Banking & Finance Digest June 15, 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 nominates Sanjay Lohiya to Central Board

The Reserve Bank of India (“RBI”) has announced that the Central Government has nominated Shri Sanjay Lohiya, Secretary, Department of Financial Services, Ministry of Finance, as a Director on the RBI Central Board, replacing Shri Nagaraju Maddirala. The appointment is effective from June 11, 2026 and will continue until further orders. This nomination strengthens representation from the Government of India in the central bank’s decision-making body and reflects ongoing coordination between fiscal and monetary authorities.

1.1.2.      RBI invites comments on SA-CCR Amendment Directions

The RBI has issued draft Amendment Directions relating to the Standardised Approach for Counterparty Credit Risk (“SA-CCR”) and invited public comments. The proposed framework replaces the Current Exposure Method (“CEM”) and reflects developments such as the Bilateral Netting of Qualified Financial Contracts Act, 2020, updated margining regulations, and clarifications issued by the Basel Committee on Banking Supervision. Key changes include expanded scope of counterparty credit risk, refined treatment of margin agreements and netting sets, guidance for clearing member transactions, and inclusion of disclosure templates. Feedback from regulated entities and stakeholders is invited until July 1, 2026.

1.1.3.      RBI invites comments on governance harmonisation across regulated entities

The RBI has released draft Amendment Directions aimed at harmonising and consolidating instructions on control and assurance functions across a wide range of regulated entities, including commercial banks, non-banking financial companies, co-operative banks, and financial institutions. The proposals cover governance frameworks and seek to create consistency in oversight, risk management, and compliance structures. Stakeholders may submit comments through the ‘Connect 2 Regulate’ portal or via email by July 9, 2026. This initiative is expected to streamline regulatory expectations and enhance governance standards across the financial sector.

1.1.4.      RBI issues final directions on lending to REITs and InvITs

The RBI has issued final Amendment Directions governing lending to Real Estate Investment Trusts (“REITs”) and Infrastructure Investment Trusts (“InvITs”). The framework permits commercial banks to extend finance to REITs subject to prudential safeguards, including exposure limits, while harmonising existing guidelines for InvITs across banks, small finance banks, and all India financial institutions. The directions incorporate stakeholder feedback received on earlier draft proposals. The RBI has also clarified that certain proposed amendments relating to financial statement disclosures will not be implemented at present in light of upcoming changes to capital adequacy norms effective April 1, 2027.

1.1.5.      RBI cancels CoR of 13 NBFCs upon surrender

The RBI has cancelled the Certificate of Registration (“CoR”) of thirteen Non-Banking Financial Companies (“NBFCs”) following their voluntary surrender of registration. The cancellations have been carried out under Section 45-IA(6) of the Reserve Bank of India Act, 1934. The reasons include exit from non-banking financial institution business, classification as entities not requiring registration (such as certain core investment companies), and cessation of legal existence due to amalgamation, merger, or dissolution. These entities are no longer permitted to carry on NBFC activities.

1.1.6.      RBI cancels CoR of 135 NBFCs

The RBI has cancelled the CoR of 135 NBFCs under the Reserve Bank of India Act, 1934, rendering them ineligible to continue non-banking financial institution operations. The cancellations span companies across multiple states and were effected through orders issued between April 6, 2026 and May 26, 2026. Consequently, these entities are prohibited from undertaking NBFC business activities as defined under the Act. This action underscores RBI’s continued focus on regulatory compliance and cleaning up inactive or non-compliant entities within the financial system.

Securities and Exchange Board of India (SEBI)

1.1.7.      SEBI extends timelines for merchant banker compliance

The Securities and Exchange Board of India (“SEBI”) has extended timelines for compliance with key provisions under the SEBI (Merchant Bankers) (Amendment) Regulations, 2025 (“MB Amendment Regulations”) and the related circular dated January 2, 2026. The extension has been granted in response to industry representations citing operational challenges in implementing the Separate Business Unit (“SBU”) framework and aligning net worth requirements with financial year timelines. Key deadlines, including transfer of activities to SBUs and compliance with net worth and liquid net worth requirements, have been deferred to March 31, 2027 and March 31, 2028 (phase-wise), while certain operational requirements have been extended to December 31, 2026.

1.1.8.      SEBI proposes harmonisation of price bands for multi-listed scrips

SEBI has issued a consultation paper proposing harmonisation of the base price used for call auction in the pre-open session and for determining price bands for scrips listed on multiple stock exchanges. The proposal addresses concerns of price divergence arising when a scrip is not traded on one or more exchanges, leading to inconsistencies in price bands. SEBI has suggested mechanisms such as adopting the closing price of the exchange with trading activity or highest trading volume to ensure uniformity. Public comments have been invited until July 2, 2026, with the objective of improving market efficiency and preventing distortions in price discovery.

1.1.9.      SEBI proposes rationalisation of AMC remuneration disclosures

SEBI has released a consultation paper proposing rationalisation of disclosure requirements relating to executive remuneration by Asset Management Companies (“AMCs”). The proposals aim to strike a balance between transparency and operational practicality by shifting from individual, name-wise disclosures to consolidated disclosures of remuneration, including total remuneration and number of employees. Additionally, SEBI has suggested that scheme-level remuneration of fund managers may be disclosed only upon request by investors, limited to schemes in which they are invested. Public comments on the proposals are invited until June 30, 2026.

Monetary Penalties

1.1.10.   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.	Amravati Merchants Sahakari Bank Ltd., Amravati, Maharashtra	INR 50,000 (Indian Rupees Fifty Thousand only)	The bank broke rules about giving loans to its own directors. This fine is purely for rule-breaking and will not affect the bank's other deals with its customers.
2.	Karnal Central Cooperative Bank Limited, Haryana	INR 3,00,000 (Indian Rupees Three Lakh only)	This fine stems from lapses in ‘Know Your Customer’ (KYC) rules, specifically failing to regularly review customer risk levels and lacking software to track suspicious transactions.
3.	IIFL Samasta Finance Limited	INR 3,90,000 (Indian Rupees Three Lakh and Ninety Thousand only)	For violating KYC and fraud risk management rules. An inspection revealed the company lacked software to track suspicious transactions and failed to correctly report frauds.
4.	True Credits Private Limited	INR 3,10,000 (Indian Rupees Three Lakh Ten Thousand only)	For failing to adhere to Know Your Customer (KYC) directions regarding Enhanced Due Diligence (EDD) for customers onboarded via non-face-to-face methods. The penalty follows a statutory inspection regarding the company's financial position as of March 31, 2025, and pertains to non-compliance rather than the validity of customer transactions.
5.	Repco Home Finance Limited	INR 70,000 (Indian Rupees Seventy Thousand only)	This fine resulted from the company failing to disclose its risk-grading approach and the reasons for varied interest rates in its application forms and sanction letters, violating fair practice rules.

2.           Key Asian Markets - Philippines and Indonesia

2.1.           Philippines

2.1.1.   Philippines’ External Debt Declines in Q1 2026; Debt Indicators Remain Strong

BSP has reported that the Philippines’ outstanding external debt declined to USD 147.35 billion (United States Dollars One Hundred Forty-Seven Billion Three Hundred Fifty Million only) as of end-March 2026 from USD 147.65 billion (United States Dollars One Hundred Forty-Seven Billion Six Hundred Fifty Million only) in the previous quarter. Key debt indicators remained sound, with external debt as a share of GDP improving to 30.0 per cent (Thirty point Zero per cent) from 30.3 per cent (Thirty point Three per cent), while short-term external debt based on remaining maturity declined to USD 25.50 billion (United States Dollars Twenty-Five Billion Five Hundred Million only). Gross international reserves stood at USD 106.64 billion (United States Dollars One Hundred Six Billion Six Hundred Forty Million only), equivalent to 4.18 (Four point One Eight) times short-term external debt, indicating strong reserve adequacy and liquidity.

2.1.2.   Philippines Records USD 1.7 Billion FDI in Q1 2026

The Bangko Sentral ng Pilipinas (BSP) has reported that year-to-date foreign direct investment (FDI) remained at USD 1.7 billion (United States Dollars One Billion Seven Hundred Million only) during January–March 2026, reflecting continued foreign investor confidence in the country. Foreign equity capital and reinvested earnings remained broadly steady during the period, with equity capital placements primarily originating from Japan, the United States, and Singapore. These investments were largely directed towards the manufacturing, financial and insurance, and real estate sectors. The sustained level of foreign investment highlights continued non-resident participation in the Philippine economy and support for key industries.

2.2.           Indonesia

2.2.1.      Bank Indonesia and People’s Bank of China Deepen Financial Cooperation

Bank Indonesia (BI) and the People’s Bank of China (PBOC) have strengthened bilateral monetary and financial cooperation following a high-level meeting held on June 11, 2026, in Shanghai. The central banks agreed to explore increasing the size of their bilateral currency swap arrangement, enhance the use of local currencies in cross-border transactions, and strengthen payment connectivity between the two countries. Key outcomes included the signing of a Memorandum of Understanding on Local Currency Transactions covering Indonesia and Hong Kong, the launch of Indonesia–China cross-border QR payment connectivity, and the designation of Bank Mandiri as a direct participant in China’s Cross-border Interbank Payment System (CIPS). BI and the PBOC also signed a Memorandum of Understanding for the establishment of a Renminbi clearing arrangement in Indonesia to support trade, investment, and financial activities. The initiatives are intended to improve transaction efficiency, deepen regional financial integration, strengthen payment infrastructure resilience, and support economic and financial stability in both countries.

2.2.2.      Indonesia’s Official Reserve Assets Remain Strong in May 2026

Bank Indonesia has reported that Indonesia’s official reserve assets stood at USD 144.9 billion (United States Dollars One Hundred Forty-Four Billion Nine Hundred Million only) at the end of May 2026, compared to USD 146.2 billion (United States Dollars One Hundred Forty-Six Billion Two Hundred Million only) at the end of April 2026. The decline reflected government external debt repayments and Bank Indonesia’s Rupiah stabilisation measures amid persistent global financial market uncertainty and seasonal domestic demand for foreign exchange, partially offset by proceeds from government global bond issuances and tax and services receipts. The reserve assets position was equivalent to 5.6 months (Five point Six months) of imports, or 5.5 months (Five point Five months) of imports and government external debt servicing, remaining well above the international adequacy standard of approximately three months of imports. Bank Indonesia stated that the reserve level remains sufficient to support external sector resilience and maintain macroeconomic and financial system stability, while continued foreign capital inflows and positive investor sentiment are expected to further strengthen external resilience and support sustainable economic growth.

3.               Trends

3.1.           Government of India seeks Rural Credit Expansion via Flagship Schemes

The Government of India (“GoI”) is working with banks to strengthen rural credit delivery by integrating flagship schemes with digital lending systems and expanding the reach of Regional Rural Banks (“RRBs”). As part of the initiative, RRBs will seek to grow their customer base beyond the current 10 per cent (ten per cent) of total depositors and diversify into investment credit, particularly in agricultural hotspot regions. The Grameen Credit Score (“GCS”) has now been fully integrated with the JanSamarth portal to accelerate loan processing, while banks have been advised to enhance their business correspondent networks to improve last mile credit access. 

3.2.           Bank Credit Growth Accelerates Amid Rising Bond Yields

Bank credit grew 17.4 per cent (seventeen point four per cent) year‑on‑year as of 31 May 2026, marking the strongest expansion in nearly two years as rising bond market yields prompted corporates to shift from market borrowing to bank loans. Latest data show credit rising to INR 220 lakh crore (Indian Rupees Two Hundred Twenty Lakh Crore only), while deposit growth continued to lag at 12.1 per cent (twelve point one per cent), with total deposits reaching INR 265 lakh crore (Indian Rupees Two Hundred Sixty-Five Lakh Crore only). On a fortnightly basis, deposits increased by INR 3.14 lakh crore (Indian Rupees Three Lakh Fourteen Thousand Crore only) or 1.2 per cent (one point two per cent), whereas credit rose by INR 3.29 lakh crore (Indian Rupees Three Lakh Twenty-Nine Thousand Crore only) or 1.5 per cent (one point five per cent).  

4.               Sector Overview

4.1.           Steady Deposit Growth Led by Corporate and Financial Deposits

Bank deposit growth remained steady at 11 per cent (eleven per cent) year‑on‑year in the fourth quarter of FY26, supported primarily by an increase in corporate deposits, which rose 16 per cent (sixteen per cent), and financial deposits, which surged 27 per cent (twenty-seven per cent). Private sector banks led the momentum with 13 per cent (thirteen per cent) growth compared with 10 per cent (ten per cent) for public sector banks (“PSBs”), which also lost around 50 basis points (fifty basis points) of deposit market share during the quarter. Savings and term deposits showed modest recovery, growing 10 per cent (ten per cent) and 12 per cent (twelve per cent) respectively, with nearly 80 per cent (eighty per cent) of term deposits mobilised from metro and urban centres. The report noted rising reliance on bulk and wholesale deposits as lenders face persistent competition for liabilities, with deposit growth continuing to lag credit demand and thereby pushing up funding costs and margin pressures. Kotak Institutional Equities cautioned that while wholesale deposits may ease short‑term funding challenges, they could increase liquidity coverage ratio risks, emphasising the need for banks to strengthen their retail deposit franchise to maintain margin stability over the medium term.

4.2.           Banks Seeking RBI Clarity on Guarantee Rule

Indian banks are urging the Reserve Bank of India (“RBI”) to clarify a guarantee provision under its new Foreign Currency Non-Resident (“FCNR”) deposit scheme, which was introduced on 5 June 2026 to shore up the rupee’s value. Specifically, lenders want the policy wording amended to allow them to issue standby letters of credit (“SBLCs”) for individual Non-Resident Indians (“NRIs”) borrowing offshore — a mechanism that enables multiple leveraging and was broadly used in 2013 to attract FCNR deposits. Under the existing rule, SBLCs were permitted only for funds “raised by any entity” and not individuals, hindering diaspora participation. Banks have now requested an RBI “frequently asked questions” clarification to confirm that SBLCs can be issued for individual NRIs — a move seen as critical to achieving significant deposit inflows via leveraged FCNR deposits and countering rupee depreciation.

5.               Business Updates

5.1.           REC Limited Power Finance Corporation Merger Receives Presidential Approval

The proposed merger of REC Limited with Power Finance Corporation (“PFC”) has received approval from the President of India, marking a significant step in the consolidation of public sector financial institutions. Upon completion of the merger, all assets and liabilities of REC will be transferred to PFC in accordance with Sections 230 to 232 of the Companies Act, 2013. The transaction is expected to create a larger and more efficient financing platform for India's power and infrastructure sectors.

5.2.           Multiple Companies Receive SEBI Approval for Proposed IPOs

SEBI has granted approval to several companies, including Prism, Truhome Finance, Veegaland Developers, Advanta Enterprises and Mehta Hitech Industries, to proceed with their proposed initial public offerings. Among the approved issues, Truhome Finance plans a fresh issue and offer for sale aggregating up to INR 3,000 Crore (Indian Rupees Three Thousand Crore only). The approvals indicate continued activity in India's primary capital markets despite broader market volatility.

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