1. Regulatory Updates
1.1. India
1.1.1. RBI releases new guidelines for property document release by lenders
The Reserve Bank of India (“RBI”) has issued a notification addressing concerns regarding the release of property documents by Regulated Entities (“REs”) upon the full repayment of loans. To standardise the process and minimise customer grievances, RBI now mandates that REs must release all original movable and immovable property documents, as well as remove any charges registered with relevant registries, within a period of 30 (thirty) days after the loan account has been completely repaid or settled. Borrowers can choose from where to collect the documents. In case of delays, if the RE is at fault, they must compensate the borrower at INR 5,000 (India Rupees five thousand) daily. RBI
1.1.2. Eight NBFCs surrender their Certificate of Registration to RBI
The following Non-Banking Financial Companies (“NBFCs”) surrendered their Certificate of Registration (“CoR”) to RBI. In furtherance of the surrender, RBI has cancelled the CoRs of the following NBFCs:
Entity Name | Grounds for Surrender |
Exit from Non-Banking Financial Institution (“NBFI”) business | |
Exit from NBFI business | |
Exit from NBFI business | |
Exit from NBFI business | |
Ceasing to be a legal entity due to amalgamation/ merger/dissolution/ voluntary strike-off, etc. | |
Ceasing to be a legal entity due to amalgamation/ merger/dissolution/ voluntary strike-off, etc. | |
Ceasing to be a legal entity due to amalgamation/ merger/dissolution/ voluntary strike-off, etc. | |
Ceasing to be a legal entity due to amalgamation/ merger/dissolution/ voluntary strike-off, etc. |
1.1.3. RBI releases revised norms for ‘Classification, Valuation and Operation of Investment Portfolio of Commercial Banks Directions, 2023’
RBI has rolled out revised guidelines for commercial banks to categorise their investments in consonance with global standards. The updated guidelines introduce a principle-based classification for investment portfolios, strengthen regulations around transfers in and out of the "held to maturity" (HTM) category, and enhance disclosures. These changes aim to improve financial reporting, boost the corporate bond market, and enhance risk management for banks. They come into effect for all commercial banks (excluding Regional Rural Banks) starting from the financial year commencing on April 01, 2024. RBI
1.1.4. Monetary Penalties
RBI imposes monetary penalties on the following financial institutions:
Name of the entity | Penalty Imposed | Reason |
INR 20,00,000 (Indian Rupees Twenty Lakh only) | Contravention of/ non-adherence with directions issued by RBI under Know Your Customer Directions, 2016 (“KYC Directions”). | |
INR 1, 55,000 (Indian Rupees One Lakh Fifty-Five Thousand only) | Contravention of/ non-adherence with directions issued by RBI under NBFC- Housing Finance Company (Reserve Bank) Directions, 2021. | |
INR 2,00,000 (Indian Rupees Two Lakh only) | Contravention of / non-adherence with directions issued by RBI on ‘Maintenance of Deposit Accounts - Primary Urban Co-operative Banks (“UCB”). | |
INR 2,00,000 (Indian Rupees Two Lakh only) | Contravention of / non-adherence to directions issued by RBI on Placement of Deposits with Other Banks by Primary UCB. | |
INR 5,00,000 (Indian Rupees Five Lakhs only) | Contravention of/ non-adherence with Directions by RBI on ‘Loans and Advances to directors etc. – directors as surety/guarantors – Clarification’, ‘Placement of Deposits with Other Banks by Primary UCB and Supervisory Action Framework (“SAF”). | |
INR 5,00,000 (Indian Rupees Five Lakhs only) | Contravention of/ non-adherence with Directions by RBI on ‘Loans and Advances to directors etc. – directors as surety/guarantors – Clarification’, ‘Placement of Deposits with Other Banks by Primary UCB and Co-operative Banks-Interest Rate on Deposit Directions, 2016. |
1.2. Bangladesh
1.2.1. Bangladesh Bank relaxes EFPF settlement rules for businesses
The Bangladesh Bank has made changes to the settlement regulations regarding funds obtained by businessmen through the Export Facilitation Pre-finance Fund (“EFPF”). Previously, this money required a one-time repayment with interest at the end of the term. Now, EFPF beneficiaries have the flexibility to make partial or complete payments before the term's expiration if they wish to do so. The Banking Regulations and Policy Department of the central bank issued a circular on this matter, instructing all scheduled banks' managing directors and chief executive officers to implement the changes promptly. The Business Standard
1.3. Sri Lanka
1.3.1. Speaker endorses key banking bills in Sri Lanka
The speaker of Parliament of Sri Lanka, Mahinda Yapa Abeywardana, officially endorsed two bills: the Central Bank of Sri Lanka bill and the Banking (Special Provisions) bill. The Central Bank of Sri Lanka bill had previously been amended and passed with a majority vote in Parliament on July 20, 2023, while the Banking (Special Provisions) bill was approved without the need for a vote on July 21, 2023. Consequently, these bills will now become effective as the Central Bank of Sri Lanka Act No. 16 of 2023 and the Banking (Special Provisions) Act No. 17 of 2023. NewsFirst
2. Trends
2.1. Public sector Indian Bank rolls out ‘IB SAATHI’ to enhance banking services
Public sector Indian bank has launched the IB Sustainable Access and Aligning Technology for Holistic Inclusion (IB SAATHI) initiative in order to provide an integrated ecosystem for all stakeholders engaged in the financial sector through the business corresponding route. The aim is to provide doorstep service to customers and basic banking services at all centres for a minimum time period of four hours at fixed branches. Economic Times
2.2. RBI rolls out list of upper-layer NBFCs
As a part of the regulatory measures adopted in the background of Infrastructure Leasing & Financial Services Limited (IL&FS) collapsing in 2018, which caused a domino effect on the entire financial system, RBI has developed a scale-based regulation framework, 2021 for NBFCs taking into account factors such as capital requirement, governance and prudential regulation. In furtherance of the same, RBI has released the list of NBFCs falling under the category of upper layer for 2023-24. RBI
2.3. Indian banks introduce UPI-based credit products
HDFC Bank and ICICI Bank, two of India's largest private sector banks, are developing credit products under the Unified Payment Interface (“UPI”) program following approval from RBI. Credit on UPI allows banks to offer pre-sanctioned credit lines to customers based on their credit limits and spending history. This initiative aims to democratise and expand access to loan funding through UPI. Banks can set terms and conditions for these credit lines, including credit limits, repayment periods, and interest rates. HDFC Bank is testing a 'UPI Now Pay Later' product, while ICICI Bank has already launched a 'PayLater' product, which offers overdraft facilities for UPI-based transactions through various apps like Google Pay and MobiKwik. Business Standard
3. Sector Overview
4. Business Updates
4.1. HDFC Bank enters into a co-lending arrangement with NBFC CreditWise Capital
HDFC Bank has partnered with CreditWise Capital (“CWC”) to offer loans to two-wheeler vehicles targeting customers from Tier-2, 3 and 4 towns of India. The move intends to enhance HDFC’s forte in offering credit facilities by assessing the credit profile of potential borrowers through the loan processing platform provided by CWC. The Business Standard
4.2. Fintech startup Perfios raises funds for global expansion and tech enhancement
Perfios, a fintech startup based in Bengaluru, has secured a USD 229 million (United States Dollar two hundred twenty-nine million only) investment from Kedaara Capital in its Series D funding round, combining primary and secondary sales of shares. The capital injection is intended to support Perfios' global expansion strategy, with a particular focus on North America and Europe. Additionally, the company plans to invest in technology to enhance its suite of decision analytics SaaS products, which are designed to streamline customer journeys in banking, insurance, and embedded commerce. Economic Times
4.3. IIFL acquires majority stake in supply-chain finance platform Xtracap Fintech
India Infoline Group’s (“IIFL”) investment vehicle, IIFL Fintech Fund, has acquired a 51 per cent (Fifty-One per cent) stake in supply chain finance platform Xtracap Fintech. Xtracap fintech offers an e-invoice financing solution that enables businesses to quickly access the value of their invoices, offering immediate liquidity. Through its two-sided application, Xtracap addresses both the financial needs of companies in the supply chain and those in the distribution network. Business Standard
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