Banking & Finance Digest July 27, 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 Foreign Investment Rules, 2026 to rationalise existing NDI Framework

The Reserve Bank of India ("RBI") has released the draft Foreign Exchange Management (Foreign Investment) Rules, 2026 for public consultation, proposing a comprehensive overhaul of the existing Foreign Exchange Management (Non-Debt Instruments) Rules, 2019 (NDI Rules). The proposed reforms aim to establish a simpler, principle-based and investor-friendly regulatory framework for foreign investment in India, in line with the Union Budget 2026-27 announcement. Key changes include rationalisation of provisions, harmonisation of definitions, clearer separation between Foreign Direct Investment (FDI) policy and procedural Foreign Exchange Management Act, 1999 (FEMA) requirements, streamlined compliance processes and a future-ready framework that is both investee-neutral and investor-neutral while retaining necessary regulatory safeguards. Stakeholders may submit comments on the draft rules to RBI by 31 August 2026.

Securities and Exchange Board of India (SEBI)

1.1.2.     SEBI revises certification requirements for distribution of SIFs

Security and Exchange Board of India (“SEBI”) has revised the certification requirements for the distribution of Specialised Investment Funds (“SIFs”). Under the revised framework, individuals engaged in the sale and/or distribution of SIFs must hold the National Institute of Securities Markets ("NISM") Series-V-D Mutual Fund - Specialised Investment Fund Distributors Certification, which will also qualify them to distribute mutual fund products without requiring a separate NISM Series V-A certification. Further, the requirement to hold the NISM Series XIII Common Derivatives Certification for SIF distribution will cease to apply from 21 September 2026. Existing distributors holding a valid NISM Series XIII certification on or before 21 September 2026 may continue distributing SIFs until the expiry of such certification, subject to maintaining a valid NISM Series V-A certification. The circular is effective immediately.  

1.1.3.     SEBI issues Consultation Paper on Comprehensive Review of Portfolio Managers Regulations

SEBI has released a consultation paper proposing a comprehensive overhaul of the SEBI (Portfolio Managers) Regulations, 2020 to align the regulatory framework with the evolving Portfolio Management Services (“PMS”) industry. Key proposals include permitting investments in to-be-listed securities, allowing Discretionary Portfolio Management Services (DPMS) to invest up to 10 Per cent (Ten Per cent) of Assets Under Management (AUM) in investment-grade unlisted debt securities, enabling overseas investments in specified foreign securities, and introducing a Mutual Fund-only PMS framework with a reduced minimum investment threshold of INR 25 lakh (Indian Rupees Twenty Five Lakh only) and lower net worth requirements. The paper also proposes enhanced flexibility for exchange-traded derivatives, various ease of compliance measures, simplification of regulatory provisions, and operational reforms including demat account portability and relaxation of certain Power of Attorney requirements. Public comments on the proposals may be submitted until 13 August 2026.

1.1.4.     SEBI issues revised framework for Transmission of Securities

SEBI has introduced a simplified and standardised framework for transmission of securities to enhance investor convenience and ease of doing business. The revised framework introduces a new Quick Transmission Processing (QTP) category for low value claims up to INR 10,000 (Indian Rupees Ten Thousand only) for securities held in physical form and INR 30,000 (Indian Rupees Thirty Thousand only) for securities held in dematerialised form, while increasing thresholds for transmission under the simplified documentation route to INR 10 lakh (Indian Rupees Ten Lakh only) and INR 30 lakh (Indian Rupees Thirty Lakh only), respectively. Key reforms include removal of the mandatory requirement for probate of a will, introduction of a combined affidavit-cum-No Objection Certificate (NOC), acceptance of QR code-enabled death certificates, and simplified verification of foreign death certificates. The framework also prescribes standardised documentation and mandates processing of transmission requests within 21 calendar days from receipt of complete documents. The revised provisions will come into effect 30 days from the date of the circular.

1.1.5.     SEBI issues Consultation Paper to streamline Online Dispute Resolution Framework

SEBI has issued a consultation paper proposing significant reforms to the Online Dispute Resolution ("ODR") framework for the Indian securities market. Key proposals include shifting the administration of ODR processes from ODR institutions to Market Infrastructure Institutions (MIIs), introducing investor participation in the selection of arbitrators, and allowing unresolved grievances on the SEBI Complaints Redressal System (SCORES) to be directly escalated to the conciliation stage, thereby reducing the dispute resolution timeline. SEBI has also proposed allowing investors in Alternative Investment Funds (AIFs) to opt for alternative dispute resolution mechanisms where contractually agreed and extending investor protection currently available to trust-structured AIFs to AIFs constituted as companies or limited liability partnerships. Public comments on the proposals have been invited until 13 August 2026.

International Financial Services Centres Authority

1.1.6.     IFSCA issues framework on Capital Relief and Prudential Requirements for factoring transactions

The International Financial Services Centres Authority ("IFSCA") has issued a framework prescribing capital relief and prudential requirements for Finance Companies and Finance Units undertaking factoring business in the International Financial Services Centre ("IFSC"). The framework permits capital relief where eligible credit protection, such as credit insurance or guarantees, is obtained from recognised institutions, subject to specified conditions. It also clarifies risk-weight treatment for covered and uncovered exposures, including under two-factor factoring arrangements. Further, the framework prescribes exposure recognition norms, requires factoring exposures to be included within applicable exposure ceilings, and mandates classification of receivables unpaid beyond 90 days as Non-Performing Assets (NPAs), with certain relaxations for entities having assets below USD 150 Million (United State One Hundred Fifty Million). The framework has come into force with immediate effect.  

1.1.7.     IFSCA proposes IFSC Depositor Education and Awareness Fund Scheme, 2026

IFSCA has issued a consultation paper on the draft IFSC Depositor Education and Awareness Fund ("IDEA Fund") Scheme, 2026, proposing a structured framework for managing unclaimed deposits held by Banking Units in the IFSC. Under the proposed scheme, deposits and other eligible amounts remaining unclaimed or inoperative for ten years or more will be transferred to the IDEA Fund, with a mechanism for reimbursement of depositor claims through Banking Units. The scheme also provides for the establishment of a dedicated committee to administer the fund, oversee its investment and audit, and utilise the fund for depositor education, awareness and protection initiatives. Public comments on the draft scheme have been invited until 12 August 2026.

Insurance Regulatory and Development Authority of India (IRDAI)

1.1.8.     IRDAI issues directions on Timely Submission of Documents to Insurance Ombudsman Offices

The Insurance Regulatory and Development Authority of India ("IRDAI") has directed insurers to streamline and expedite submissions to the Offices of the Insurance Ombudsmen (“IOs”) to facilitate timely resolution of policyholder complaints. Insurers are now required to submit Self-Contained Notes (“SCNs”) along with supporting documents within seven days of receiving a notice from an IO, and furnish any additional information or documents sought within three days. IRDAI has further instructed insurers to provide all required information in a single submission rather than in a piecemeal manner and clear all pending requests for SCNs and related documents within 30 days of the circular. The regulator has clarified that where insurers fail to comply, the relevant IO may proceed ex-parte based on available records to ensure adherence to the prescribed 90-day complaint resolution timeline under the Insurance Ombudsman Rules, 2017.   

Monetary Penalty

RBI imposes monetary penalty on:

S. No.	Name of Bank	Amount of Penalty	Contravention
1.	The United Puri-Nimapara Central Co-operative Bank Limited, Odisha	INR 3,00,000/- (Indian Rupees Three Lakh only)	Failure to upload customers' Know Your Customer ("KYC") records to the Central KYC Records Registry ("CKYCR") within the prescribed timeline, resulting in non-compliance with RBI directions on KYC.
2.	Manmad Urban Co-operative Bank Ltd., Manmad, Maharashtra	INR 1,00,000/- (Indian Rupees One Lakh only)	Non-compliance with RBI directions on Loans and Advances to Directors, their Relatives, and Firms/Concerns in which they are Interested, specifically by sanctioning loans to a relative of one of its directors.
3.	Kolhapur District Central Co-operative Bank Ltd., Maharashtra	INR 13,30,000/- (Indian Rupees Thirteen Lakh Thirty Thousand only)	Non-compliance with Section 20(1) read with Section 56 of the Banking Regulation Act, 1949, by sanctioning director-related loans.
4.	The City Co-operative Bank, Hassan, Karnataka	INR 50,000/- (Indian Rupees Fifty Thousand)	Non-compliance with Reserve Bank of India RBI directions on KYC, specifically failure to upload customers' KYC records to the CKYCR within the prescribed timeline.
5.	Mandya District Co-operative Central Bank Ltd., Karnataka	INR 50,000/- (Indian Rupees Fifty Thousand)	Contravention of Section 19 read with Section 56 of the Banking Regulation Act, 1949, by holding shares in other co-operative societies in violation of the statutory provisions.
6.	Sindhudurg District Central Co-operative Bank Ltd., Sindhudurg, Maharashtra	INR 13,30,000/- (Indian Rupees Thirteen Lakh Thirty Thousand only)	Contravention of Section 20(1) read with Section 56 of the Banking Regulation Act, 1949, by sanctioning a director-related loan.
7.	Shri Baria Nagarik Sahakari Bank Ltd., Baria, Gujarat	INR 1,00,000/- (Indian Rupees One Lakh)	Non-compliance with RBI directions on Inspection & Audit Systems in Primary (Urban) Co-operative Banks, specifically failure to conduct internal audit during the period from 1 April 2023 to 31 March 2025.
8.	Rajnandgaon Kendriya Sahakari Bank Maryadit, Rajnandgaon, Chhattisgarh	INR 1,00,000/- (Indian Rupees One Lakh)	Non-compliance with Reserve Bank of India ("RBI") directions on Interest Rate on Deposits, specifically by paying additional interest to certain ineligible depositors.
9.	Arvind Sahakari Bank Ltd., Katol, Maharashtra	INR 11,00,000/- (Indian Rupees Eleven Lakh)	Non-compliance with RBI directions on Housing Finance for Urban Co-operative Banks (UCBs) and Interest Rate on Deposits. The bank (i) sanctioned loans to builders/contractors for acquisition of land, and (ii) paid additional interest to certain ineligible depositors.

2.                Key Asian Markets – Vietnam and Philippines

2.1.            Vietnam  

2.1.1.        SBV Issues Circular on Foreign Exchange Management for Offshore Investment

The State Bank of Vietnam ("SBV") has issued Circular No. 34/2026/TT-NHNN, replacing Circular No. 12/2016/TT-NHNN, to provide an updated framework for foreign exchange management relating to offshore investments. The Circular sets out comprehensive provisions covering currencies for overseas remittances, pre-investment and investment capital accounts, registration and amendment of foreign exchange transactions, procedures for offshore investment projects, repatriation and use of investment profits, and reporting obligations. It also clarifies the responsibilities of investors, licensed credit institutions and SBV authorities, while streamlining registration and notification requirements for offshore investment activities. The Circular will come into effect on 31 July 2026.

2.2.        Philippines

2.2.1.     BSP issues recommendations for managing risks from Frontier Artificial Intelligence Systems

The Bangko Sentral ng Pilipinas ("BSP") has issued Memorandum No. M-2026-034 recommending measures for Bangko Sentral-supervised institutions (“BSIs”) to address emerging cybersecurity risks arising from frontier artificial intelligence ("AI") systems. The BSP highlighted that advanced AI systems may enable the identification of software vulnerabilities and execution of sophisticated cyberattacks with minimal human intervention. To strengthen resilience, BSIs have been advised to enhance attack surface visibility, reinforce foundational security controls, adopt Multi-Factor Authentication (MFA) for critical systems, implement proactive attack surface reduction measures, leverage AI-enabled cybersecurity tools, and strengthen business continuity and incident response capabilities. The BSP further recommended that BSIs develop a formal AI governance framework aligned with the institution's risk profile and in accordance with BSP Memorandum No. M-2026-031.

3.              Trends

3.1.          RBI, SEBI and IRDAI to roll out Common Customer Identification System across financial sector

RBI, SEBI and the IRDAI are jointly implementing Central Know Your Customer 2.0 ("CKYC 2.0"), a common customer identification framework aimed at simplifying access to financial products. Under the proposed system, banks and insurers are expected to begin using CKYC 2.0 from August 2026, with mutual funds and brokerages planned to join later in the year. The framework will enable regulated entities to access verified customer data from a central registry with customer consent, eliminating the need for repeated submission of identification documents. The upgraded system will also introduce data confidence scores and verification indicators to improve data quality, reduce fraud risks and support broader participation in financial products across the sector.

3.2.          NPCI’s proposed UPI Meta framework faces Fintech opposition over competition concerns

Several fintech companies, including Paytm, CRED, Navi, BharatPe, FamPay, Kiwi and Super.money, have raised concerns with the National Payments Corporation of India ("NPCI") regarding its proposed Unified Payments Interface ("UPI") Meta framework, also referred to as UPI Checkout. The proposal would allow customers to save a preferred UPI application or payment handle during onboarding and complete future transactions through one-click authentication, without selecting a payment application for each transaction. Fintech firms have argued that the framework could strengthen the market position of dominant UPI applications, reduce customer choice, hinder competition and innovation, and create barriers for smaller payment providers. The companies have therefore requested wider industry consultation before the framework is implemented, while NPCI continues to evaluate the proposal as part of efforts to enhance the UPI payments experience.

3.3.          RBI Bulletin highlights strongest rate transmission by Foreign Banks in current easing cycle

According RBI Bulletin, foreign banks demonstrated the strongest transmission of policy rate cuts during the current monetary easing cycle between February 2025 and May 2026, passing on reductions in both lending and deposit rates more effectively than public and private sector banks. Foreign banks reduced weighted average lending rates on fresh rupee loans by 1.24 Percentage points, compared with 1.08 Percentage points for private sector banks and 0.66 Per cent (Zero Point Six Six Per cent) for public sector banks. They also recorded the sharpest decline in deposit rates, reflecting a quicker pass-through of RBI's cumulative repo rate reduction of 1.25 Percentage points. The RBI noted that transmission remained particularly strong in sectors linked to external benchmark-based lending rates, highlighting the responsiveness of foreign banks to monetary policy changes.   

4.              Sector Overview

4.1.          India Fintech Sector Records Two Unicorns, Two IPOs and Seven Acquisitions in H1 2026

India’s fintech ecosystem demonstrated continued maturity during the first half of 2026, recording two initial public offerings (“IPOs”), seven acquisitions and two new unicorns, reflecting stronger exit opportunities despite a cautious funding environment. Turtlemint and Kissht completed IPOs with estimated market capitalisations of USD 471 Million (United State Four Hundred Seventy One Million) and USD 305 Million (United State Three Hundred Five Million), respectively, while consolidation accelerated through seven strategic acquisitions, including Oxyzo's acquisition of GoldenPi, Freo's acquisition of IndiaLends, Raise's acquisition of GreenLife Insurance and Rainmatter's acquisition of PensionBox. The report further noted that KreditBee and Square Yards achieved unicorn status, highlighting sustained investor confidence and the growing maturity of India’s fintech landscape.  

5.              Business Updates

5.1.          Bandhan Bank Revises FY27 Return on Assets Guidance Downwards

Bandhan Bank has lowered its financial year 2026-27 (FY27) exit Return on Assets (RoA) guidance to 1.2 Per cent (One Point Two Per cent) to 1.4 Per cent (One Point Four Per cent), from its earlier projection of 1.6 Per cent (One Point Six Per cent) to 1.8 Per cent (One Point Eight Per cent). The bank attributed the revision to elevated funding costs, higher technology-related expenditure and uncertainty arising from global supply chain disruptions and potential energy cost pressures. Management noted that investments in technology infrastructure and loan origination systems have increased the operating expenses-to-assets ratio to 4.3 Per cent (Four Point Three Per cent), above the earlier guidance of 4.2 Per cent (Four Point Two Per cent). The revised outlook triggered a sharp decline in the bank’s share price despite reporting improved profitability, with the bank maintaining that its long-term strategic objectives remain unchanged.

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