with investee companies, intervention and escalation, conflict-of-interest management, voting, collaboration with other investors, and periodic disclosure and reporting including Environmental, Social and Governance (“ESG”) risks. Adopters, including AIFs and Retail Funds (RFs), must publish the adopted code on their website, report compliance to IFSCA, and maintain internal review mechanisms.

1.1.12. IFSCA issues Consultation paper on Regulatory Framework for differential distribution in Restricted Schemes and Venture Capital Schemes to facilitate blended finance and other fund structures

IFSCA has issued a consultation paper to allow differential distribution in Venture Capital Schemes and Restricted Schemes under the IFSCA (Fund Management) Regulations, 2025 within IFSCs, enabling AIFs to issue multiple unit classes with senior and junior rights. Fund Management Entities (FMEs) must give detailed Placement Memorandum (PPM) disclosures, have an independent valuer compute net asset value (NAV) for each class, and ensure investments are not used by investee companies to discharge obligations to the schemes’ investors or their associates. ESG schemes may accept grants up to 20 per cent (twenty per cent) of corpus and must disclose alignment with the United Nations Sustainable Development Goals (SDGs), while non-ESG schemes face a 25 per cent (twenty-five per cent) single-investee cap. Minimum subscription for junior or subordinate units is USD 2,000,000 (United States Dollars Two Million only), or USD 1,000,000 (United States Dollars One Million only) for accredited investors. Public comments are invited by November 11, 2025.

Ministry of Finance (MoF)

1.1.13. Nomination provisions under Banking Laws (Amendment) Act, 2025 notified for commencement

Ministry of Finance announced that sections 10, 11, 12 and 13 of the Banking Laws (Amendment) Act, 2025 will come into force on November 1, 2025, standardising nomination across banks under the Banking Regulation Act, 1949, the State Bank of India Act, 1955, and the Banking Companies (Acquisition and Transfer of Undertakings) Acts, 1970 and 1980. The provisions permit up to 4 (four) nominees per deposit account, articles in safe custody and lockers. Deposits may carry simultaneous or successive nominations. Articles and lockers permit only successive nominations. Simultaneous nominations must total 100 per cent (one hundred per cent). The Banking Companies (Nomination) Rules, 2025 will prescribe procedures and forms. The change aims at uniformity, transparency and faster claim settlement.

Miscellaneous

Ministry of Electronics and Information Technology (MeitY)

1.1.14.  MeitY amends IT Rules to tighten takedown triggers and timelines

Ministry of Electronics and Information Technology (“MeitY”) notified the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Amendment Rules, 2025, substituting rule 3(1)(d) of the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021 (IT Rules, 2021), effective November 15, 2025. “Actual knowledge” under Section 79(3)(b) of the Information Technology Act, 2000 will now arise only via a court order or a reasoned written intimation by an authorised officer not below Joint Secretary or Director rank, and for police not below Deputy Inspector General, subject to a monthly Secretary-level review. The intimation must specify the legal basis and statutory provision, describe the unlawful act, and identify the exact Uniform Resource Locator (URL) or other electronic location, and intermediaries must remove or disable access within 36 (thirty-six) hours. The consolidated IT Rules now reflect this substitution.

1.1.15.  MeitY drafts IT Rules amendment to label and verify synthetically generated content

MeitY invited comments on draft amendments to the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021 (IT Rules, 2021) to regulate “synthetically generated information”, with submissions due by November 6, 2025. The draft, issued under Section 87 of the Information Technology Act, 2000, defines “synthetically generated information” in Rule 2(1)(wa), clarifies via Rule 2(1A) that unlawful-use provisions cover such content, and adds a safe-harbour proviso for removals under Rule 3(1)(b). Intermediaries that enable creation must embed a permanent label or metadata that is visible or audible and covers at least 10 per cent (ten per cent) of the visual display or the initial 10 per cent (ten per cent) of audio and must prevent its removal. Significant Social Media Intermediaries (SSMIs) must require user declarations, deploy reasonable technical measures to verify accuracy, and clearly label confirmed synthetic content before publication.

Monetary Penalties

1.1.16.  RBI imposes penalties on one bank for regulatory non-compliance

RBI has imposed monetary penalty on the following institution:

Sr. No.	Name of Bank	Amount of Penalty	Grounds for Penalty
1.	Rampur Jilla Sahkari Bank Ltd., Uttar Pradesh	INR 5,00,000 (Indian Rupees Five Lakh only)	Contravention of provisions of Section 26A read with Section 56 of the Banking Regulation Act, 1949. 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.   Key Asian Markets

2.1.  Philippines

2.2.1. Philippines BOP surplus narrows deficit

The Philippines’ Balance of Payments (BOP) posted a surplus of USD 82 million (United States Dollars Eighty-Two Million only) in September 2025, lower than the USD 3.5 billion (United States Dollars Three Billion and Five Hundred Million only) surplus in September 2024. The surplus reflected Bangko Sentral ng Pilipinas (“BSP”) net income from investments abroad and National Government (“NG”) net foreign currency deposits, helping trim the year-to-date BOP deficit from USD 5.4 billion (United States Dollars Five Billion and Four Hundred Million only) in January–August 2025 to USD 5.3 billion (United States Dollars Five Billion and Three Hundred Million only) in January - September 2025. Preliminary data attribute the year-to-date deficit mainly to a continued goods trade gap, partly offset by inflows from overseas remittances, services, foreign direct and portfolio investments, and NG foreign borrowings.

2.2.2.   BSP eases rules for Islamic banking units

BSP eased rules for Islamic banking units (“IBUs”) to support the growth of Islamic finance. IBUs, which are divisions or branches of conventional banks operating in line with Shari’ah principles, will not face a separate capital requirement and will follow the capital regime and IBU licence processing fees applicable to their bank category. The rules institutionalise a 3 (three) year observation period from launch for prudential reporting to help firms meet reportorial requirements. IBUs no longer need a stand-alone liquidity report and may integrate it with the bank-wide liquidity report. The measures align with Republic Act (RA) No. 11439 (Islamic Banking Law) and aim to expand access to compliant financial services.

2.3.   Indonesia

2.3.1. Bank Indonesia holds BI-Rate at 4.75 per cent and launches KLM bank-lending incentives

Bank Indonesia (“BI”) kept the BI-Rate at 4.75 per cent (four point seven five per cent), maintained the Deposit Facility (DF) at 3.75 per cent (three point seven five per cent) and the Lending Facility (LF) at 5.50 per cent (five point five zero per cent), citing inflation within the 2.5±1 per cent (two point five plus or minus one per cent) target, rupiah stability and support for growth. BI also announced a Macroprudential Liquidity Incentive Policy (Kebijakan Likuiditas Makroprudensial) (KLM), effective December 1, 2025, offering combined incentives of up to 5.5 per cent (five point five per cent) of third-party funds (TPF) for banks that expand lending to priority sectors and pass through lower policy rates.

2.3.2.  BI Banking Survey Q3 2025

BI reported continued growth in new loan disbursements in the third quarter (Q3) of 2025, with a Weighted Net Balance (WNB) of 82.33 per cent (eighty-two point three three per cent), lower than the second quarter (Q2) of 2025 at 85.22 per cent (eighty-five point two two per cent) but higher than Q3 2024 at 80.64 per cent (eighty point six four per cent). Respondents expect acceleration in the fourth quarter (Q4) of 2025, projecting WNB at 96.40 per cent (ninety-six point four zero per cent). Lending Standards Index (LSI) indicated tighter standards in Q3 at 5.78 (five point seven eight), with easing expected in Q4 at -5.95 (minus five point nine five).

3.  Trends

3.1.  RBI December rate-cut bets firm up across markets

Growing speculation that the RBI will deliver another policy rate cut in December, citing lower inflation and supportive guidance; traders’ position for softer government bond yields while watching growth signals ahead of the Monetary Policy Committee (MPC) meeting.

3.2.  RBI seen sustaining FX defence near 88 on the rupee

Mainstream reports indicate dealers expect the Reserve Bank of India (RBI) to keep smoothing volatility in the foreign exchange (FX) market around the 88-per-US-dollar area, after state-run banks were observed selling dollars and the rupee rallied into October 24; markets are pricing continued operations to stabilise sentiment.

4.  Sector Overview

4.1. Banking system slips into liquidity deficit on FX operations and festive cash demand

Analysts reported that system liquidity turned negative for the first time in about a month as RBI spot-market FX actions absorbed rupee liquidity while festival-season currency in circulation increased, tightening money-market conditions relevant to Banking, Financial Services and Insurance (“BFSI”) funding costs and transmission. The development signals higher reliance on RBI’s liquidity facilities under its monetary operations, with near-term rates reacting accordingly.

4.2.  InvITs line up debut bonds as yields stabilise

Two InvITs planned debut bond issues totalling over INR 2,600 Crore (Indian Rupees Two Thousand Six Hundred Crore only), signalling improving primary-market risk appetite critical for BFSI intermediation. The trusts aim to issue between late October and November, taking advantage of range-bound government bond yields, with bankers citing steady demand from institutional investors. InvITs are regulated collective investment vehicles that pool capital for operating assets, and increased issuance can widen the domestic credit channel and diversify funding away from banks.

5.  Business Updates

5.1.  RBL Bank stake sale to Emirates NBD

Dubai-based Emirates NBD will acquire a 60 per cent (sixty per cent) stake in RBL Bank for USD 3 billion (United States Dollars Three Billion only) via a preferential issue at INR 280 (Indian Rupees Two Hundred Eighty only) per share, with an accompanying open offer and eventual merger of Emirates NBD’s India operations into RBL, subject to regulatory approvals from the RBI and others.

5.2.  Federal Bank 9.9 per cent stake to Blackstone

Blackstone Inc. will invest USD 705 million (United States Dollars Seven Hundred Five Million only) to acquire a 9.9 per cent (nine point nine per cent) stake in Federal Bank, making Blackstone the largest shareholder, with the transaction subject to customary regulatory 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