Banking & Finance Digest July 20, 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 Acquisition and Holding of Shares or Voting Rights in Commercial Banks

The Reserve Bank of India ("RBI") has issued the draft Reserve Bank of India (Commercial Banks - Acquisition and Holding of Shares or Voting Rights) Amendment Directions, 2026, proposing a simplified framework for subsequent acquisitions of major shareholding in banking companies by certain regulated institutional investors. Under the proposal, mutual funds registered with the Securities and Exchange Board of India ("SEBI"), insurance companies registered with the Insurance Regulatory and Development Authority of India ("IRDAI"), and pension funds registered with the Pension Fund Regulatory and Development Authority (“PFRDA”) may be granted a one-time RBI approval for subsequent acquisitions of major shareholding up to 10 Per cent (Ten Per cent) of the paid-up share capital or voting rights in the same banking company, subject to prescribed conditions.  

1.1.2.     RBI issues draft amendment directions on Acquisition and Holding of Shares or Voting Rights in Payments Banks

RBI has issued the draft Reserve Bank of India (Payments Banks - Acquisition and Holding of Shares or Voting Rights) Amendment Directions, 2026, proposing a streamlined approval framework for certain institutional investors. Under the draft, mutual funds registered with the SEBI, insurance companies registered with the IRDAI, and pension funds registered with the PFRDA may obtain a one-time RBI approval for subsequent acquisitions of major shareholding of up to 10 Per cent (Ten Per cent) of the paid-up share capital or voting rights in the same payments bank, subject to specified conditions.

1.1.3.      RBI issues Reserve Bank of India (Governance) Amendment Directions, 2026

RBI has issued the Reserve Bank of India (Governance) Amendment Directions, 2026, applicable to commercial banks, small finance banks, payments banks and local area banks, with effect from 1 October 2026. The amendments replace the earlier prescriptive framework of seven broad Board agenda themes with a principle-based approach, providing boards greater flexibility to determine matters requiring their consideration while ensuring adequate focus on strategy and risk governance. RBI has also consolidated matters required to be placed before boards into appendices for ease of reference, clarified delegation principles, and incorporated stakeholder feedback received on the draft directions. 

1.1.4.     RBI issues draft Guidance on Data Governance for Regulated Entities

RBI issued a draft Guidance on Regulatory Expectations for Data Governance for public consultation, aimed at strengthening data governance frameworks across regulated entities. The proposed guidance applies to commercial banks, small finance banks, payments banks, local area banks, regional rural banks, urban co-operative banks, rural co-operative banks, All India Financial Institutions (“AIFIs”), non-banking financial companies (“NBFCs”), asset reconstruction companies (ARC) and credit information companies (CICs). The guidance outlines RBI's expectations regarding data governance, governance roles and responsibilities, data architecture, metadata and data lineage, data quality, and third-party data-sharing arrangements. Comments from stakeholders have been invited until 17 August 2026.  

1.1.5.     RBI issues Prudential Norms on Specified Non-Financial Assets acquired by Regulated Entities

RBI has issued the final prudential norms on Specified Non-Financial Assets (SNFAs) acquired by regulated entities after reviewing stakeholder feedback on the draft directions released in May 2026. To implement the framework, RBI has issued corresponding amendment directions relating to resolution of stressed assets and income recognition, asset classification and provisioning norms applicable to commercial banks, small finance banks, NBFCs, AIFIs, urban co-operative banks, rural co-operative banks, regional rural banks and local area banks.   

1.1.6.     RBI cancels registration certificates of 192 NBFCs

RBI has cancelled the Certificates of Registration ("CoRs”) of 192 NBFCs under Section 45-IA (6) of the Reserve Bank of India Act, 1934. Consequent to the cancellation, these entities are prohibited from carrying on the business of a non-banking financial institution. The cancellations, effected through orders issued during June 2026, cover NBFCs across multiple states, marking a significant regulatory enforcement action by RBI.   

1.1.7.     RBI cancels registration certificates of 18 NBFCs following voluntary surrender

RBI has cancelled the CoRs of 18 NBFCs after they voluntarily surrendered their licences. The cancellations were effected under Section 45-IA (6) of the Reserve Bank of India Act, 1934 and fall into three categories: (i) entities exiting the Non-Banking Financial Institution (NBFI) business, (ii) entities qualifying as unregistered Core Investment Companies, that do not require registration, and (iii) entities that ceased to exist due to amalgamation, merger, dissolution or voluntary strike-off. Consequently, these entities are no longer authorised to undertake NBFC activities.  

Securities and Exchange Board of India (SEBI)

1.1.8.     SEBI extends SWP and STP standing instruction facility to dematerialised mutual fund units

SEBI has permitted the creation of standing instructions for Systematic Withdrawal Plans ("SWPs") and Systematic Transfer Plans ("STPs") for mutual fund units held in dematerialised form, addressing a facility previously unavailable to such investors. The framework will be implemented in two phases: Phase I will enable unit-based SWPs/STPs, involving periodic redemption of a fixed number of units, while Phase II will introduce amount-based SWPs/STPs, involving periodic redemption or transfer of a fixed amount. Depositories have been designated as nodal facilitators and must implement Phase I by 31 January 2027 and Phase II by 30 April 2027, while also publishing a standard operational framework by 31 October 2026. The initiative is intended to enhance investor convenience and facilitate ease of doing business in the mutual fund ecosystem.   

International Financial Services Centres Authority (IFSCA)

1.1.9. IFSCA proposes expansion of Permitted Jurisdictions for Distribution of Capital Market Products

The International Financial Services Centres Authority ("IFSCA") has issued a consultation paper proposing to expand the list of foreign jurisdictions from which capital market products and services may be distributed by IFSCA-registered distributors to all categories of clients, including retail investors. The proposal seeks to add the United Arab Emirates (UAE), Singapore, Australia and the European Union (EU) (excluding Croatia) to the existing list of permitted jurisdictions, which currently includes, among others, the United States, the United Kingdom, France, Germany, Japan and Canada. IFSCA noted that the expansion would enhance the competitiveness of Gujarat International Finance Tec-City International Financial Services Centre (GIFT IFSC), broaden access to global investment opportunities and facilitate cross-border distribution activities in a regulated and transparent manner. Public comments on the proposal have been invited until 7 August 2026.   

1.1.10.  IFSCA invites public comments on Proposed Amendments for Credit Rating Agencies in IFSC

IFSCA has issued a consultation paper seeking public comments on proposed amendments to the IFSCA (Capital Market Intermediaries) Regulations, 2025 and the relevant Master Circular governing Credit Rating Agencies ("CRAs") operating in the International Financial Services Centre ("IFSC"). The proposed changes are aimed at strengthening the regulatory framework applicable to CRAs, enhancing market efficiency and aligning the existing regime with evolving market practices. Stakeholders have been invited to submit comments on the proposed amendments as part of IFSCA’s consultative approach to policy development within the IFSC ecosystem.  

1.1.11.  IFSCA issues consultation paper on Direct Listing of Specified Securities Without Public Offer

IFSCA has issued a consultation paper proposing a regulatory framework for the direct listing of specified securities without a public offer in the IFSC. The proposal seeks to facilitate listings by eligible issuers without undertaking a traditional public issuance process, with the objective of improving market accessibility, enhancing capital-raising flexibility and strengthening the attractiveness of the IFSC as a global financial hub. Stakeholder comments have been invited on the proposed framework before its finalisation.  

Insurance Regulatory and Development Authority of India (IRDAI)

1.1.12.  IRDAI issues further clarifications on the implementation of Indian Accounting Standards

IRDAI has issued additional clarifications on the implementation of Indian Accounting Standards ("Ind AS"), focusing on the role of the Appointed Actuary, independent validation requirements and preparation of Ind AS- compliant financial statements for consolidation purposes. IRDAI has clarified the responsibilities of the Appointed Actuary in valuing insurance contract liabilities, determining actuarial methodologies and supporting financial statement disclosures, and has mandated submission of a technical report to the Board of Directors.   

1.1.13.  Monetary Penalty

RBI imposes a monetary penalty on the following institutions:

S. No.	Name of Bank	Amount of Penalty	Contravention
1.	Sambalpur District Co-operative Central Bank Limited, Odisha	INR 8,00,000/- (Indian Rupees Eight Lakh only)	Contravention of Section 26A read with Section 56 of the Banking Regulation Act, 1949 and non-compliance with RBI directions on Know Your Customer ("KYC").
2.	Surat People’s Co-operative Bank Limited. Surat	INR 13,30,000/- (Indian Rupees Thirteen Lakh and Thirty Thousand only)	Non-compliance with RBI directions on Board of Directors - Urban Co-operative Banks (“UCBs”).
3.	Chikhli Urban Co-operative Bank Limited, Chikhli, Maharashtra	INR 13,00,000/- (Indian Rupees Thirteen Lakh only)	Contravention of Section 26A read with Section 56 of the Banking Regulation Act, 1949 and non-compliance with RBI directions on Finance for Housing Schemes - UCBs and KYC.
4.	Muthoot Finance Limited	INR 5,80,000/- (Indian Rupees Five Lakh Eighty Thousand only)	Non-compliance with certain provisions of the Reserve Bank of India KYC Directions.
5.	Satya MicroCapital Limited	INR 3,10,000/- (Indian Rupees Three Lakh Ten Thousand only)	For non-compliance with RBI directions on asset classification.
6.	PAN Emami Cosmed Limited	INR 3,10,000/- (Indian Rupees Three Lakh Ten Thousand only)	Breach of the prescribed regulatory limit for credit exposure to a single group of parties, resulting in non-compliance with RBI's credit/investment concentration norms.
7.	Dhani Loans and Services Limited	INR 2,70,000/- (Indian Rupees Two Lakh Seventy Thousand only)	For non-compliance with RBI directions on asset classification.
8.	Muthoot Vehicle and Asset Finance Limited	INR 2,70,000/- (Indian Rupees Two Lakh Seventy Thousand only)	Failure to put in place a system for periodic review of risk categorisation of accounts as required under the RBI KYC Directions.
9.	Avail Financial Services Limited	INR 6,20,000/- (Indian Rupees Six Lakh Twenty Thousand only)	Non-compliance with governance and credit/investment concentration norms.

2.               Key Asian Markets - Sri Lanka and Bangladesh

2.1.           Bangladesh

2.1.1.     BB reviews treatment of Deferred Tax Assets for regulatory capital purposes

Bangladesh Bank ("BB") has reiterated the accounting and regulatory treatment of Deferred Tax Assets ("DTAs") under Bangladesh Accounting Standards ("BAS") and International Financial Reporting Standards ("IFRS"). The clarification highlights the recognition, measurement and utilisation of DTAs, while emphasising their impact on the calculation of Regulatory Eligible Capital. BB has advised regulated entities to ensure that DTAs are recognised and reported in accordance with applicable BAS and IFRS requirements, and that any regulatory adjustments relating to DTAs are appropriately considered for capital adequacy purposes.

2.1.2.   BB permits external borrowing from parent companies, associates and shareholders by foreign-owned industrial enterprises

BB has granted general permission for fully foreign-owned industrial enterprises operating within and outside specialised zones to obtain external borrowings from parent companies, associates and shareholders abroad. The circular allows short-term, medium-term and long-term borrowings, subject to prescribed conditions on utilisation, repayment and reporting. For cost-bearing borrowings, the all-in-cost is capped at 3 Per cent (Three Per cent) per annum, while cost-free borrowings are encouraged. Medium-term cost-free loans are permitted up to USD 50 Million (United State Fifty Million) and cost-bearing loans up to USD 5 Million (United State Five Million). Authorised Dealers are required to ensure compliance with foreign exchange, anti-money laundering and reporting requirements, with the framework aimed at facilitating easier access to finance for foreign-owned industrial enterprises in Bangladesh. 

2.1.3.      BB issues directions on withholding tax deduction and deposit on fixed deposits

BB has directed all finance companies to ensure strict compliance with withholding tax requirements on interest/profit paid on fixed deposits under the Income Tax Act, 2023. BB clarified that where Proof of Submission of Return is unavailable, tax must be deducted at source at 30 Per cent (Thirty Per cent) for corporate taxpayers and 15 Per cent (Fifteen Per cent) for individual and other taxpayers. The circular also reiterates the prescribed timelines for depositing taxes deducted at source with the government treasury and instructs finance companies to maintain accurate records, avoid retaining deducted taxes in general ledger accounts, and submit the required returns and supporting documents within the stipulated timeframes.  

2.2.         Sri Lanka

2.2.1.     CBSL reports continued expansion in manufacturing and services activities in June 2026

The Central Bank of Sri Lanka ("CBSL") reported that Sri Lanka's Purchasing Managers' Index ("PMI") indicated continued expansion in both manufacturing and services activities during June 2026. PMI-Manufacturing moderated to 53.0 from 56.6 in May 2026, reflecting continued growth at a slower pace, driven primarily by the food and beverages sector, despite skilled labour shortages, rising labour costs and Middle East-related uncertainties. PMI-Services increased to 58.5 from 56.9, supported by growth in financial, professional and insurance services, alongside increased employment and new business activity. CBSL noted that business expectations remain positive, supported by anticipated economic improvements and higher tourist arrivals, although global uncertainties continue to pose risks.  

3.              Trends

3.1.          RBI faces calls for clarification on collateral-free loans to MSEs.

Banks have reportedly sought clarification from RBI regarding the implementation of its requirement for collateral-free loans of up to INR 20 lakh (Indian Rupees Twenty Lakh only) for eligible Micro and Small Enterprises (MSEs). Lenders have highlighted operational challenges, including instances where borrowers are not covered under the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) scheme and reluctance among borrowers to bear guarantee fees. Banks have also expressed concerns over the treatment of loans backed by collateral and the eligibility of certain stressed or restructured accounts for guarantee coverage. The industry is expected to engage with the Government and RBI to seek greater clarity and facilitate smoother credit delivery to MSEs.   

4.              Sector Overview

4.1.      India fintech funding doubles to USD 2 Billion in H1 2026, led by late-stage investments

According to a report by Tracxn, India's fintech sector recorded a strong funding recovery in the first half of 2026, raising approximately USD 2 Billion (United State 2 Billion), driven primarily by late-stage investments. Late-stage funding increased 3.4 times compared to the previous half year, with major funding rounds led by CRED (USD 900 million), KreditBee (USD 220 million) and Weaver (USD 156 million). Investors continued to favour mature fintech companies with proven business models, clear profitability prospects and stronger revenue visibility, while early-stage funding remained relatively subdued. Bengaluru retained its position as the leading fintech funding hub, accounting for around 70 per cent (seventy per cent) of total investments, highlighting the continued concentration of capital in established startup ecosystems.   

4.2.        NBFCs poised for stronger growth amid cleaner balance sheets and improved liquidity

Non-Banking Financial Companies ("NBFCs") are expected to witness stronger growth in financial year 2026-27 (FY27), supported by healthier balance sheets, improving asset quality and enhanced banking system liquidity. According to a report by Motilal Oswal Financial Services, liquidity inflows arising from Foreign Currency Non-Resident (Bank) (FCNR(B)) deposits are likely to improve funding availability for NBFCs, reduce incremental borrowing costs and support net interest margins. The sector has largely completed a prolonged phase of portfolio clean-up and tighter underwriting, positioning it for improved loan growth and earnings recovery. Lower crude oil prices and easing geopolitical tensions have further strengthened the operating environment, although adverse monsoon conditions and renewed geopolitical risks remain key concerns.  

5.              Business Updates

5.1.          Federal Bank reports 37 Per cent rise in Q1 FY27 net profit

Federal Bank reported a net profit of INR 1,177 crore (Indian Rupees One Thousand One Hundred and Seventy-Seven Crore only) for the first quarter of financial year 2026-27 (Q1 FY27), reflecting a 37 Per cent (Thirty-Seven Per cent) year-on-year (YoY) increase, driven by higher net interest income and lower provisioning. Net Interest Income (NII) grew by 26 Per cent (Twenty-Six Per cent) to INR 2,946 crore (Indian Rupees Two Thousand Nine Hundred and Forty-Six Crore only), while asset quality improved, with Gross Non-Performing Assets (GNPA) declining to 1.52 Per cent (One Point Five Two Percent) and Net Non-Performing Assets ("NNPA") falling to 0.18 Per cent (Zero point One Eight Per cent).   

5.2.          Peak XV leads funding round in Neo Group to accelerate wealth-tech growth

Neo Group has raised INR 350 crore (Indian Rupees Three Hundred and Fifty Crore only) in a funding round led by existing investor Peak XV Partners. The wealth-tech platform intends to use the proceeds to expand its advisory business, strengthen technology capabilities and enhance its presence across India. The fundraise follows Neo Group’s earlier capital raise of INR 550 crore (Indian Rupees Five Hundred and Fifty Crore only) and reflects continued investor confidence in India’s growing wealth management sector. As of 30 June 2026, Neo Group managed approximately INR 1.3 lakh crore (Indian Rupees One Lakh and Thirty Thousand Crore only) in Assets under Advice and Assets under Management (AUA/AUM), serving ultra-high-net-worth individuals, family offices, institutions and corporates across more than 30 cities.   

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