Banking & Finance Digest August 03, 2026

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

1.1.1.     RBI issues Draft amendment directions on Securitisation Transactions

The Reserve Bank of India ("RBI") has issued draft amendment directions relating to securitisation transactions applicable to Commercial Banks, Small Finance Banks (“SFBs”), Non-Banking Financial Companies (“NBFCs”) and All India Financial Institutions (AIFIs). The proposed amendments aim to enhance efficiency, liquidity and transparency in the issuance and subsequent transfer of Securitisation Notes (SNs). RBI has invited comments and feedback from the public and other stakeholders on the draft directions by 27 August 2026 through its Connect2Regulate platform, email, or other prescribed channels.

1.1.2.     RBI issues Basel Pillar 3 Disclosure Amendment Directions for Banks

RBI has issued ten amendment directions to implement the final Basel Pillar 3 disclosure framework for banks, following stakeholder consultation on draft directions released in May 2026. The amendments revise existing requirements relating to capital adequacy, asset liability management, governance, and financial statement disclosures for Commercial Banks, Small Finance Banks ("SFBs") and Payments Banks. RBI has incorporated stakeholder feedback into the final framework and clarified that detailed Basel Pillar 3 disclosure templates covering market risk, operational risk, counterparty credit risk, credit valuation adjustment and leverage ratio for Commercial Banks will be issued separately after further examination of comments received.

1.1.3.     RBI issues amendment directions on Interest Rates on Deposits

RBI has issued final amendment directions on interest rates for deposits across Commercial Banks, SFBs, Regional Rural Banks (RRBs), Payments Banks and Urban Co-operative Banks (“UCBs”), following stakeholder consultation on the draft framework. The amendments are intended to provide greater flexibility to banks in pricing Rupee bulk deposits while ensuring uniformity in the disclosure of deposit interest rates. Feedback received during the consultation process has been incorporated into the final directions, which will come into effect from 1 October 2026.

1.1.4.     RBI issues consolidated Supervisory Master Directions

RBI has issued 64 consolidated Master Directions covering supervisory instructions administered by its Department of Supervision across 11 categories of regulated entities, including Commercial Banks, SFBs, NBFCs, Asset Reconstruction Companies (ARCs) and Credit Information Companies (“CICs”). The consolidation exercise streamlines and rationalises the supervisory framework by bringing together 628 existing circulars, Master Circulars and Master Directions into a structured, function-wise repository, aimed at improving clarity and reducing compliance costs. Following stakeholder consultation, RBI has also issued a circular repealing or withdrawing the 628 superseded instructions, with the new Master Directions serving as the single reference source for supervisory requirements.

Securities and Exchange Board of India (SEBI)

1.1.5.     SEBI revises SEBI-extended Timeline for Digital Accessibility Compliance

The Securities and Exchange Board of India ("SEBI") has extended the timeline for compliance with its digital accessibility requirements issued under the Rights of Persons with Disabilities Act, 2016. Pursuant to representations received from regulated entities (“REs”) and a review of their compliance status, SEBI has extended the deadline for conducting accessibility audits of digital platforms and implementing remediation measures identified through such audits until 31 October 2026. All other requirements under the earlier digital accessibility circulars remain unchanged and continue to be applicable to REs.

1.1.6.     SEBI introduced GARUDA Mechanism for Faster Launch of AIF Schemes

SEBI has introduced the Green-Channel: AIF Rollout Upon Document Acknowledgement (GARUDA) mechanism to streamline and expedite the launch of schemes by Alternative Investment Funds (“AIFs”). Under the revised framework, regular AIF schemes may be launched after 10 working days from filing the Placement Memorandum (“PPM”) with SEBI through a registered merchant banker, unless otherwise advised by SEBI. Accredited Investor Only Funds (AI Only Funds), Large Value Funds for Accredited Investors (LVFs) and Angel Funds have been provided greater flexibility and may launch schemes immediately upon filing the PPM, without the requirement of merchant banker involvement. The framework also strengthens accountability by prescribing enhanced due diligence, disclosure and certification requirements for managers and merchant bankers, while clarifying that filing of a PPM with SEBI does not constitute regulatory approval. The circular has come into effect immediately and applies to all relevant PPMs filed from the date of notification of the Securities and Exchange Board of India (Alternative Investment Funds) (Second Amendment) Regulations, 2026.

International Financial Services Centres Authority

1.1.7.     IFSCA issues Circular Extending Compliance Timeline for Internet Banking Services by IBUs

The International Financial Services Centres Authority ("IFSCA") has amended its earlier circulars on internet banking services offered by International Banking Units (IBUs), granting a one-time extension for compliance with the prescribed requirements. The extension has been provided in response to requests from IBUs seeking alignment with the closure of the RBI Swap Facility for Foreign Currency Non-Resident (Bank) (“FCNR(B)”) Deposits scheme. Under the revised framework, both existing and newly established IBUs may offer liability products without full compliance until 30 September 2026, after which any non-compliant IBU will be required to cease onboarding new customers for the relevant liability products from 1 October 2026. All other provisions of the earlier circulars remain unchanged.

1.1.8.     IFSCA release Survey Report on Artificial Intelligence Adoption in GIFT IFSC

IFSCA has released its Artificial Intelligence ("AI") in the GIFT International Financial Services Centre (IFSC) Survey Report 2026, highlighting a significant increase in AI adoption, maturity and governance across regulated entities. The report notes that Generative AI has entered the institutional mainstream, with 65 Per cent (Sixty-Five Per cent) of surveyed entities either exploring or implementing such solutions, while 82 Per cent (Eighty- Two Per cent) identified operational efficiency and process automation as the primary driver for AI adoption. Data privacy and protection emerged as the key risk area, cited by 74 Per cent (Seventy-Four Per cent) of respondents. The survey also indicates growing investment in AI, increasing use of governance and audit mechanisms, and demand for greater regulatory clarity. IFSCA observed that the GIFT IFSC ecosystem has progressed from AI experimentation to early-stage operationalisation, with AI increasingly being deployed in risk and compliance, internal operations and customer-facing functions.

Insurance Regulatory and Development Authority of India (IRDAI)

1.1.9.     IRDAI notifies Regulations on Manner and Procedure for Imposing Penalties

The Insurance Regulatory and Development Authority of India ("IRDAI") has notified the Insurance Regulatory and Development Authority of India (Manner and Procedure for Imposing Penalties) Regulations, 2026, establishing a comprehensive framework for penalty proceedings under the Insurance Act, 1938 and the Insurance Regulatory and Development Authority Act, 1999. The Regulations prescribe the process for initiation of penalty proceedings, issuance and service of show cause notices, timelines for response, personal hearings, adjudication and appeals. They also require penalties to be proportionate to the nature, gravity and impact of the violation, taking into account factors such as unfair gain, loss caused to policyholders, recurrence of defaults and remedial measures undertaken. Further, IRDAI may publish penalty orders and related press releases on its website, while affected parties may appeal before the Securities Appellate Tribunal within 45 days of receipt of the order. Amounts recovered as penalties will be credited to the Policyholders’ Education and Protection Fund.

1.1.10.  IRDAI issues Second Amendment Regulations on Actuarial, Finance and Investment Functions of Insurers

IRDAI has notified the Insurance Regulatory and Development Authority of India (Actuarial, Finance and Investment Functions of Insurers) (Second Amendment) Regulations, 2026, introducing significant changes to actuarial, reporting and investment requirements for insurers and reinsurers. The amendments define the roles of Appointed Actuary, Certifying Actuary and Actuary for Specific Purposes, strengthen actuarial governance and reporting obligations, and mandate enhanced Financial Condition Reports (FCRs) covering solvency, profitability, liquidity, risk management and stress testing. On the investment side, IRDAI has revised investment norms, permitting specified investments in Special Purpose Vehicles (SPVs), private limited companies, AIFs and Venture Funds (VFs), subject to prescribed exposure limits and eligibility conditions. The framework also introduces revised reporting formats, actuarial surplus disclosures and repo/reverse repo limits, with a view to enhancing risk management, transparency and prudential oversight across the insurance sector.

1.1.11.  IRDAI issued Amendment Regulations for Insurance Intermediaries

IRDAI has notified the Insurance Intermediaries (Amendment) Regulations, 2026, with the objective of aligning the regulatory framework for insurance intermediaries with the Insurance Laws (Amendment) Act, 2025 and strengthening accountability, transparency and policyholder protection. The amendments introduce a perpetual registration regime for corporate agents and insurance brokers, subject to payment of annual fees, replacing the earlier renewal-based framework. IRDAI has also prescribed enhanced governance and disclosure requirements, including tagging of soliciting personnel on proposal forms and policy documents, mandatory enrolment and training requirements, additional disclosures by intermediaries having majority foreign shareholding or earning commission exceeding INR 10,00,00,000 (Indian Rupees Ten Crore only), and stricter reporting obligations. Further, the regulations streamline registration, suspension and cancellation procedures, mandate annual fee compliance, and empower IRDAI to impose business-related conditions in the interest of policyholders and the orderly growth of the insurance sector.

1.1.12.  IRDAI issued Policyholders’ Education and Protection Fund Regulations, 2026

IRDAI has notified the Policyholders’ Education and Protection Fund Regulations, 2026, establishing a dedicated Policyholders’ Education and Protection Fund (“PEPF”) to promote policyholder awareness, financial inclusion and consumer protection. The corpus of the PEPF will comprise contributions, grants, donations, penalties, undistributed disgorged amounts and other sources specified by IRDAI. Only the investment income generated from the corpus may be utilised for activities such as financial literacy programmes, insurance awareness initiatives, grievance redressal support, unclaimed amount recovery infrastructure, digital policyholder services and consumer outreach. The regulations also provide for a Fund Management Committee (FMC) to administer the fund, prescribe governance, reporting and audit requirements, and mandate investment of fund assets in Government securities and deposits with scheduled commercial banks.  

1.1.13.  IRDAI issued Amendment Regulations on Registration, Capital Structure, Transfer of Shares and Amalgamation of Insurers

IRDAI has notified the IRDAI (Registration, Capital Structure, Transfer of Shares and Amalgamation of Insurers) (Amendment) Regulations, 2026, introducing significant changes to the ownership, governance and restructuring framework applicable to insurers. Key amendments include revised prior approval thresholds for transfer of shares and equity issuances, expanded eligibility for investors and promoters from Financial Action Task Force (FATF) compliant jurisdictions, relaxation of lock-in requirements in specified circumstances, and enhanced fit and proper criteria for promoters and investors.

Monetary Penalty

Reserve Bank of India imposes Monetary Penalty on:

S. No.	Name of Bank	Amount of Penalty	Contravention
1.	The Citizen Co-operative Bank Limited, Bangalore, Karnataka	INR 50,000 (Indian Rupees Fifty Thousand only)	Non-compliance with RBI directions on Income Recognition, Asset Classification, Provisioning and Other Related Matters - Urban Co-operative Banks (UCBs) by failing to classify certain loan accounts as Non-Performing Assets (NPAs).
2.	Raigad District Central Co-operative Bank Ltd., Maharashtra	INR 10,10,000/-  (Indian Rupees Ten Lakh and Ten Thousand only)	Contravention of Section 20(1) read with Section 56 of the Banking Regulation Act, 1949 and non-compliance with RBI directions on Membership of CICs by Co-operative Banks.
3.	Sangli District Central Co-operative Bank Ltd., Maharashtra	INR 7,00,000/- (Indian Rupees Seven Lakh only)	Contravention of Section 20(1) read with Section 56 of the Banking Regulation Act, 1949. The bank sanctioned director-related loans in violation of the applicable statutory provisions.
4.	Jilla Sahakari Kendriya Bank Maryadit, Shajapur, Madhya Pradesh	INR 1,00,000/- (Indian Rupees One Lakh only)	Contravention of Section 26A read with Section 56 of the Banking Regulation Act, 1949. The bank failed to transfer eligible unclaimed amounts to the Depositor Education and Awareness Fund ("DEAF") within the prescribed period.

2.               Key Asian Markets – Bangladesh & Sri-Lanka  

2.1.            Bangladesh

2.1.1.      BB issues Consolidated Circular on Foreign Exchange Regulations for Export Trade Transactions

Bangladesh Bank ("BB") has issued a consolidated circular on foreign exchange regulations governing export trade transactions, replacing previous instructions and incorporating subsequent updates into a single framework. The circular streamlines procedures for export proceeds realisation, electronic Export (EXP) Forms, open account exports, e-commerce exports, documentary collections, trade finance mechanisms, and service exports, while reinforcing Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) compliance requirements. Key measures include expansion of digital trade documentation and electronic presentation of export documents, a pilot framework for digital processing of trade documents under approved trade corridors, facilitation of alternative trade finance and supply chain finance arrangements, enhanced provisions for freelancers and Information and Communication Technology (ICT) service exporters, streamlined inward remittance processing, and updated Exporters’ Retention Quota (ERQ) account rules. The circular also reiterates the requirement to repatriate export proceeds within four months, introduces operational guidance for e-commerce and open account exports, and seeks to improve efficiency, transparency and security in cross-border trade and foreign exchange transactions.

2.1.2.        BB issues Framework for Bank-Intermediated Cross-Border Digital Payments

BB has introduced a new bank-intermediated cross-border digital payment framework, enabling Authorised Dealers (“ADs”) to collaborate with Cross-border Digital Payment Service Providers (CDPSPs) to facilitate cross-border digital transactions. Under the framework, ADs may enable customers to use Digital Value Accounts (DVAs), including digital wallets and stored-value accounts, which must remain linked to AD-controlled master accounts and be subject to real-time monitoring, reconciliation and regulatory oversight.

2.2.             Sri-Lanka  

2.2.1.        CBSL reports acceleration in CCPI Headline Inflation in July 2026

The Central Bank of Sri Lanka ("CBSL") reported that Colombo Consumer Price Index (CCPI)-based headline inflation (year-on-year) increased to 7.3 Per cent (Seven Point Three Per cent) in July 2026 from 6.8 Per cent (Six Point Eight Per cent) in June 2026. The increase was primarily driven by higher housing rents in the non-food category and a base effect in food inflation. Food inflation accelerated to 6.3 Per cent (Six Point Three Per cent) from 3.6 Per cent (Three Point Six Per cent), while non-food inflation moderated to 7.8 Per cent (Seven point Eight Per cent) from 8.4 Per cent (Eight Point Four Per cent). On a month-on-month basis, the CCPI rose by 0.24 Per cent (Zero Point Two Four Per cent), largely due to increased housing rents. Core inflation also increased to 4.4 Per cent (Four Point Four Per cent) from 4 Per cent (Four Per cent). CBSL noted that headline inflation is expected to remain above the 5 Per cent (Five Per cent) target in the near term before easing towards the target over the medium term, although the outlook remains uncertain due to ongoing geopolitical tensions in the Middle East and their potential economic spillover effects.

3.              Trends

3.1. UPI goes live with Maldives’ Favara Payment System

The Maldives Monetary Authority (MMA), in collaboration with the RBI and NPCI International Payments Limited (NIPL), has launched the Favara-UPI cross-border payment corridor, enabling real-time person-to-person transfers from the Maldives to Unified Payments Interface ("UPI")-enabled bank accounts in India using mobile banking applications. The service is currently available through Bank of Maldives Plc and Maldives Islamic Bank Plc and represents a significant step in strengthening digital financial connectivity and economic cooperation between the two countries. Future phases will introduce QR code-based merchant payments and additional cross-border payment solutions. The launch further expands UPI’s international footprint and is expected to facilitate faster, more convenient and cost-effective remittances between India and the Maldives.

4.              Sector Overview

4.1.          RBI reports strong mobilisation under FCNR(B) Concessional Swap Facility

RBI reported that authorised dealer banks have mobilised USD 36.73 Billion (United States Dollars Thirty-Six Billion Seven Hundred Thirty Million only) through FCNR(B) deposits under its concessional swap facility as of 31 July 2026. Including Overseas Foreign Currency Borrowings (OFCBs) of USD 2.58 billion (United States Dollars Two Billion Five Hundred Eighty Million only) and External Commercial Borrowings (ECBs) of USD 1.52 billion (United States Dollars One Billion Five Hundred Twenty Million only), total foreign currency inflows under the scheme reached USD 40.82 billion (United States Dollars Forty Billion Eight Hundred Twenty Million only). Introduced in June 2026 to enhance foreign exchange liquidity, the facility has already surpassed the 2013 mobilisation programme, with FCNR(B) deposits accounting for nearly 90 Per cent (Ninety Per cent) of total inflows. RBI noted that the facility for FCNR(B) deposits remains available until 30 September 2026, while the OFCB and ECB windows remain open until 31 December 2026. The inflows are expected to support deposit growth, ease liquidity pressures and strengthen banks’ long-term funding profiles.

5.              Business Updates

5.1.          LIC Housing Finance reports 10 Per cent increase in Q1 FY27 Net Profit

LIC Housing Finance Limited reported a consolidated net profit of INR 1,499.03 crore (Indian Rupees One Thousand Four Hundred Ninety-Nine Crore and Three Lakh only) for the quarter ended 30 June 2026, representing an increase of 10 percent (ten percent) compared to INR 1,364 crore (Indian Rupees One Thousand Three Hundred Sixty-Four Crore only) in the corresponding period of the previous year. Total disbursements grew by 14.5 percent (fourteen point five percent) year-on-year to INR 15,014 crore (Indian Rupees Fifteen Thousand Fourteen Crore only), driven by growth across individual home loans, non-housing loans and project loans. The company’s total outstanding loan portfolio increased 4 percent (four percent) to INR 3,22,098 crore (Indian Rupees Three Lakh Twenty-Two Thousand Ninety-Eight Crore only), while asset quality improved, with Stage 3 exposure reducing to 2.14 percent (two point one four percent) from 2.62 percent (two point six two percent) a year earlier.

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

info@akandpartners.in