Banking & Finance Digest August 31, 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

Securities and Exchange Board of India (SEBI)

1.1.1.     SEBI launches Cyber Suraksha Portal to Strengthen Cybersecurity Awareness

The Securities and Exchange Board of India ("SEBI") has launched the Cyber Suraksha Portal, a centralised platform aimed at strengthening cybersecurity awareness, information sharing and cyber resilience across the securities market ecosystem. The portal provides market participants with access to cybersecurity advisories, regulatory circulars, vulnerability alerts, threat intelligence, incident-related information, best practices, and learning resources relating to emerging technologies such as artificial intelligence and quantum computing. Through this initiative, SEBI seeks to facilitate timely dissemination of cyber risk information, enhance preparedness against evolving cyber threats and promote a more resilient securities market infrastructure.

1.1.2.     SEBI extends timeline for implementation of ETF Trading Framework

SEBI has extended the implementation timeline for its circular dated 15 June 2026 prescribing norms relating to base price, price bands, call auction in the pre-open session and close-out procedures for Exchange Traded Funds (“ETFs”). The revised framework, originally scheduled to come into effect from 1 September 2026, will now be implemented from 7 September 2026 following feedback received from stock exchanges and to facilitate smooth implementation. SEBI has clarified that all other provisions of the June 2026 circular remain unchanged and has directed Market Infrastructure Institutions (MIIs) to complete necessary system changes, regulatory amendments and stakeholder communication before the revised effective date.  

International Financial Services Centres Authority

1.1.3.     IFSCA issues Consultation Paper on Secondary Listing of ETFs in IFSC

The International Financial Services Centres Authority ("IFSCA") has issued a consultation paper proposing a framework to permit secondary listing of ETFs on recognised stock exchanges in the Gujarat International Finance Tec-City International Financial Services Centre (GIFT IFSC). Under the proposal, ETFs already listed in India or overseas may be admitted for trading in the IFSC without requiring the fund manager to establish a presence in the IFSC, subject to prescribed eligibility conditions. The proposed framework draws from international practices and would allow regulated fund managers from India and foreign jurisdictions to secondary list eligible ETFs, supported by local representation, disclosure obligations and market-making requirements. IFSCA expects the framework to expand investment opportunities, enhance market depth in the IFSC, attract global fund managers and strengthen the IFSC’s position as an international investment gateway.

1.1.4.     IFSCA mandates FMEs to maintain websites or webpages for enhanced transparency

IFSCA has mandated all Fund Management Entities (“FMEs”) registered under the IFSCA (Fund Management) Regulations, 2025 to maintain a website or webpage to improve transparency and facilitate investor access to information relating to their operations in the International Financial Services Centre (“IFSC”). Authorised FMEs and Registered FMEs (Non-Retail) may maintain either an independent website or a dedicated webpage hosted on a parent or group entity’s website, while Registered FMEs (Retail) must maintain an independent website. The website or webpage must contain prescribed disclosures, including registration details, fund management activities, key service providers, grievance redressal mechanisms, key managerial personnel, regulatory disclosures and material enforcement actions. The circular will come into effect from 1 December 2026.

1.1.5.     IFSCA extends timeline for transition to IFSC-Issued ISINs

IFSCA has extended the deadline for units operating in the IFSC to obtain International Securities Identification Numbers (ISINs) from depositories recognised by IFSCA. Under the earlier directions, entities holding ISINs issued by domestic depositories in India for securities or other permitted financial products were required to transition to ISINs issued by an IFSCA-recognised depository by 31 August 2026. Based on stakeholder representations, IFSCA has extended the deadline to 31 December 2026. Consequently, the timeline for recognised depositories in the IFSC to submit compliance reports confirming completion of the transition process has also been extended to 31 January 2027.

Monetary Penalty

Reserve Bank of India imposed a monetary penalty on the following institutions:

S. No.	Name of Bank	Amount of Penalty	Contravention
1.	Shri Vijay Mahantesh Co-operative Bank Limited, Hungund, Karnataka	INR 2,50,000 (Indian Rupees Two Lakh Fifty Thousand only)	Non-compliance with RBI directions on Income Recognition, Asset Classification, Provisioning and Other Related Matters - Urban Co-operative Banks (“UCBs”) and Loans and Advances to Directors, Their Relatives, and Firms/Concerns in which They Are Interested. The bank failed to classify certain loan accounts as non-performing assets and sanctioned director-related loans in violation of regulatory requirements.
2.	Pragathi Co-operative Bank Limited, Karnataka	INR 2,00,000 (Indian Rupees Two Lakh only)	Contravention of Section 20 read with Section 56 of the Banking Regulation Act, 1949, and non-compliance with RBI directions on Loans and Advances to Directors, Their Relatives, and Firms/Concerns in which They Are Interested, Exposure Norms and Statutory/Other Restrictions - UCBs, and Classification, Valuation and Operation of Investment Portfolio of Primary (Urban) Co-operative Banks. The bank sanctioned director-related loans, breached the prescribed single borrower exposure limit, and exceeded prudential inter-bank exposure and counter-party limits.
3.	Vikas Souharda Co-operative Bank Limited, Hosapete, Karnataka	INR 1,00,000 (Indian Rupees One Lakh only)	Non-compliance with RBI directions on Income Recognition, Asset Classification, Provisioning and Other Related Matters - UCBs. The bank failed to classify certain loan accounts as non-performing assets (NPAs), resulting in regulatory non-compliance.
4.	Jalna District Central Co-operative Bank Ltd., Maharashtra	INR 50,000 (Indian Rupees Fifty Thousand only)	Non-compliance with RBI directions on 'Membership of Credit Information Companies (CICs) by Co-operative Banks' and'Know Your Customer (KYC)'. The bank failed to report borrower credit information to all CICs and failed to conduct periodic reviews of risk categorisation of customer accounts at least once every six months.

2.               Key Asian Markets – Sri-Lanka & Bangladesh

2.1.          Sri-Lanka  

2.1.1.     CBSL releases Monetary Policy Report for August 2026

The Central Bank of Sri Lanka ("CBSL") has released its second Monetary Policy Report for 2026, providing an assessment of inflation, economic growth and key macroeconomic risks. The report notes that headline inflation, which rose sharply in 2026, is expected to remain elevated in the near term before converging to the CBSL’s 5 per cent (five per cent) target. The CBSL highlighted its monetary policy tightening measures introduced in May 2026 to contain inflationary pressures and anchor inflation expectations. The report further indicates that private sector credit growth is likely to moderate, while the external sector remains resilient despite geopolitical disruptions. Although Sri Lanka’s economic growth outlook remains broadly stable, the CBSL cautioned that geopolitical developments, commodity price movements and adverse weather conditions could pose risks to future growth.  

2.2.             Bangladesh

2.2.1.        BB permits ADs to issue Guarantees and SBLCs for Local Project Authorities on behalf of Resident Entities

Bangladesh Bank (BB) has permitted Authorised Dealers ("ADs") to issue bank guarantees and Standby Letters of Credit (SBLCs) in foreign currency on behalf of resident entities in favour of government authorities, state-owned enterprises and other authorised project entities in Bangladesh for contracts awarded to foreign companies through international tenders. The facility is intended to support foreign companies participating in projects in Bangladesh through local strategic partners, agents or authorised representatives. ADs are required to ensure the existence of bona fide contractual relationships between resident entities and foreign awardees, obtain appropriate collateral or counter-security, comply with applicable credit and risk management norms, and secure necessary internal approvals. The circular further provides that guarantee invocations should ordinarily be settled in Bangladeshi Taka, although foreign currency settlement may be permitted where specifically required under the relevant tender or contract documents.

3.              Trends

3.1.          Banks and FIU-IND strengthen framework to detect Money Mule Accounts

Banks are working with the Financial Intelligence Unit-India (FIU-IND) to enhance the Suspicious Transaction Report ("STR") framework for identifying and reporting money mule accounts. The proposed approach focuses on improving the quality of STR filings through detailed risk assessments, pattern identification and analysis by designated principal officers, rather than relying on routine reporting. Banks have also been directed to deploy artificial intelligence (AI), machine learning and network analytics tools to detect suspicious transaction patterns and identify mule account networks. The initiative follows regulatory and parliamentary concerns regarding the misuse of the banking system for laundering proceeds of cyber and financial frauds, with the objective of enabling more effective detection, investigation and recovery of funds.   

3.2.     SEBI considering enhanced Institutional Participation Framework for SME IPOs

SEBI is considering significant reforms to the Small and Medium Enterprises ("SME") initial public offering ("IPO") framework to strengthen investor protection and improve market quality. Proposed measures include reserving up to 50 per cent (fifty per cent) of SME IPO issues for Qualified Institutional Buyers (QIBs), with 35 per cent (thirty-five per cent) allocated to retail investors and 15 per cent (fifteen per cent) to non-institutional investors, broadly aligning SME IPO allocation norms with those applicable to mainboard IPOs. SEBI is also considering stricter eligibility criteria, including higher profitability requirements for SME listings, revised size thresholds, provision for anchor investor participation, and an offer-for-sale framework to facilitate investor exits. The proposals are being evaluated amid regulatory concerns regarding fund utilisation practices and governance standards among certain SME-listed entities.

4.              Sector Overview

4.1.          Startup India’s Industrial Output Growth Moderates to 6.7 Per cent in July 2026

India's industrial output growth, measured by the Index of Industrial Production (IIP), moderated to 6.7 per cent (six point seven per cent) year-on-year in July 2026 from a revised 8.8 per cent (eight point eight per cent) in June, primarily due to a contraction in mining activity and slower growth in manufacturing and electricity generation. Manufacturing output grew 7.3 per cent (seven point three per cent), electricity generation increased 8.7 per cent (eight point seven per cent), while mining output declined 0.9 per cent (zero point nine per cent) during the month. Despite the moderation, capital goods output remained strong at 16.1 per cent (sixteen point one per cent) and consumer durables output rose 10.5 per cent (ten point five per cent), indicating continued strength in investment-led and consumer demand-driven sectors. Industrial output during April-July 2026 recorded cumulative growth of 6.3 per cent (six point three per cent) compared to 4.0 per cent (four per cent) in the corresponding period of the previous year. 

5.              Business Updates

5.1.          RBL Bank receives GST Demand Notice of INR 103.76 Crore

RBL Bank Limited has received a show cause notice from the Assistant Commissioner of State Tax, Mumbai, proposing a Goods and Services Tax (GST) demand of INR 103.76 crore (Indian Rupees One Hundred Three Crore and Seventy-Six Lakh only), including interest and penalty, for the financial year 2020-21. The proposed demand relates to input tax credit availed by the bank under a separate GST registration maintained for its digital banking business vertical. RBL Bank has stated that it will respond to the notice within the prescribed timelines and believes it has adequate grounds to contest the matter, particularly in light of favourable GST authority orders received on a similar issue for financial years 2018-19 and 2019-20. The bank has further indicated that it does not currently expect the proceedings to have any material adverse impact on its operations or financial position.

5.2.        Acko expands Garage Network to reduce motor insurance claim costs

Acko General Insurance Limited has expanded its owned and franchise-led garage network as part of its strategy to lower motor insurance claim costs and improve customer experience. The company has grown its network to more than 10 centres across multiple cities and has doubled its servicing capacity to approximately 2,500 vehicles per month. According to Acko, repairs carried out through its network can reduce claim costs by 20 per cent (twenty per cent) to 30 per cent (thirty per cent) compared to conventional repair channels. Through the expansion, Acko aims to gain greater control over the end-to-end claims and repair process, reduce customers’ out-of-pocket expenses and potentially lower insurance premiums over time.

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