Banking & Finance Digest May 18, 2026

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1. Regulatory Updates

1.1. Reserve Bank of India (RBI)

1.1.1. RBI restores Certificate of Registration of Krishna Capfin Limited

The Reserve Bank of India (“RBI”) has restored the Certificate of Registration of Krishna Capfin Limited, a non-banking financial company, with effect from April 17, 2026, pursuant to orders passed by the Appellate Authority / Courts. The RBI has advised the company to ensure continued compliance with the applicable provisions of the Reserve Bank of India Act, 1934, and directions/guidelines issued by the RBI, including reporting requirements.

1.1.2. RBI and European Central Bank sign Memorandum of Understanding on mutual cooperation

RBI and the European Central Bank have entered into a Memorandum of Understanding to strengthen cooperation in the field of central banking. Signed by Shri Sanjay Malhotra, Governor of the RBI, and Christine Lagarde on the sidelines of the Bank for International Settlements meetings in Basel, the updated arrangement replaces the earlier 2015 framework and provides for regular exchange of information, policy dialogue, and technical cooperation in areas of mutual interest.

1.1.3. RBI issues amendment directions on inclusion of quarterly profits in CET1 capital for CRAR computation

RBI has issued amendment directions revising the framework for inclusion of quarterly profits in Common Equity Tier 1 capital for computation of Capital to Risk Weighted Assets Ratio for banks. The amendments remove the earlier qualifying condition relating to incremental provisions for non-performing assets in the previous financial year. Following stakeholder consultation on draft directions issued on April 08, 2026, the RBI has finalised and notified amendment directions applicable to commercial banks, small finance banks, and payments banks under their respective prudential capital adequacy frameworks.

1.1.4. Revised RBI Framework for NBFC Remittance Tie‑ups

RBI has issued a revised framework under which Non‑Banking Financial Companies (“NBFCs”) facilitating outward remittances will no longer require prior approval to enter partnerships with authorised dealer banks. The regulatory focus has shifted from preapproval requirements to enhanced compliance, transparency and consumer‑protection standards at authorised dealers. Banks must provide customers with full disclosure of estimated transaction costs, including separate breakdowns for interbank exchange rates, mark‑ups, service fees and all additional charges. The RBI has also strengthened safeguards to ensure that customer funds do not pass through third‑party accounts and remain fully protected from insolvency risks. All cross‑border transfers must originate directly from the remitter’s bank account and be credited only to the beneficiary’s bank account. Authorised dealers remain wholly responsible for compliance with the Foreign Exchange Management Act (“FEMA”), due‑diligence procedures and grievance redressal, even when services are delivered through third‑party platforms.

Securities and Exchange Board of India (SEBI)

1.1.5. SEBI issues Master Circular on surveillance of securities market

The Securities and Exchange Board of India (“SEBI”) has issued an updated Master Circular consolidating and superseding earlier circulars on surveillance of the securities market, with the objective of providing a single comprehensive reference for stakeholders. The circular incorporates key frameworks including financial disincentives for surveillance related lapses, automated trading window closure mechanisms, and system-driven disclosures under insider trading regulations. It also sets out obligations for market infrastructure institutions (“MIIs”), listed companies and intermediaries to strengthen monitoring, reporting, and internal controls to prevent market abuse, including restrictions on trading during sensitive periods and enhanced oversight of dissemination of information. The circular rescinds earlier instructions while preserving past actions, and aims to improve market integrity, investor protection and regulatory efficiency by standardising surveillance practices across the ecosystem.

1.1.6. SEBI issues circular on SPV status post concession termination for InvITs

SEBI has clarified the regulatory treatment of special purpose vehicles (“SPVs”) held by Infrastructure Investment Trusts (“InvITs”) following the conclusion or termination of concession agreements. The circular provides that such SPVs shall continue to retain their status, subject to specified conditions, including a requirement for the investment manager to either exit the investment or acquire a new infrastructure project within one year from the later of key milestones such as completion of the concession, resolution of litigations, or expiry of the defect liability period. The circular further mandates detailed disclosures at both InvIT and SPV levels in annual reports, covering asset-liability positions, contingent liabilities, debt repayment schedules, and exit strategies. This framework is intended to ensure transparency and orderly transition of SPVs post project completion while safeguarding investor interests.

1.1.7.  SEBI issues consultation paper on utilisation of IPF income by depositories

SEBI has released a consultation paper proposing to permit depositories to utilise up to 5 per cent (five per cent) of the interest or income earned from the Investor Protection Fund (“IPF”) corpus for administrative and statutory expenses of IPF trusts, aligning them with the framework applicable to stock exchanges. Currently, depositories are required to treat 100 per cent (one hundred per cent) of such income as part of the corpus and bear related expenses independently. The proposal, supported by the Secondary Market Advisory Committee (SMAC), would allow utilisation of such income for staff costs, audit fees, taxes and other administrative expenses, with any excess to be borne by the depository and unused amounts to be reinvested into the IPF. Public comments have been invited on this proposal to improve operational efficiency while maintaining investor protection objectives.

1.1.8. SEBI issues circular on permitted use of borrowings above threshold for InvITs

The SEBI has clarified the permitted utilisation of fresh borrowings by InvITs where net borrowings exceed 49 per cent (forty-nine per cent) of the value of InvIT assets. The circular permits such borrowings to be used for specified purposes including capital expenditure aimed at enhancing asset performance or capacity, major maintenance expenses for road projects in accordance with concession agreements, and refinancing of existing debt subject to conditions. Refinancing is restricted to the principal component only and requires that the original debt was raised for permissible purposes. This clarification provides operational flexibility to InvITs while ensuring that higher leverage is deployed strictly for value-accretive or essential purposes, thereby balancing growth needs with investor protection.

1.1.9. SEBI issues consultation paper on intraday borrowing by mutual funds

SEBI has issued a consultation paper proposing a broader framework for the use of intraday borrowing facilities by mutual funds as a cash management tool. The proposal seeks to allow Asset Management Companies (“AMCs”) to utilise intraday borrowings not only for meeting redemption obligations but also for other operational needs such as trade settlements, derivative obligations, and foreign exchange settlements arising due to timing mismatches in inflows and outflows. It further proposes permitting such borrowings to exceed receivables, provided they are extinguished within the same day or converted into overnight borrowings in compliance with regulatory limits. The paper also reiterates safeguards such as AMC-level policies and bearing of borrowing costs by AMCs. Public comments have been invited on the proposals, with the objective of enhancing liquidity management flexibility while maintaining regulatory discipline.

International Financial Services Centres Authority (IFSCA)

1.1.10.   IFSCA Approves Draft Managing General Agents Regulations, 2026

IFSCA has approved the draft IFSCA (Managing General Agents) Regulations, 2026 during its 28th meeting. The draft regulations seek to establish a comprehensive regulatory framework for the registration, regulation, and operation of Managing General Agents (MGAs) operating in International Financial Services Centres in India with delegated authority from foreign insurers for underwriting direct insurance business or settlement of claims. The proposed framework permits MGAs to operate in incorporated or branch form, prescribes eligibility conditions for foreign insurers including minimum net worth of USD 100 million (United States Dollars One Hundred Million only) and minimum credit rating of ‘A’, and allows MGAs to undertake direct insurance business within IFSCs and outside India in specified foreign currencies. The regulations further prescribe minimum capital requirements of USD 500,000 (United States Dollars Five Hundred Thousand only), net worth requirements of USD 250,000 (United States Dollars Two Hundred Fifty Thousand only) or 50 per cent (Fifty per cent) of minimum capital, insurer-wise fiduciary accounts, professional indemnity insurance requirements, code of conduct provisions, and maintenance of books and records. The framework is intended to ensure transparency, accountability, protection of policyholders’ interests, and orderly development of the insurance ecosystem in IFSCs.

1.1.11.   IFSCA Amends Finance Company Regulations to Introduce SPV Framework

IFSCA has notified the International Financial Services Centres Authority (Finance Company) (Amendment) Regulations, 2026, which came into effect upon publication in the Official Gazette on May 5, 2026. The amendments introduce definitions for Special Purpose Vehicle (“SPV”) and “Trust and Company Service Provider (“TCSP”) under the International Financial Services Centres Authority (Finance Company) Regulations, 2021. The amended framework permits leasing or financing activities to be undertaken by SPVs incorporated or administered by TCSPs for permissible activities specified by the Authority. The notification further prescribes that such SPVs must maintain minimum owned funds or paid-up share capital equivalent to the amount prescribed under the Companies Act, 2013 or such other amount as may be specified by the Authority, while exempting such SPVs from compliance with Regulations 4 and 8 of the regulations. The amendments are intended to facilitate SPV-based financing and leasing structures within International Financial Services Centres.

1.1.12. IFSCA Introduces TCSP Framework Under TechFin and Ancillary Services Regulations

IFSCA has notified the International Financial Services Centres Authority (TechFin and Ancillary Services) (Amendment) Regulations, 2026, introducing a new regulatory framework for TCSPs operating in International Financial Services Centres. The amendments insert a new chapter governing registration, eligibility, governance, compliance, reporting, and operational requirements for TCSPs undertaking services relating to leasing activities permitted by the Authority. The framework requires entities to obtain registration prior to commencing operations, maintain arm’s length segregation between TCSP and other activities, appoint full-time Principal and Compliance Officers based in IFSCs, establish governance and audit mechanisms, maintain records for a minimum of five years, and maintain professional indemnity insurance coverage. The regulations also prescribe permissible TCSP services, including acting as agents for establishing trusts, companies, limited liability partnerships, and other body corporates, arranging trustees, nominee shareholders, directors, or partners, and providing registered office or administrative address services. The framework further restricts service recipients to non-residents from jurisdictions not identified by the Financial Action Task Force as “High-Risk Jurisdictions subject to call for action”, while permitting services to IFSC-based special purpose vehicles associated with Indian sponsors or financiers. The amendments are intended to establish a regulated framework for TCSP activities supporting leasing structures and related financial activities within IFSCs.

1.1.13.   IFSCA Clarifies Framework for Implementation Services by Investment Advisers

IFSCA has issued a circular clarifying the framework governing implementation services provided by Investment Advisers registered in the International Financial Services Centre under the International Financial Services Centres Authority (Capital Market Intermediaries) Regulations, 2025. The circular clarifies that “implementation services” refer to services provided for executing or giving effect to investment advice rendered by an Investment Adviser. The framework specifies that implementation services relating to financial products listed on stock exchanges in foreign jurisdictions must be undertaken through a Global Access Provider or an Introducing Broker in the IFSC, while implementation services for financial products listed on recognised stock exchanges in the IFSC must be undertaken through a member of such recognised stock exchange. For unlisted financial products, Investment Advisers are required to enter into formal arrangements with platforms and/or asset management companies regulated by a financial sector regulator in a foreign jurisdiction.

1.1.14.   IFSCA Issues Master Circular for Broker Dealers and Clearing Members

IFSCA has issued the “Master Circular for Broker Dealers and Clearing Members” consolidating the regulatory framework applicable to Broker Dealers and Clearing Members operating in GIFT IFSC into a single instrument. The Master Circular consolidates various circulars issued over the last five years relating to registration, supervision, conduct, and operational requirements, supersedes applicable SEBI circulars issued prior to October 01, 2020 in respect of such intermediaries registered with IFSCA, and is intended to serve as a single reference point for regulated entities. The circular is organised into eleven chapters covering the lifecycle of Broker Dealers and Clearing Members, including registration, supervision, technology obligations, conduct requirements, and surrender of registration. Key features include streamlined registration through SWITS, governance standards, a risk-based supervisory framework, tiered system audit requirements, client asset protection measures, a technical glitches framework, business continuity and disaster recovery requirements, vendor risk and software resilience measures, market access through authorised persons, and periodic reporting and compliance audit obligations.

1.1.15.   IFSCA Proposes Amendment to Premium Definition

IFSCA has issued a consultation paper seeking public comments on the proposed International Financial Services Centres Authority (Manner of Payment and Receipt of Premium) (Amendment) Regulations, 2026. The proposed amendment seeks to align the definition of “premium” under the IFSCA (Manner of Payment and Receipt of Premium) Regulations, 2022 with the definition inserted under Section 2(13BC) of the Insurance Act, 1938 pursuant to the Sabka Bima Sabki Raksha (Amendment of the Insurance Laws) Act, 2025 notified on December 21, 2025. The draft amendment proposes the substitution of the existing definition of “premium” so that it carries the same meaning as assigned under the Insurance Act, 1938. Public comments and suggestions have been invited till June 02, 2026 through the consultation process hosted on the IFSCA website.

Monetary Penalties

1.1.16.   RBI imposes penalties on four 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.	Shree Kadi Nagarik Sahakari Bank Ltd., Dist. Mehsana, Gujarat	INR 16,30,000 (Indian Rupees Sixteen Lakh Thirty Thousand only)	For violating exposure norms and failing to ensure proper use of certain loan funds, based on a 2025 inspection. The action was taken under the Banking Regulation Act, 1949, and addresses regulatory lapses without affecting the bank’s customer transactions or ruling out further action.
2.	Jilla Sahakari Kendriya Bank Maryadit, Seoni, Madhya Pradesh	INR 1,50,000 (Indian Rupees One Lakh Fifty Thousand only)	For violating KYC norms and provisions of the Banking Regulation Act, based on a 2025 inspection. The bank failed to transfer unclaimed deposits to the prescribed fund on time and did not regularly review risk categorisation of accounts. The penalty addresses compliance lapses and does not affect customer transactions.
3.	IIFL Finance Limited	INR 3,10,000 (Indian Rupees Three Lakh Ten Thousand only)	For violating NBFC regulatory guidelines, based on a 2025 inspection. The company failed to return surplus auction proceeds from pledged gold to certain borrowers. The penalty addresses compliance lapses and does not affect customer transactions.
4.	Appnit Technologies Private Limited	INR 5,80,000 (Indian Rupees Fine Lakh Eighty Thousand only)	For non-compliance with KYC and PPI guidelines. The company allowed Aadhaar-based e-KYC PPI accounts to remain active beyond one year without full verification and failed to periodically review account risk categories. The penalty addresses regulatory lapses and does not affect customer transactions.

2. Key Asian Markets - Philippines and Indonesia

2.1.  Philippines

2.1.1. BSP, ASEAN+3 members reaffirm regional financial cooperation amid global uncertainties

BSP and other ASEAN+3 central banks and finance ministries reaffirmed their commitment to regional financial cooperation during the 29th ASEAN+3 Finance Ministers’ and Central Bank Governors’ Meeting held in Samarkand, Uzbekistan. Discussions focused on strengthening the Chiang Mai Initiative Multilateralization (CMIM), enhancing macroeconomic surveillance through AMRO, developing regional bond markets under the Asian Bond Markets Initiative (ABMI), and advancing cross-border digital payments. BSP Monetary Board Member Rosalia V. De Leon highlighted the importance of these initiatives in reinforcing regional financial stability and resilience amid increasing global economic challenges.

2.1.2. FDI Net Inflows into the Philippines Reach USD 1 Billion in January–February 2026

BSP has reported that foreign direct investments (“FDIs”) into the Philippines recorded net inflows of USD 590 Million (United States Dollars Five Hundred Ninety Million only) in February 2026. United States was the leading source of FDIs during the month, while corporations engaged in financial and insurance activities were the largest recipients. On a cumulative basis, FDI net inflows reached USD 1 billion (United States Dollars One Billion only) during January-February 2026. Equity capital placements during the period were sourced primarily from Japan, the United States, and Singapore, and were mainly directed towards the manufacturing, financial and insurance, and real estate industries.

2.2. Indonesia

2.2.1. Bank Negara Malaysia and Bank Indonesia Sign MoU to Strengthen Bilateral Central Banking Cooperation

Bank Negara Malaysia and Bank Indonesia have signed a new Memorandum of Understanding (MoU) to further strengthen bilateral cooperation between the two central banks. The MoU establishes a comprehensive framework for cooperation across various central banking areas, including monetary policy, financial stability and macroprudential policy, payment systems and digitalisation, financial sector development, capacity-building initiatives, and information sharing. The Central Banks stated that the MoU reinforces their longstanding partnership and expands collaboration into emerging areas of mutual interest amid the current geopolitical landscape. The arrangement is intended to support stronger institutional ties, enhance bilateral cooperation, and promote regional stability and sustainable economic growth.

2.2.2. Bank Indonesia Retail Sales Survey Indicates Stable Retail Sales Outlook for April 2026

Bank Indonesia has released the Retail Sales Survey for April 2026, indicating that retailers expect sales to remain stable during the month. Respondents projected a Real Sales Index (“RSI”) of 231.0, supported by positive annual sales growth in spare parts and accessories, other household equipment, and clothing. On a monthly basis, retailers anticipated a 10.0 per cent (Ten point Zero per cent) contraction in sales in April 2026 due to the normalisation of private demand following the Ramadan and Eid-ul-Fitr 1447 H festive period. In March 2026, the RSI stood at 256.7, with retail sales increasing by 10.3 per cent (Ten point Three per cent) month-on-month, driven by seasonal demand across multiple commodity groups. The survey also indicated rising inflationary pressures over the next three and six months, reflected in higher Price Expectations Index (PEI) readings for June and September 2026 due to increased raw material prices.

3. Trends

3.1. Bank of Baroda’s outlines plan to double balance sheet on strong growth outlook

Bank of Baroda (“BoB”), India’s second‑largest state‑owned lender, has announced plans to double its balance sheet over the next five years by leveraging India’s robust economic growth, rising credit demand and increased fee‑based income. Chief Executive Officer Debadatta Chand emphasised that scale and capital strength are essential for achieving global competitiveness, especially as policymakers continue to discuss further consolidation of state‑run banks. India’s banking sector has expanded rapidly since the Covid‑19 pandemic, supported by strong deposits and revived credit demand. BoB has grown its total assets by nearly 75 per cent (Seventy‑Five per cent) over the last five years, reaching INR 21 Trillion (Indian Rupees Twenty‑One Trillion only) as at end‑March, outpacing several peer state‑owned lenders.

3.2. Jana SFB to raise capital with TVS Venu Group investment and investor participation

Jana Small Finance Bank (“Jana SFB”) is set to receive a significant capital infusion of up to INR 700 crore (Indian Rupees Seven Hundred Crore only), with the Venu Srinivasan-led TVS Venu Group planning to acquire a 10 per cent (Ten per cent) stake for approximately INR 450 crore (Indian Rupees Four Hundred Fifty Crore only). Three to four additional investors, including an overseas corporation, are also reportedly preparing to participate, marking Jana SFB’s first equity raise since its initial public offering in February 2024. The development is seen as a sign of long-term institutional interest, contrasting with typical private equity investment cycles. Jana SFB maintains a strong capital adequacy ratio of 19.4 per cent (Nineteen Point Four per cent), comfortably above the regulatory minimum of 15 per cent (Fifteen per cent). Private equity investor TPG Capital, which currently holds 8.11 per cent (Eight point One One per cent), may reduce its stake by up to 5 per cent (Five per cent).

3.3. Microfinance sector faces rising stress from over‑leveraged borrowers

Nearly INR 15,800 Crore (Indian Rupees Fifteen Thousand Eight Hundred Crore only), representing around 5 per cent (Five per cent) of the total microfinance portfolio, is concentrated among over leveraged borrowers who have taken loans from more than three lenders, according to Crif High Mark data. About 1.5 million small borrowers fall into this high-risk category, each holding outstanding exposures exceeding INR 1 Lakh (Indian Rupees One Lakh only) on average, more than twice the typical microfinance loan size. Since July 2024, industry rules prohibit fresh lending to borrowers with loans from more than three microfinance lenders, limiting their ability to refinance and increasing their vulnerability to default. Approximately 10 per cent (ten per cent) of this stress exposed portfolio is already overdue by 30 to 180 days.

4. Sector Overview

4.1.  PSBs’ Liquidity Buffers Strain Amid Robust Credit Growth

Public Sector Banks (“PSBs”) are experiencing tightening liquidity conditions as their Liquidity Coverage Ratios (“LCRs”) declined towards regulatory thresholds during the March quarter, driven by strong loan demand far outpacing retail deposit mobilisation. LCR levels at major PSBs fell by 10 to 12 percentage points, settling between 114 per cent and 118 per cent (One Hundred Fourteen to One Hundred Eighteen per cent), compared with more comfortable buffers a year earlier. Analysts attribute this trend to households shifting savings away from traditional bank deposits into higher-yielding instruments, forcing PSBs to deploy surplus liquidity to sustain credit growth. The situation is expected to ease in Q1 FY27, when revised liquidity norms, reducing the run off rate for trusts, partnerships and LLPs from 100 per cent (One hundred per cent) to 40 per cent (Forty per cent), come into effect.

4.2. Market Share Pressure on Mid‑Sized Banks

Mid‑sized private sector banks continue to lose share in the home‑loan market to larger lenders as competition intensifies and yields narrow. Major players are expanding their mortgage portfolios more aggressively, supported by lower funding costs and broader distribution reach. In comparison, other major players have reported muted or negative year‑on‑year growth as of end‑March 2026. For smaller banks, thin pricing margins—where long‑tenure home loans are being offered at 7.15 per cent (Seven Point One Five per cent) while deposit rates remain higher, are making the economics increasingly difficult. Larger banks, meanwhile, are using home loans as long‑term relationship‑building products rather than mere lending assets.

5.  Business Updates

5.1. Emirates NBD Secures Approval from Department of Financial Services for 74 per cent Stake in RBL Bank

Dubai-based Emirates NBD Bank, the second largest bank in the UAE, received a letter from the Department of Financial Services dated May 14, 2026, approving its proposed acquisition of between 49 per cent (Forty Nine per cent) and up to 74 per cent (Seventy Four per cent) of the total paid-up equity share capital of RBL Bank, for a consideration of INR 26,853 Crore (Indian Rupees Twenty Six Thousand Eight Hundred and Fifty Three Crore only) marking the largest FDI in India's financial services sector. Under the approval, Emirates NBD will acquire and maintain a shareholding of at least 51 per cent (Fifty-One per cent) of RBL Bank's paid-up share capital, resulting in the bank being classified as a foreign bank in subsidiary mode with Emirates NBD as its parent. The transaction, which was first initiated through an Investment Agreement on October 18, 2025, still remains subject to final clearance from the RBI and the completion of customary closing conditions.

5.2. RBI Revokes Licence of Mumbai-Based Sarvodaya Co-operative Bank

The RBI cancelled the licence of Mumbai-based Sarvodaya Co-operative Bank Limited on May 12, 2026, citing inadequate capital, poor earnings prospects, and non-compliance with several provisions of the Banking Regulation Act, 1949, with the bank ceasing all banking operations including accepting fresh deposits and repaying existing ones with immediate effect. The RBI directed the Commissioner for Cooperation and Registrar of Cooperative Societies, Maharashtra, to initiate winding-up proceedings and appoint a liquidator. Depositors remain protected under the DICGC framework with insurance coverage of up to INR 5 Lakh (Indian Rupees Five Lakhs only), and nearly 98.36 per cent (Ninety Eight point Three Six per cent) of depositors are entitled to receive the full amount of their insured deposits, with DICGC having already paid INR 26.72 Crore (Indian Rupees Twenty Six point Seven Two per cent) toward insured deposits as of March 31, 2026.

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