Banking & Finance Digest May 25, 2026

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1. Regulatory Updates

1.1. Reserve Bank of India (RBI)

1.1.1.      RBI invites comments on capital adequacy amendment directions

The Reserve Bank of India (“RBI”) has released draft amendment directions on capital adequacy with the objective of aligning Pillar 3 disclosure requirements with the Basel framework. The draft directions cover both commercial banks and small finance banks, and are aimed at improving consistency, transparency and comparability of disclosures. RBI has invited comments from stakeholders on the proposed amendments, with feedback to be submitted by June 02, 2026 through the ‘Connect2Regulate’ platform or via email.

1.1.2.      RBI issues amendment directions on investment fluctuation reserve framework

RBI has issued final amendment directions revising the norms relating to the Investment Fluctuation Reserve (“IFR”) across various categories of regulated entities. The revised framework removes the IFR requirement for entities maintaining capital charge for market risk under updated investment portfolio norms, while requiring other entities to comply with IFR provisions on balance sheet dates instead of on a continuous basis. The amendments also harmonise existing instructions applicable to different categories of regulated entities, thereby improving regulatory clarity and consistency.

1.1.3.      RBI issues revised draft directions on loan recovery and engagement of recovery agents

RBI has issued revised draft amendment directions on the conduct of regulated entities in recovery of loans and engagement of recovery agents, incorporating stakeholder feedback received on earlier drafts. The revised framework includes changes to key provisions and considers the use of technology-based mechanisms to restrict functionalities of financed devices in cases of borrower default. RBI has invited further public comments on the revised draft directions, with submissions to be made by May 31, 2026 through prescribed channels.

International Financial Services Centres Authority (IFSCA)

1.1.4.      IFSCA Clarifies Use of Voice Broking Services by IBUs

IFSCA has issued a guidance clarifying that IFSC Banking Units (IBUs) may avail voice broking services from entities registered as TechFin and Ancillary Service Providers under the IFSCA (TechFin and Ancillary Services) Regulations, 2025, subject to compliance with the conditions specified in Module 5 of the IFSCA Banking Handbook: Conduct of Business Directions Version 6.0. The guidance refers to the existing framework permitting IBUs to use voice brokers for executing transactions in financial assets and clarifies that registered TechFin and Ancillary Service Providers offering voice broking services are eligible to provide such services. The guidance has been issued under Sections 12 and 13 of the International Financial Services Centres Authority Act, 2019 and has come into force with immediate effect to facilitate regulated access to voice broking services within the IFSC framework.

1.1.5.      IFSCA Clarifies Fee Structure for Existing ASPs and TechFin Entities

IFSCA has issued a circular clarifying that the fee structure prescribed under the March 02, 2026 circular on fees for TechFin and Ancillary Services Providers (TAS Providers) shall also apply to existing Ancillary Service Providers (“ASPs”) and existing TechFin entities operating under the transition provisions of the IFSCA (TechFin and Ancillary Services) Regulations, 2025. The circular refers to Regulation 4 of the TAS Regulations, which allows existing ASPs and TechFin entities to continue under their earlier regulatory frameworks until grant of registration under the TAS Regulations. The circular further provides a one-time measure permitting applicable fees for Financial Year 2026-27 to be remitted on or before May 31, 2026 in the manner specified under the Fee Circular. The clarification has been issued under Section 12 of the International Financial Services Centres Authority Act, 2019 read with Regulation 15 of the TAS Regulations and has come into force with immediate effect.

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.	Aurangabad District Central Co-operative Bank Limited, Bihar	INR 20,000 (Indian Rupees Twenty Thousand only)	For failing to comply with credit information reporting guidelines. The issue was identified during a NABARD inspection (as of March 31, 2025), which found that the bank did not submit borrower data to all four Credit Information Companies.
2.	AKG Infin Private Limited	INR 1,80,000 (Indian Rupees One Lakh Eighty Thousand only)	For not obtaining prior RBI approval before a change in shareholding exceeding 26 per cent (twenty-six per cent). The violation was identified during correspondence regarding post-facto approval.
3.	Mintifi Finserve Private Limited	INR 3,10,000 (Indian Rupees Three Lakh Ten Thousand only)	For failing to upload certain customers’ KYC records to the Central KYC Records Registry within the required timeframe. The issue was identified during an inspection as of March 31, 2025.
4.	City Union Bank Limited	INR 10,10,000 (Indian Rupees Ten Lakh Ten Thousand only)	For regulatory violations, including charging fees on small agriculture priority sector loans (up to INR 25,000) (Indian Rupees Twenty Five Thousand only) and failing to report SHG member data to Credit Information Companies. The issues were identified during an inspection (as of March 31, 2025) and relate to compliance lapses, not customer transactions.
5.	Newa Investments Private Limited	INR 2,70,000 (Indian Rupees Two Lakh Seventy Thousand only)	For governance violations, specifically for appointing directors without prior RBI approval, leading to over 30 per cent (thirty-percent) change in its board. The issue was identified during an inspection (as of March 31, 2025) and relates to regulatory non-compliance.

2.               Key Asian Markets - Philippines and Indonesia

2.1.           Philippines

2.1.1.     Philippines’ GIR Settles at USD 104.3 billion While BOP Records Deficit in April 2026

BSP has announced that the Philippines’ gross international reserves (GIR) settled at USD 104.3 billion (United States Dollars One Hundred Four Billion Three Hundred Million only) as of end-April 2026, providing an external liquidity buffer equivalent to 6.9 (Six point Nine) months’ worth of imports of goods and payments of services and primary income, and covering about 3.8 (Three point Eight) times the country’s short-term external debt based on residual maturity. The BSP further stated that the country’s overall balance of payments (BOP) recorded a deficit of USD 2.1 billion (United States Dollars Two Billion One Hundred Million only) in April 2026, resulting in a cumulative BOP deficit of USD 7.4 billion (United States Dollars Seven Billion Four Hundred Million only) for the January–April 2026 period. The BSP noted that GIR comprise foreign-denominated securities, foreign exchange, and other reserve assets including gold, and are maintained to support import requirements, external debt obligations, currency stability, and resilience against external economic shocks.

2.1.2.     BSP Introduces Releasable Capital Buffer Framework for Banks

BSP has approved a reform introducing the Positive Neutral Countercyclical Capital Buffer (PN-CCyB), a releasable capital buffer framework that enables banks to build up capital during periods of strong credit growth and draw it down during periods of stress to sustain lending. The framework applies to universal and commercial banks, their subsidiaries and quasi-banks, and digital banks. Under the reform, 1.5 per cent (One point Five per cent) of banks’ existing Common Equity Tier 1 (CET1) capital will be designated as a releasable buffer, while the minimum CET1 requirement will remain at 4.5 per cent (Four point Five per cent) of risk-weighted assets, consistent with Basel III standards. The BSP clarified that the reform does not increase overall capital requirements, while all other capital requirements, including the minimum Tier 1 ratio and Capital Adequacy Ratio, remain unchanged. The BSP further stated that the banking system’s CET1 ratio stood at 15.06 per cent (Fifteen point Zero Six per cent) as of end-December 2025, above regulatory requirements. The framework has been introduced with phased implementation timelines of one year for universal and commercial banks and two years for digital banks, with the objective of strengthening financial stability and supporting continued credit flow during periods of economic stress.

2.2.           Indonesia

2.2.1.      Broad Money Records Positive Growth in April 2026

Bank Indonesia has reported that broad money (M2) in April 2026 reached Rp10,253.7 trillion (Indonesian Rupiah Ten Thousand Two Hundred Fifty-Three point Seven Trillion only), reflecting year-on-year growth of 9.2 per cent (Nine point Two per cent), slightly down from 9.7 per cent (Nine point Seven per cent) in March 2026. The growth was driven by narrow money (M1) at 13.6 per cent (Thirteen point Six per cent) and quasi-money at 4.7 per cent (Four point Seven per cent). Developments in M2 were primarily influenced by net claims on the central government, which grew 38.6 per cent (Thirty-Eight point Six per cent) year-on-year, and disbursed loans, which increased 9.4 per cent (Nine point Four per cent) year-on-year, supporting overall liquidity in the economy.

2.2.2.      Bank Indonesia Raises Policy Rates to Support Rupiah Stability and Inflation Targeting

Bank Indonesia has announced an increase in the BI-Rate by 50 (Fifty) bps to 5.25 per cent (Five point Two Five per cent), the Deposit Facility rate by 50 (Fifty) bps to 4.25 per cent (Four point Two Five per cent), and the Lending Facility rate by 50 (Fifty) bps to 6.00 per cent (Six per cent) following the Board of Governors’ meeting on May 19-20, 2026. The policy measures aim to strengthen Rupiah exchange rate stability amid global turmoil from the Middle East conflict and to maintain inflation within the 2.5 per cent±1 per cent (Two point Five per cent ± One per cent) target corridor for 2026 and 2027. Bank Indonesia will support these objectives through intensified foreign exchange interventions via Non-Deliverable Forward, Domestic Non-Deliverable Forward and spot transactions, a strengthened interest rate structure to attract foreign investment, maintenance of primary money growth above 10 per cent (Ten per cent), and enhanced macroprudential policies including easing the Macroprudential Intermediation Ratio and expanding incentives under the Macroprudential Liquidity Incentive Policy (KLM) scheme.

3.               Trends

3.1.           IOB approves INR 5,000 crore capital raising plan and Tier II bond issuance

Indian Overseas Bank (“IOB”) has approved a comprehensive INR 5,000 crore (Indian Rupees Five Thousand Crore only) capital plan for the financial year 2026–27. The plan, endorsed at the bank’s board meeting on 21 May 2026, allows IOB to raise equity capital through multiple routes, including Follow‑on Public Offer, Rights Issue, Qualified Institutional Placement (“QIP”), and Preferential Issue, in one or more tranches, subject to statutory approvals. The board has also cleared issuance of 10 crore equity shares under the IOB‑ESPS 2026–27 for permanent employees. In addition, IOB has authorised the issuance of Basel III‑compliant Tier II bonds of up to INR 1,000 crore (Indian Rupees One Thousand Crore only), with or without a green‑shoe option, via private placement or public issuance in domestic or overseas markets. The bank also intends to utilise its share premium account to offset accumulated losses as of 31 March 2026, subject to necessary regulatory approvals. The 26th Annual General Meeting (“AGM”) is scheduled for 7 July 2026 to consider these proposals and other agenda items.

3.2.           GoI announces OFS of up to 8 per cent stake in Central Bank of India

The Government of India (“GoI”) has announced an Offer for Sale (“OFS”) of up to 8 per cent (Eight per cent) equity stake in the Central Bank of India to meet public‑shareholding regulatory requirements. The OFS comprises an initial 4 per cent (Four Per Cent) sale amounting to 3.62 Crore shares, with an additional 4 Per Cent (Four Per Cent) available under an oversubscription option, bringing the total offer to approximately 72.41 crore shares. The floor price has been set at INR 31 (Indian Rupees Thirty-One only) per equity share, and Goldman Sachs (India) Securities Private Limited has been appointed as the Seller’s Broker. The sale will take place through a dedicated window on both the BSE and NSE, opening first for non‑retail investors on Friday, with retail investors and eligible bank employees participating on Monday. At least 10 per cent (ten per cent) of the offer is reserved for retail investors with bids up to INR 2,00,000 (Indian Rupees Two Lakh only), while mutual funds and insurance companies collectively receive a 25 per cent (Twenty-Five per cent) allocation. A separate pool of 75 lakh (Seventy-Five Lakh) shares has been reserved for eligible bank employees.

3.3.   Vodafone Idea explores INR 35,000 crore funding package led by SBI for network expansion

Vodafone Idea Limited (“Vi”), India’s third‑largest telecom operator, is in advanced discussions with a consortium led by the State Bank of India (“SBI”) for a proposed INR 35,000 Crore (Indian Rupees Thirty-Five Thousand Crore only) funding package. The proposal includes INR 25,000 Crore (Indian Rupees Twenty-Five Thousand Crore only) in funded facilities and INR 10,000 Crore (Indian Rupees Ten Thousand Crore only) in non‑funded support, aimed at enabling Vi’s planned INR 45,000 Crore (Indian Rupees Forty Five Thousand Crore only) capital expenditure over the next three years, particularly for accelerating network expansion and 5G rollout. The discussions follow significant relief on Vi’s adjusted gross revenue (“AGR”) dues, which were reduced to INR 64,046 Crore (Indian Rupees Sixty Four Thousand and Forty Six Crore only) from the previously assessed INR 87,695 Crore (Indian Rupees Eighty Seven Thousand Six Hundred Ninety Five Crore only), and the operator has also reduced its bank debt to INR 726 Crore (Indian Rupees Seven Hundred Twenty Six Crore only) as of 31 March 2026, down from INR 2,326 Crore (Indian Rupees Two Thousand Three Hundred Twenty Six Crore only) the previous year.

4.              Sector Overview

4.1.           LIC Earnings Lift Insurance Stocks Amid Cautious Trading

Trading across India’s banking, financial services and insurance (“BFSI”) sector remained cautious and volatile through the week, driven by sustained rupee weakness, elevated crude oil prices and geopolitical tensions in West Asia, with the Indian rupee hitting successive record lows and touching INR 96.96 (Indian Rupees Ninety Six and Ninety Six Paise only) per United States dollar, making it Asia’s weakest-performing currency, while the Sensex opened sharply lower—falling over 800 points. A notable improvement in sentiment followed the strong Q4 results of Life Insurance Corporation of India (“LIC”), which reported a 23.3 per cent (twenty three point three per cent) rise in consolidated net profit to INR 23,467.18 crore (Indian Rupees Twenty Three Thousand Four Hundred Sixty Seven Crore and Eighteen Lakh only), leading to a 2.22 per cent (two point two two per cent) weekly gain in its stock and lifting the broader insurance segment, with ICICI Lombard, ICICI Prudential Life, Niva Bupa Health Insurance, SBI Life and HDFC Life also recording gains. Banking stocks showed divergent trends, as large private-sector banks posted modest advances, whereas public sector banks (“PSBs”) remained subdued after early-week declines. Non-banking financial companies (“NBFCs”) registered a mixed performance, meanwhile, the fintech segment underperformed.

4.2.           ECLGS 5.0: Credit Guarantee to Reduce MSME Bad Loan Risks

The Government of India’s Emergency Credit Line Guarantee Scheme 5.0 (“ECLGS 5.0”) is aimed at strengthening micro, small and medium enterprises (“MSMEs”) by providing guaranteed credit at a time when many businesses are under financial stress. According to industry experts, the scheme is expected to reduce the risk of bad loans for banks, particularly as lenders anticipate pressure on MSME repayments due to rising input costs and liquidity constraints. Lenders have already begun proactively engaging eligible borrowers to ensure early adoption before their financial positions weaken further. ECLGS 5.0 seeks to catalyse INR 2.55 lakh crore (Indian Rupees Two Lakh Fifty-Five Thousand Crore only) in additional credit as part of a counter‑cyclical support mechanism addressing effects arising from the West Asia crisis. The scheme offers 100 Per Cent (One Hundred per cent) credit guarantee coverage on incremental credit extended to MSMEs.  

4.3.         India’s Macroeconomic Outlook: Resilient Growth Amid Inflationary and External Pressures

India’s macroeconomic performance in April 2026 reflected a mixed but resilient start to the new financial year. Retail inflation increased slightly to 3.48 per cent (three point four eight per cent), while wholesale inflation rose sharply to 8.30 per cent (eight point three zero per cent), signalling broad-based price pressures. Meanwhile, business activity strengthened, with the Composite Purchasing Managers’ Index (“PMI”) climbing to 58.2, supported by a manufacturing PMI of 54.7 and a services PMI of 58.8. On the fiscal front, gross Goods and Services Tax (“GST”) collections reached a record INR 2.42 lakh crore (Indian Rupees Two Lakh Forty-Two Thousand Crore only), up from INR 2.00 lakh crore (Indian Rupees Two Lakh Crore only) in March 2026. Digital activity remained robust, with the Unified Payments Interface (UPI) processing 22.35 billion transactions amounting to INR 29.03 lakh crore (Indian Rupees Twenty-Nine Lakh Three Thousand Crore only), a strong year‑on‑year increase in both volume and value. However, external pressures persisted: the trade deficit widened significantly to USD 7.81 billion (United States Dollars Seven Point Eight One Billion only), amid rising imports and a record-low rupee influenced by the ongoing West Asia conflict.

5.             Business Updates

5.1.         SBI Mutual Fund’s stake in Bandhan Bank crosses 5 per cent threshold after fresh market purchase

SBI Mutual Fund has increased its holding in Bandhan Bank to over 5 per cent (five per cent) of the bank’s paid-up share capital, according to regulatory disclosures. The fund’s total holding stood at 8.12 Crore (Eight Crore Twelve Lakhs only) shares, or 5.04 per cent (five point zero four per cent), as of May 20, 2026, following the acquisition of nearly 17 lakh additional shares through open market purchases. The transaction reflects continued institutional accumulation in the private sector lender amid active portfolio rebalancing by mutual fund schemes. Bandhan Bank’s stock has seen steady trading interest, with the development further reinforcing SBI Mutual Fund’s position as a key institutional shareholder in the bank.

5.2.           Sundaram Alternates closes ESG real estate credit fund

Sundaram Alternates, the alternative investment arm of Sundaram Finance Group, has announced the final close of its ESG-aligned Real Estate Credit Fund V at over INR 2,500 Crore (Indian Rupees Two Thousand Five Hundred Crore only), surpassing its initial target of INR 1,500 Crore (Indian Rupees One Thousand Five Hundred only). The strong fundraising reflects sustained investor demand for its structured real estate credit strategy, with commitments coming from a diversified base of institutional investors, insurance companies, family offices, corporate treasuries, and high-net-worth individuals. The fund had already crossed the INR 1,000 Crore (Indian Rupees One Thousand only) milestone earlier in its fundraising cycle, indicating steady momentum leading up to the final close. The development highlights continued appetite for ESG-integrated private credit strategies within India’s alternative investment ecosystem.

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