Banking & Finance Digest July 06, 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 (RBI)

1.1.1.     RBI revised application framework for voluntary surrender of NBFC registrations 

RBI has revised the application form and indicative checklist for voluntary surrender of Certificates of Registration (“CoR”) by Non-Banking Financial Companies (“NBFCs”), including Housing Finance Companies (“HFCs”), seeking cancellation of their registration. The revisions follow the issuance of the Reserve Bank of India (Non-Banking Financial Companies – Registration, Exemptions and Framework for Scale Based Regulation) Amendment Directions, 2026, particularly in relation to Unregistered Type-I NBFCs. Eligible NBFCs and HFCs are required to submit the updated application form along with the prescribed supporting documents through the PRAVAAH portal. RBI has clarified that submission of an application does not automatically result in cancellation of the CoR. Entities must continue to comply with all applicable regulatory requirements and submit prescribed returns until RBI formally approves the cancellation and communicates its decision.

Securities and Exchange Board of India (SEBI)

1.1.2. SEBI proposes framework to standardise AIF investor consent and conflicted transactions

The Securities and Exchange Board of India (“SEBI”) has issued a consultation paper proposing reforms to the investor consent framework under the SEBI (Alternative Investment Funds) Regulations, 2012. SEBI has proposed standardising the process for obtaining investor consent, allowing Alternative Investment Funds (AIFs) to adopt one of three consent methodologies—deemed consent, present and voting, or express voting—for fund-level decisions, subject to clear disclosures and uniform application. SEBI has also proposed harmonising approval thresholds by prescribing a uniform requirement of 75 per cent (Seventy-Five Per cent) investor approval by value across various matters requiring unitholder consent. Further, to strengthen oversight of conflict of interest situations, SEBI has proposed replacing the term ‘associate’ with ‘related party’ for specified conflicted transactions and adopting a broader related party definition aligned with the Companies Act, 2013.  

International Financial Services Centres Authority (IFSCA)

1.1.3.     IFSCA clarifies reporting requirements for FDI received by IFSC regulated entities 

RBI, in consultation with the International Financial Services Centres Authority (“IFSCA”), has revised certain Frequently Asked Questions (“FAQs”) relating to the Annual Return on Foreign Liabilities and Assets (“FLA”) under the Foreign Exchange Management Act, 1999 (FEMA). The revisions clarify the reporting treatment of Foreign Direct Investment (“FDI”) received by regulated entities in International Financial Services Centres (“IFSCs”). The updated FAQs clarify that, although FDI norms do not apply to investments made in regulated entities in IFSCs, data relating to such investments are required for compilation of India’s balance of payments statistics. Accordingly, regulated entities in IFSCs will not be required to file FLA returns with RBI. Instead, IFSCA will issue separate instructions for submission of the necessary data required for statistical reporting purposes.  

1.1.4.      IFSCA amends internet banking compliance framework for IFSC Banking Units

IFSCA has amended its circular on internet banking services provided by IFSC Banking Units (“IBUs”), extending the timeline for compliance with prescribed requirements. IBUs that commenced operations prior to the issuance of the earlier circular must now ensure compliance by July 31, 2026. Non-compliant IBUs will be prohibited from onboarding new customers for the relevant liability products from August 1, 2026.  IFSCA has also clarified that the term ‘all linked accounts’ includes all customer accounts, including deposit and loan accounts, while ‘whitelisting’ refers to a feature allowing customers to maintain a predefined list of approved beneficiaries. 

Insurance Regulatory and Development Authority of India (IRDAI)

1.1.5. IRDAI extended transitional arrangements for annual fee payment and registration certificates

The Insurance Regulatory and Development Authority of India (“IRDAI”) has extended the transitional arrangements relating to payment of annual fees and issuance of CoR for intermediaries, surveyors, and loss assessors. The arrangements, originally applicable until June 30, 2026, will now remain in force until August 31, 2026, or the date of notification of the relevant amended regulations, whichever is earlier. The extension has been granted pending notification of the amended regulations under the Insurance Act, 1938, as amended by the Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Act, 2025. IRDAI has clarified that all other provisions of its earlier circulars dated March 16, 2026 and April 7, 2026 will continue to remain applicable without any change.

Monetary Penalties

1.1.6. RBI imposes penalties on five banks for regulatory non-compliance

RBI has imposed monetary penalties on the following institutions:

Sr. No.	Name of Bank	Amount of Penalty	Grounds for Penalty
1.	Nirmal Urban Co-operative Bank Limited, Nagpur, Maharashtra	INR 1,00,000/- (Indian Rupees One Lakh only)	Non-compliance with RBI directions on borrower exposure limits, priority sector lending targets for Urban Co-operative Banks and operational instructions under the Supervisory Action Framework.
2.	The N.E. & E.C. Railway Employees’ Multi-State Primary Co-operative Bank Limited, Gorakhpur, Uttar Pradesh	INR 1,05,000/- (Indian Rupees One Lakh Five Thousand only)	Contravention of provisions relating to the Depositor Education and Awareness Fund and non-compliance with RBI directions on membership of Credit Information Companies (CICs) by co-operative banks.
3.	Dharmavir Sambhaji Urban Cooperative Bank Limited, Pune, Maharashtra	INR 10,000 (Indian Rupees Ten Thousand only)	Non-compliance with RBI directions on Know Your Customer (“KYC”). The bank failed to upload customers’ KYC records to the Central KYC Records Registry (CKYCR) within the prescribed timeline.
4.	Sri Bharathi Co-operative Urban Bank Limited, Hyderabad, Telangana	INR 1,50,000/- Lakh (Indian Rupees One Lakh Fifty Thousand only)	Non-compliance with RBI directions on loans and advances to directors and related entities, and Small Value Loans for Primary (Urban) Co-operative Banks.
5.	Bank of Baroda	INR 63,60,000/- (Indian Rupees Sixty-Three Lakh Sixty Thousand only)	For non-compliance with RBI directions relating to the Fair Practices Code for Lenders and KYC requirements.

2.               Key Asian Markets - Vietnam and Bangladesh

2.1.           Vietnam

2.2.1.      SBV issues Circular No. 27/2026/TT‑NHNN amending audit requirements for credit institutions

The State Bank of Vietnam (“SBV”) has issued Circular No. 27/2026/TT‑NHNN amending and supplementing provisions relating to independent audits of commercial banks, non‑bank credit institutions, microfinance institutions, and foreign bank branches. The circular introduces revised procedural requirements, including mandatory notification to SBV within 30 days of appointing an independent audit firm and submission of audited financial statements within 90 days from the end of the financial year. It also clarifies the roles of SBV departments and regional branches in supervising, receiving, and evaluating audit outcomes.

2.2.2.      SBV issues amended regulatory framework to Circular No. 39/2016/TT NHNN on lending activities

SBV has issued a circular amending and supplementing provisions of Circular No. 39/2016/TT NHNN, which governs lending activities of credit institutions and foreign bank branches, with a focus on strengthening regulatory oversight and clarity. The amendments introduce refined definitions and lending parameters, including revised thresholds for small value loans and specific provisions for lending under restructuring plans of credit institutions. The framework also continues the policy direction of tightening lending practices by clarifying permissible loan purposes and reinforcing restrictions on high risk or non-productive credit exposures.

2.2.3.      SBV issues Circular No. 26/2026/TT NHNN on regulatory framework for banking operations

SBV has issued Circular No. 26/2026/TT NHNN on June 25, 2026, introducing amendments to the regulatory framework applicable to credit institutions and foreign bank branches, with a focus on strengthening governance, compliance, and operational standards. The circular forms part of a broader regulatory overhaul in Vietnam’s banking sector, updating existing provisions to align with the Law on Credit Institutions and evolving supervisory requirements. It is aimed at enhancing transparency, improving risk management, and ensuring consistency in regulatory practices across banks and financial institutions.

2.2.           Bangladesh

2.2.1.     BB revises Merchant Discount Rate framework for NPSB, POS and Bangla QR transactions

Bangladesh Bank (“BB”) has issued revised guidelines relating to Merchant Discount Rate (“MDR”) charges applicable to National Payment Switch Bangladesh (NPSB) transactions, including Point of Sale (POS), Bangla QR, and e commerce payments. The framework covers transactions carried out through bank accounts, debit cards, prepaid cards, credit cards, and Mobile Financial Services (MFS) channels. The revised measures are intended to standardise MDR arrangements across digital payment channels and promote wider adoption of electronic payment mechanisms. By streamlining fee structures for merchants and payment service providers, the initiative seeks to strengthen Bangladesh’s digital payments ecosystem and support the continued growth of cashless transactions.

2.2.2.     BB revises reporting requirements for banks’ investments in open end mutual funds

BB has amended its reporting framework relating to investments by SCB in non-listed securities, specifically open-end mutual funds. The central bank has replaced the existing reporting template prescribed under DOS Circular No. 04 of 2019 with a revised format and directed all SCBs to submit disclosures in accordance with the updated template from the quarter ended June 2026. The revised reporting format requires detailed disclosure of investments in open end mutual funds, including the number of units purchased, cost of investment, proportion of approved units acquired, and investment exposure relative to the bank’s capital components. All other requirements and instructions under DOS Circular No. 04 of 2019 remain unchanged.

3.             Trends

3.1.        NPCI and J.P. Morgan Payments partnered to enhance cross-border UPI payments

The National Payments Corporation of India (NPCI) has partnered with J.P. Morgan Payments to enable real-time foreign exchange (“FX”) conversion and settlement for cross-border transactions conducted through the Unified Payments Interface (“UPI”). The integration will connect J.P. Morgan’s FX platform and application programming interface (API) capabilities with UPI infrastructure, facilitating transparent exchange rates and real-time settlement across multiple currencies.

4.               Business Updates

4.1.           Zerodha to enter investment banking business

Zerodha has applied to the SEBI for a Category I Merchant Banker licence, marking its proposed entry into the investment banking sector. The application is currently under SEBI’s review and, if approved, would enable Zerodha to manage initial public offerings (IPOs), advise companies on fund raising transactions, and provide a range of merchant banking services. 

5.              Sector Overview

5.1.          PSBs raise term deposit rates to regain deposit market share

Public Sector Banks (“PSBs”) have increased fresh term deposit rates in an effort to reverse a prolonged decline in their share of the deposit market, even as private sector banks continue to reduce deposit rates. RBI data shows that the weighted average fresh term deposit rate for PSBs increased to 6.33 per cent in May 2026 from 6.18 per cent in April 2026, while private sector banks reduced rates to 5.96 per cent. PSBs’ share of system deposits has fallen significantly over the past decade, from 76 per cent in 2013–14 to 57 per cent in March 2026, prompting banks to prioritise deposit mobilisation despite potential pressure on near-term margins. The move comes amid continued growth in credit demand, with the banking system’s credit-deposit ratio remaining elevated at 82.5 per cent and deposit growth continuing to lag credit expansion.

5.2.        RBI data shows rise in India’s external debt and debt-to-GDP ratio

India’s external debt increased by USD 26.3 billion to USD 762.8 billion at the end of March 2026, resulting in the external debt-to-Gross Domestic Product (“GDP”) ratio rising to 20.8 per cent from 19.8 per cent a year earlier. According to RBI data, the appreciation of the United States dollar significantly influenced the increase, with valuation effects accounting for USD 24.6 billion. Long-term debt rose to USD 613.5 billion, while the share of short-term debt increased to 19.6 per cent of total external debt. United States dollar-denominated liabilities continued to account for the largest share of India’s external debt at 55.5 per cent. Despite the increase in debt, debt servicing improved, with principal and interest payments declining to 5.8 per cent of current receipts from 6.6 per cent 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