Banking & Finance Digest May 11, 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. Reserve Bank of India (RBI)

1.1.1. RBI issues Foreign Exchange Management (Authorised Persons) Regulations, 2026

The Reserve Bank of India (“RBI”) has issued the Foreign Exchange Management (Authorised Persons) Regulations, 2026, with the objective of rationalising the authorisation and renewal framework for authorised persons and extending the principal-agent model for delivery of foreign exchange facilities, while maintaining appropriate regulatory checks and balances. The Regulations have been finalised after considering stakeholder feedback received on the draft framework published on December 26, 2023. RBI has stated that the major comments received and its responses thereto have been set out in the Annex. The revised framework is aimed at streamlining regulatory processes, improving operational efficiency and enhancing access to foreign exchange services through a more structured and flexible authorisation regime.

1.1.2. RBI issues draft Prudential Norms on Specified Non-financial Assets Directions

RBI has issued the draft ‘Prudential Norms on Specified Non-financial Assets (SNFA) Directions’ to provide clarity on the prudential treatment of non-financial assets acquired by regulated entities (REs) as part of recovery proceedings in respect of non-performing exposures. The draft Directions permit REs to acquire specified non-financial assets in lieu of full or partial extinguishment of borrower claims where other recovery options have been explored and found unviable. In cases of partial extinguishment, the residual exposure shall be treated as restructured and subject to applicable prudential norms. The framework, inter alia, prescribes valuation principles for SNFAs, mandates disclosure of such assets in balance sheets, imposes a maximum holding period of seven years and prohibits sale of such assets back to the borrower or related parties. RBI has invited comments and stakeholder feedback on the draft Directions by May 26, 2026.

1.1.3. RBI reiterates caution against unauthorised campaigns promising loan waivers

RBI has reiterated its caution to the public against false and misleading campaigns promising loan waivers, referring to its earlier press release dated December 11, 2023. RBI noted with concern the continued circulation of such campaigns through various media channels and direct outreach by certain individuals and entities. The campaigns, inter alia, involve false assurances regarding waiver of outstanding dues owed to banks and Non-Banking Financial Companies (NBFCs), issuance of purported ‘debt waiver certificates’ and collection of fees under various pretexts from members of the public. RBI has clarified that such claims are misleading and may attract legal action under applicable laws. RBI has advised members of the public to avoid associating with such individuals or entities and to directly approach their respective lending institutions for any information relating to their loans. The public has also been encouraged to report such misleading campaigns to appropriate law enforcement authorities.

Securities and Exchange Board of India (SEBI)

1.1.4. SEBI discontinues Investor Risk Reduction Access (IRRA) platform

The Securities and Exchange Board of India (“SEBI”) has discontinued the Investor Risk Reduction Access (“IRRA”) platform with effect from May 07, 2026. IRRA was introduced in December 2022 as an alternative trading access mechanism for stockbrokers during service disruptions and was operationalised from October 01, 2023. SEBI noted that, over time, several technology‑driven measures such as robust Business Continuity Plan and Disaster Recovery (“BCP‑DR”) norms, enhanced cyber security frameworks, Market Security Operations Centre (“M‑SoC”) and strengthened technical glitch frameworks have significantly improved brokers’ operational resilience. In addition, the Contingency Pool Trading facility provided by stock exchanges has been effectively used during disruptions. Given that IRRA was never utilised and had become structurally redundant, SEBI accepted stakeholder feedback and decided to discontinue the platform, while advising stock exchanges to further review and strengthen the Contingency Pool Trading framework.

1.1.5. SEBI specifies framework for ‘Significant Indices’ under IP Regulations

SEBI has issued a circular specifying the criteria and list of ‘Significant Indices’ under the SEBI (Index Providers) Regulations, 2024 (“IP Regulations”). An index (including an index of indices) based on listed securities will be treated as a ‘Significant Index’ if the daily average cumulative Assets Under Management (“AUM”) tracking or benchmarking such index across mutual fund schemes exceeds INR 20,000 crore (Indian Rupees Twenty Thousand Crore only) for each of the preceding six months, ending June 30 and December 31. Once classified, an index will continue to remain ‘significant’ unless the AUM falls below the threshold for a continuous period of three years. SEBI has also notified a detailed list of such indices. Index Providers administering these indices are required to apply for registration with SEBI within six months, subject to specified exemptions for indices regulated by the RBI. The circular further clarifies governance, separation of activities, and applicability of grievance redressal mechanisms for Significant Indices, and has come into force with immediate effect.

1.1.6. SEBI issues consultation paper on extending early pay‑in benefit to options in commodity derivatives

SEBI has issued a consultation paper proposing to extend the benefit of early pay‑in, currently available only for futures contracts, to options contracts in the commodity derivatives segment. Early pay‑in allows market participants to deposit certified goods in accredited warehouses against derivative positions, enabling clearing corporations, based on risk perception, to provide margin exemptions other than mark‑to‑market margins. The proposal follows stakeholder representations and recommendations of the Working Group and the Commodity Derivatives Advisory Committee (“CDAC”), which were broadly in agreement with extending this benefit to options contracts. SEBI has invited public comments on the draft circular by May 26, 2026, after which the revised framework will be finalised.

1.1.7. SEBI issues advisory on AI‑based vulnerability detection tools

SEBI has issued an advisory addressing emerging cyber security risks arising from advanced Artificial Intelligence (“AI”) based vulnerability detection tools, such as Mythos. SEBI observed that while such tools can rapidly identify system vulnerabilities at scale, they may also heighten risks relating to data confidentiality, system integrity, and reliability of outputs if misused. Considering the interconnected nature of the securities market ecosystem, SEBI emphasised the need for coordinated vulnerability management and information sharing among Regulated Entities. Accordingly, SEBI has constituted a task force named cyber‑suraksha.ai to examine AI‑related cyber risks, share threat intelligence, review third‑party vendors’ cybersecurity posture, and facilitate rapid reporting of cyber incidents. The advisory, along with detailed recommendations in the annexure, sets out measures relating to patch management, vulnerability assessments, Security Operations Centre (“SOC”) monitoring, API security, risk assessment, and system hardening, and is to be read in conjunction with SEBI’s existing Cyber Security and Cyber Resilience Framework.

International Financial Services Centres Authority (IFSCA)

1.1.8. IFSCA Issues Circular on Consumer Charter for Regulated Entities

IFSCA has issued a circular encouraging regulated entities dealing with retail consumers in the IFSC to develop and publish Consumer Charters on their GIFT IFSC entity websites or provide links redirecting consumers to dedicated webpages of group entities. The Consumer Charter published by IFSCA sets out the authority’s vision and mission for consumer protection and outlines the rights and responsibilities of financial consumers. Regulated entities have been advised to include consumer-centric provisions such as vision, mission, rights, responsibilities, and key do’s and don’ts based on the nature of their business, operational model, product complexity, and delivery channels, or alternatively adopt the IFSCA Consumer Charter with suitable modifications. The circular has been issued to strengthen consumer protection, ensure market integrity, and promote fair, transparent, and responsible conduct across financial services in the IFSC.

Monetary Penalties

1.1.9.  RBI imposes penalties on 6 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	Mogaveera Co-operative Bank Ltd., Mumbai	INR 20,000/-	For non-compliance with certain directions issued by RBI on ‘Prudential Norms on Capital Adequacy – Primary (Urban) Cooperative Banks (UCBs)’.
2	Pandharpur Urban Co-operative Bank Ltd., Pandharpur, Maharashtra	INR 2,00,000/-	For non-compliance with certain directions issued by RBI on ‘Asset classification and treatment of accounts as Non-Performing Assets’
3	Youth Development Co-operative Bank Ltd., Kolhapur, Maharashtra	INR 40,000/-	For non-compliance with certain directions issued by RBI on ‘Inoperative Accounts / Unclaimed Deposits in Banks – Revised Instructions' and ‘Know Your Customer’.
4	Himachal Pradesh Gramin Bank, Mandi	INR 5,00,000/-	For contravention of the provisions of Section 26A read with Section 51(1) of the Banking Regulation Act, 1949 (BR Act) and non-compliance with certain directions issued by RBI on ‘Interest Rate on Deposits’.
5	Yes Bank Limited	INR 31,80,000/-	For non-compliance with certain provisions of directions issued by RBI on ‘Know Your Customer’. The bank failed to put in place a system of using KYC Identifier assigned by Central KYC Records Registry for the purpose of establishing an account-based relationship with customers.
6	Hinduja Housing Finance Limited	INR 1,80,000/-	For violating governance norms by changing over 30 per cent (thirty per cent) of its directors without obtaining prior written approval from the RBI, following an inspection as of March 31, 2025.

2.  Key Asian Markets - Philippines and Indonesia

2.1. Philippines

2.1.1. Philippines’ Foreign Reserves Stand at USD 104.1 Billion in April 2026

Bangko Sentral ng Pilipinas (“BSP”) reported that the country’s Gross International Reserves (GIR) settled at USD 104.1 billion (United States Dollars One Hundred Four Billion One Hundred Million only) as of end-April 2026, based on preliminary data. The reserve level was stated to provide an external liquidity buffer equivalent to 6.9 months’ worth of imports of goods and payments of services and primary income, and covered approximately 3.8 times the country’s short-term external debt based on residual maturity. The BSP noted that the GIR comprises foreign-denominated securities, foreign exchange and other reserve assets, including gold, and is intended to support dollar liquidity requirements, manage currency volatility and provide resilience against external economic shocks.

2.1.2. Philippines’ financial system remains resilient in H2 2025

The Philippine financial system remained resilient in H2 2025, with banks and BSP-supervised non-bank financial institutions continuing to support economic activity. Total banking sector assets grew 8.9 per cent (Eight point Nine per cent) year-on-year to PHP 29.9 trillion (Philippine Pesos Twenty Nine Trillion Nine Hundred Billion only) as of December 2025, while deposits increased 7.4 per cent (Seven point Four per cent) to PHP 21.9 trillion (Philippine Pesos Twenty One Trillion Nine Hundred Billion only) and bank lending expanded 11.7 per cent (Eleven point Seven per cent) to PHP 17.1 trillion (Philippine Pesos Seventeen Trillion One Hundred Billion only). Asset quality remained manageable, with the non-performing loan ratio at 3.1 per cent (Three point One per cent) and loan-loss coverage at 97.2 per cent (Ninety-Seven point Two per cent). Capital and liquidity indicators remained above regulatory minimums, with solo and consolidated capital adequacy ratios at 15.8 per cent (Fifteen point Eight per cent) and 16.2 per cent (Sixteen point Two per cent), respectively, while the BSP highlighted ongoing reforms to strengthen governance, supervisory capabilities, digital finance, and inclusive finance initiatives.

2.2. Indonesia

2.2.1. Indonesia CPI Inflation Remains Within Target Range in April 2026

Bank Indonesia has reported that Consumer Price Index (CPI) inflation in April 2026 remained within the 2.5 per cent (Two point Five per cent) ±1 per cent (One per cent) target corridor, with monthly inflation recorded at 0.13 per cent (Zero point One Three per cent) and annual headline inflation easing to 2.42 per cent (Two point Four Two per cent) from 3.48 per cent (Three point Four Eight per cent) in the previous month. Core inflation stood at 0.23 per cent (Zero point Two Three per cent) month-on-month and 2.44 per cent (Two point Four Four per cent) year-on-year, mainly influenced by higher cooking oil prices, while volatile food prices recorded 0.88 per cent (Zero point Eight Eight per cent) deflation amid normalised demand and ongoing harvests. Administered prices recorded 0.69 per cent (Zero point Six Nine per cent) inflation, driven by higher airfares, petrol prices and household fuel prices. Bank Indonesia stated that inflation is expected to remain under control in 2026 and 2027 through continued monetary policy measures and coordination with the Government under national inflation and food security programmes.

2.2.2. Indonesia Trade Surplus Increases in March 2026

Bank Indonesia has reported that Indonesia’s trade surplus increased to USD 3.32 billion (United States Dollars Three Billion Three Hundred Twenty Million only) in March 2026 from USD 1.27 billion (United States Dollars One Billion Two Hundred Seventy Million only) in February 2026, strengthening the country’s external resilience. The increase was primarily driven by a higher non-oil and gas trade surplus of USD 5.21 billion (United States Dollars Five Billion Two Hundred Ten Million only), supported by non-oil and gas exports amounting to USD 21.25 billion (United States Dollars Twenty-One Billion Two Hundred Fifty Million only), particularly from precious metals, jewellery, mineral fuel, iron and steel exports. Exports to China, the United States and India remained the main contributors to export performance, while the oil and gas trade deficit widened to USD 1.89 billion (United States Dollars One Billion Eight Hundred Ninety Million only) due to a larger increase in imports relative to exports.

3. Trends

3.1. SBI Proposes Foreign Currency Bond Fund Raise

The State Bank of India (“SBI”) has stated that its Executive Committee of the Central Board will meet on 12 May 2026 to consider raising up to USD 2 Billion (United States Dollars Two Billion only) through long-term funding during the financial year 2026–27. The proposed fund raise may be undertaken in single or multiple tranches via public offers and/or private placements of fixed or floating rate bonds, denominated in United States dollars or other major foreign currencies, under the Regulation S and Rule 144A framework. The move is aimed at strengthening the bank’s long-term funding profile and supporting its growth and lending plans.

3.3. ECLGS 5.0: SBI to Extend INR 70,000–80,000 Crore Credit Support

The Emergency Credit Line Guarantee Scheme 5.0 (“ECLGS 5.0”), approved by the Union Cabinet, is expected to enable the SBI to extend additional credit of INR 70,000 Crore to INR 80,000 Crore (Indian Rupees Seventy Thousand Crore to Eighty Thousand Crore only). The scheme is aimed at supporting micro, small and medium enterprises (“MSMEs”) and the airline sector in light of liquidity stress arising from the West Asia crisis. SBI has indicated that implementation issues are likely to be resolved within eight to ten days, following which credit disbursement under the scheme is expected to commence. Under ECLGS 5.0, the government has provided for INR 2.55 Lakh Crore (Indian Rupees Two Lakh Fifty-Five Thousand Crore only) of additional credit for eligible borrowers, including INR 5,000 crore (Indian Rupees Five Thousand Crore only) earmarked for airlines. Eligible MSMEs can avail additional credit of up to 20 per cent (twenty per cent) of peak working capital utilised during the fourth quarter of the financial year ended March 2026, subject to a cap of INR 100 Crore (Indian Rupees One Hundred Crore only) per borrower.

4. Sector Overview

4.1. RBI Releases Data on Strong Credit Growth, Deposit Growth Moderates

Data released by the RBI indicates that bank credit growth strengthened to 16 per cent (Sixteen per cent) in the fortnight ending 30 April 2026, reflecting an acceleration from 15 per cent (Fifteen per cent) recorded in the previous fortnight. Deposit growth, however, remained comparatively moderate at 12.3 per cent (Twelve point three per cent) year-on-year, marginally higher than 12.2 per cent (Twelve point two per cent) in the preceding period. As per the RBI data, outstanding credit extended by scheduled commercial banks rose to INR 212.12 lakh crore (Indian Rupees Two Hundred Twelve Lakh Crore and Twelve Thousand Crore only), while total deposits in the banking system stood at INR 258.64 lakh crore (Indian Rupees Two Hundred Fifty-Eight Lakh Crore and Sixty-Four Thousand Crore only). The credit–deposit ratio increased to 82.01 per cent (Eighty-two point zero one per cent), signalling continued strong demand for loans and relatively tighter liquidity conditions within the banking system.

4.2. Fitch Flags Manageable Capital Impact from ECL Framework

Fitch Ratings has stated that Indian banks are well‑placed to transition to the Expected Credit Loss (“ECL”) provisioning framework that has been finalised by the RBI. The ECL framework is scheduled to come into effect from 1 April 2027, and Fitch has noted that the banking system is sufficiently capitalised to absorb the impact of the shift from the existing incurred‑loss model. According to Fitch, the adoption of ECL is expected to lead to a moderate reduction in capital, with the average Common Equity Tier 1 (“CET1”) ratio of Indian banks likely to decline by around 30 basis points (Thirty basis points) in the financial year 2027–28. If banks opt to utilise the RBI‑permitted four‑year transition period, the cumulative impact on CET1 ratios could rise to approximately 80 basis points (eighty basis points) over time. Fitch added that higher‑than‑expected starting provisions across banks will help cushion the effect of the new rules, reinforcing its positive outlook on the operating environment for Indian banks.

5. Business Updates

5.1. PNB Ramps Up Cybersecurity Spending Amid AI-Driven Threats

Punjab National Bank has earmarked roughly INR 700 Crore (Indian Rupees Seven Hundred Crores only) - INR 800 Crore (Indian Rupees Eight Hundred Crore only) for cybersecurity in the current financial year, about 20 per cent of its total technology budget, marking a rise of more than 50 per cent over the previous year. The push is driven by growing concerns around advanced AI models, including Anthropic's Mythos, which has been flagged for its ability to identify critical software vulnerabilities.  PNB is also fast-tracking procurement of security tools such as firewalls and has moved to round the clock audit processes to identify threats more rapidly.

5.2. IDBI Bank Partners with IIT Madras to Launch I2SSL Lab for Secure Banking Innovation

IDBI Bank has announced a strategic tie-up with IIT Madras to jointly establish the IDBI IITM Secure Systems Lab (“I2SSL”), aimed at advancing research in secure banking technologies. The lab will focus on developing next-generation security frameworks, advanced threat detection systems, and robust digital platforms to support India's growing digital economy. The collaboration brings together IDBI Bank's domain expertise and IIT Madras research capabilities, reflecting a broader push for industry-academia partnerships in driving fintech innovation. The initiative is expected to raise cybersecurity standards across the banking sector and contribute to a more resilient financial ecosystem as digital adoption continues to rise in India.

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