Banking & Finance Digest November 02, 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 delegates FEMA compounding powers for Overseas Investment and Cross-Border Transactions to regional offices
The Reserve Bank of India (“RBI”) has issued A.P. (DIR Series) Circular No. 28/2026-27, delegating the compounding of certain contraventions under the Foreign Exchange Management Act, 1999 (“FEMA”) to select RBI regional offices. The delegation covers specified contraventions relating to Overseas Direct Investment (ODI), overseas investments, borrowing and lending, and guarantee transactions. Applications concerning overseas investment contraventions will be handled by designated regional offices based on the Unique Identification Number (UIN) of the overseas entity, while applications relating to borrowing, lending and guarantee transactions will be processed by the regional office having jurisdiction over the applicant's registered office or place of domicile. Contraventions involving multiple categories of transactions will continue to be handled by the Cell for Effective Implementation of FEMA (CEFA) at RBI's Central Office. The measure has been introduced to enhance customer service and streamline the compounding process.
Securities and Exchange Board of India (SEBI)
1.1.2. SEBI extends timeline for Debenture Trustees engaged in Non-SEBI activities
SEBI through a circular issued on 27 October 2026, has extended the timeline available to Debenture Trustees for complying with the regulatory requirements applicable to entities undertaking activities that fall outside SEBI's regulatory jurisdiction. The extension follows representations received from market participants seeking additional time to restructure operations and align existing business activities with the regulatory framework prescribed by SEBI. The circular provides regulated entities with further time to assess their business models, implement necessary organisational changes and ensure continued compliance with applicable regulatory requirements while maintaining the integrity of trustee functions in the securities market.
International Financial Services Centres Authority (IFSCA)
1.1.3. IFSCA reviews SCC framework for trading on IIBX
The International Financial Services Centres Authority (“IFSCA”) has issued a circular reviewing the Special Category Client (SCC) framework applicable to trading on the India International Bullion Exchange (“IIBX”). The review forms part of IFSCA's ongoing efforts to enhance operational efficiency, improve market participation and strengthen the regulatory framework governing bullion trading within the International Financial Services Centre (“IFSC”). The revised framework seeks to facilitate a more streamlined participation mechanism for eligible market participants while supporting the continued development of the bullion ecosystem at IIBX.
1.1.4. IFSCA prescribes financial soundness criteria for Payment System Operators
The IFSCA has issued a circular prescribing financial soundness criteria applicable to existing Payment System Operators (PSOs) and applicants seeking authorisation to commence payment system operations within the IFSC. The framework aims to strengthen prudential oversight by establishing minimum financial eligibility and ongoing financial soundness requirements for regulated entities operating payment systems. The initiative forms part of IFSCA's broader efforts to promote a resilient, well-governed and stable payments ecosystem within the IFSC.
Miscellaneous
Telecom Regulatory Authority of India (TRAI)
1.1.5. TRAI’s rules on voice-and-SMS-only recharge vouchers come into force
The Telecom Consumers Protection (Thirteenth Amendment) Regulations, 2026, notified by the Telecom Regulatory Authority of India (TRAI) on 22 September 2026, came into force on 22 October 2026. Telecom service providers must now offer Special Tariff Vouchers (“STVs”) for voice and SMS only, without data. A bundled voice, SMS and data STV may have a validity of 30 (thirty) days or less. For each such validity period, providers must offer a matching voice-and-SMS-only STV at an appropriately reduced tariff. Providers must also offer at least one voice-and-SMS-only STV that renews on the same date every month. If that date does not exist in a month, it renews on the last day of the month. Providers must also offer at least one voice-and-SMS-only STV with a longer validity. The regulations do not fix specific prices.
1.1.6. TRAI releases draft guidelines on responsible use of AI in telecommunications
On 30 October 2026, TRAI released draft Guidelines on Responsible Use of Artificial Intelligence (AI) in Telecommunication Networks and Provision of Telecommunication Services for stakeholder consultation. The proposed guidelines seek to promote responsible AI adoption in telecommunications, with emphasis on accountability, transparency, safety and resilience. Stakeholders were invited to submit written comments by 27 November 2026.
The Insurance Regulatory and Development Authority of India (IRDAI)
1.1.7. IRDAI launches Grievance Resolution Month in November 2026 to expedite resolution of pending policyholder grievances
The Insurance Regulatory and Development Authority of India (“IRDAI”) has announced the launch of “Grievance Resolution Month” during November 2026 to accelerate the meaningful resolution of pending policyholder grievances and disputes, particularly long-pending cases. As of 31 March 2026, approximately 2.21 lakh cases were pending before Consumer Commissions and Judicial Courts, of which 72.49 per cent (seventy-two point four nine per cent) had been pending for over one year, while approximately 11 lakh cases were pending before Motor Accidents Claims Tribunals. During the initiative, insurers have been advised to review pending grievances and disputes, prioritise long-pending cases, assess pending litigation for amicable settlement where legally and factually sustainable, ensure prompt compliance with Insurance Ombudsman Awards and strengthen grievance and litigation management. The Life Insurance Council, General Insurance Council and Council for Insurance Ombudsmen have been asked to support the initiative by sensitising member insurers. IRDAI, in association with the Councils and State-wise Lead Insurers, will also organise outreach programmes across the country, with particular emphasis on Tier-II and Tier-III cities, to facilitate access to grievance redressal.
2. Key Asian Markets – Philippines & Indonesia
2.1. Vietnam
2.1.1. Vietnamese banks pledge VND 230 trillion for regional development
Vietnamese commercial banks and businesses signed 18 financing cooperation agreements worth approximately VND 230 trillion at a conference in Ho Chi Minh City on 23 October 2026. The agreements reportedly cover infrastructure, energy, manufacturing, pharmaceuticals and social housing. The draft mentions joint financing by BIDV and VietinBank for a petroleum-sector project valued at USD 2.8 billion, and VND 50 trillion in financing from HDBank and Vikki Bank for the Ho Chi Minh City International Financial Centre project complex.
2.1.2. TP Bank secures USD 50 million from DEG for green and SME lending
HSBC arranged a USD 105 million green loan for Northern Power Corporation (EVNNPC) to finance battery energy storage units across northern Vietnam. The transaction illustrates international bank financing for energy-transition infrastructure and the role of green-finance frameworks in directing capital towards environmental objectives.
2.2. Sri Lanka
2.2.1. Sri Lanka outlines plans to become a regional fintech hub
On 28 October 2026, Sri Lanka's Deputy Minister of Digital Economy outlined plans to position the country as a regional fintech hub. The reported initiatives included a cash-light economy, collaboration between banks and fintech companies, a venture-capital funding framework, virtual economic zones, cloud and AI data centres, digital payments and e-invoicing.
2.2.2. Sri Lanka’s national inflation holds steady at 8.1 per cent in September 2026
Sri Lanka's exports reached USD 13.61 billion between January and September 2026, representing year-on-year growth of 5.04 per cent. Merchandise exports amounted to USD 10.76 billion, up 5.35 per cent, while services exports reached USD 2.85 billion, up 3.88 per cent. September exports amounted to USD 1.69 billion, up 17.23 per cent year-on-year. The Export Development Board reportedly released the figures on 26 October 2026.
3. Trends
3.1. Indian Banks Move Towards Large-Scale Adoption of Artificial Intelligence in Banking Operations
Discussions at the Business Standard BFSI Insight Summit 2026 highlighted the growing emphasis among Indian banks on moving artificial intelligence (“AI”) applications beyond pilot projects towards wider operational deployment. Banking executives discussed the potential use of AI in lending, customer experience, operational productivity and internal processes. Industry participants also highlighted the need for stronger data governance, cybersecurity measures and authentication mechanisms as financial institutions increasingly explore autonomous AI agents capable of performing banking-related tasks. The shift towards wider AI deployment could change how banks undertake credit assessment, process customer requests and manage internal operations. However, the use of autonomous AI systems also raises questions concerning accountability, data security and operational oversight. Financial institutions will need to establish appropriate governance mechanisms to ensure that efficiency gains do not compromise customer protection and operational resilience.
3.2. Cybersecurity Vulnerabilities Emerge as a Growing Concern for Smaller NBFCs
NBFC Cyberattacks targeting smaller NBFCs reportedly resulted in financial losses of approximately INR 300 crore over a two-month period, with nearly 150 complaints and first information reports (“FIRs”) filed, according to a report published by Moneycontrol citing information reported by The Economic Times. The incidents have raised concerns regarding the cybersecurity preparedness of smaller lending institutions, particularly in relation to vulnerabilities in digital payment systems and the exploitation of technology-enabled fraud techniques. The report also highlighted concerns regarding the potential use of artificial intelligence tools to facilitate more sophisticated fraud attempts. As NBFCs increasingly depend on digital platforms for customer onboarding, loan disbursement and repayment collection, cybersecurity vulnerabilities can expose both financial institutions and their customers to fraud-related losses. The reported incidents highlight the importance of strengthening information-security infrastructure, transaction monitoring and fraud-detection mechanisms, particularly for smaller lenders with comparatively limited technology resources.
3.3. NBFCs Strengthen Their Position in Specialised Retail Lending as Banks Remain Selective
NBFCs are gaining a larger share of retail loan originations, particularly in specialised lending segments such as gold loans, consumer durable financing and vehicle loans. According to a report published by ETBFSI, NBFCs accounted for 43 per cent of retail loan originations by volume and 30% by value during the quarter ended June 2026. Their presence remains particularly significant in smaller-ticket lending and borrower segments that may have limited access to traditional bank credit. The report also noted that retail credit growth in the NBFC sector has been supported by increased lending against gold jewellery and consumer durable financing. The development highlights the complementary role of NBFCs in India’s retail credit ecosystem. Their specialised distribution networks and lending models allow them to serve borrower segments that may not be adequately addressed by conventional banking channels. However, sustaining this growth will depend on maintaining asset quality, managing funding costs and ensuring appropriate borrower-level credit assessments.
4. Business Updates
4.1. PhonePe remains focused on growth as IPO timeline stays undecided
PhonePe co-founder Rahul Chari has stated that the company has not committed to a timeline for its initial public offering (“IPO”), while remaining focused on business growth and generating free cash flow. He clarified that the proposed IPO had been structured as an offer for sale (OFS) and did not involve raising primary capital. Chari also emphasised the need for a sustainable revenue model for the Unified Payments Interface (“UPI”) ecosystem, citing the importance of merchant discount rate (MDR) in supporting investments in customer education, trust, safety and infrastructure. Beyond payments, PhonePe intends to expand its distribution of financial products, including mutual funds, fixed deposits, insurance and precious metals, while scaling its lending partnerships with banks and non-banking financial companies (NBFCs). Chari further highlighted the potential use of artificial intelligence (AI) in improving operational efficiency and assisting consumers with financial decisions, as well as the company’s plans to follow UPI’s international expansion, including through its first international licence in the UAE.
4.2. PNB Housing Finance targets 40 per cent share of non-housing loans in retail portfolio
Punjab National Bank (“PNB”) Housing Finance is targeting an increase in the share of non-housing loans in its retail asset portfolio to 40 per cent (forty per cent) by the end of the current financial year, with the remaining 60 per cent (sixty per cent) comprising individual housing loans, to improve margins. Non-housing loans accounted for 34.9 per cent (thirty-four point nine per cent) of its retail portfolio at the end of the September 2026 quarter, compared with 27.2 per cent (twenty-seven point two per cent) in the corresponding period last year. Managing Director and Chief Executive Officer Ajai Kumar Shukla stated that the strategy would focus on increasing the lender’s share in the loans against property segment while maintaining compliance with the prescribed principal business criteria norms. The company also plans to increase lending rates across all tenors from 1 November 2026, following the Reserve Bank of India’s (RBI) 25 basis point increase in the repo rate. Shukla indicated that the lending rate increase could be around 10–15 basis points, as the lender’s entire borrowing base is not linked to the repo rate. The company reported a net interest margin of 3.67 per cent (three point six seven per cent) during the September quarter, while loan disbursements increased to INR 9,609 crore (Indian Rupees Nine Thousand Six Hundred and Nine Crore only) from INR 5,995 crore (Indian Rupees Five Thousand Nine Hundred and Ninety-Five Crore only) in the corresponding quarter of the previous financial year.
4.3. IndusInd Bank adopts calibrated approach to microfinance growth amid drought concerns
IndusInd Bank’s microfinance portfolio returned to growth in the September 2026 quarter after around eight quarters of decline, increasing by 8 per cent (eight per cent) sequentially. However, the bank is adopting a calibrated approach to further expansion in view of drought declarations in Karnataka, Maharashtra and Andhra Pradesh, with management also identifying fuel prices, inflation and upcoming State elections as key risks. Asset quality in the microfinance segment improved, with gross slippages declining to 3.3 per cent (three point three per cent) from 4.6 per cent (four point six per cent) in the previous quarter, while loans overdue by 1–90 days declined to 0.6 per cent (zero point six per cent) from 1 per cent (one per cent). Bank-wide credit costs also declined by 26 basis points sequentially to 1.40 per cent (one point four zero per cent), with approximately 89 per cent (eighty-nine per cent) of the microfinance portfolio covered under the Credit Guarantee Fund for Micro Units (CGFMU). Changes to microfinance underwriting introduced last year were stated to be yielding results.
5. Sector Overview
5.1. India’s banking sector expects sustained double-digit credit growth amid macroeconomic challenges
The latest Federation of Indian Chambers of Commerce and Industry-Indian Banks' Association (FICCI-IBA) Bankers’ Survey has indicated that India’s banking sector remains confident of sustaining double-digit credit growth despite funding pressures and macroeconomic headwinds. Retail and small and medium enterprises (“SME”) lending have emerged as the key drivers, with more than four-fifths of respondents expecting robust double-digit year-on-year growth in both segments and almost all respondents anticipating double-digit growth in SME credit. The survey also highlighted improved asset quality, stronger capital buffers, sustained retail demand and emerging signs of a broader revival in private-sector capital expenditure as factors supporting the sector’s resilience.
5.2. RBI Central Board reviews economic outlook and potential risks at 625th meeting
The Central Board of Directors of the Reserve Bank of India (“RBI”), at its 625th meeting held in Mumbai on 30 October 2026 under the chairmanship of Governor Sanjay Malhotra, reviewed the prevailing economic conditions, challenges and potential risks to the economic outlook. The Board also reviewed the activities of the Deposit Insurance and Credit Guarantee Corporation (DICGC) and select RBI Central Office departments. As part of Vigilance Awareness Week 2026, the Board members also took the Integrity Pledge. All four Deputy Governors and other Central Board directors attended the meeting.
5.3. RBI to retain existing dimensions for polymer banknotes to avoid ATM reconfiguration costs
RBI is planning to retain the existing dimensions of INR 10 (Indian Rupees Ten only) and INR 20 (Indian Rupees Twenty only) banknotes for its proposed polymer currency pilot, likely to commence on 1 April 2027, to avoid costs associated with reconfiguring automated teller machines (“ATMs”). The move is expected to spare banks expenditure on modifying cash-dispensing cassettes, updating sensors and recalibrating machines. Previous recalibration exercises following the introduction of new INR 100 (Indian Rupees One Hundred only) and INR 200 (Indian Rupees Two Hundred only) notes reportedly cost the ATM industry approximately INR 100 crore (Indian Rupees One Hundred Crore only) for around 2.4 lakh machines. The pilot, initiated by Bharatiya Reserve Bank Note Mudran Private Limited (BRBNMPL), has received six bids for the supply of 68,000 reams of biaxially oriented polypropylene (BOPP) substrate, equally divided between the two denominations. The substrate is required to meet prescribed technical specifications, including safeguards against animal-derived materials. The pilot will assess the performance of polymer notes under Indian climatic and operational conditions, with the RBI Governor having indicated that such notes could last two to four times longer than paper currency. The Government has approved field trials of one billion notes each in the INR 10 and INR 20 denominations.
5.4. Banks see no immediate need for fresh capital under RBI’s revised operational risk rules
Banks do not expect the RBI revised operational risk capital requirements to trigger an immediate need for fresh capital, although the impact is expected to vary across lenders depending on their operational loss history and the revised calculation methodology. The revised directions specify the calculation of the business indicator used to determine operational risk capital requirements and will take effect from 1 April 2027. The changes could improve banks’ capital adequacy ratios by 10–15 basis points, as a reduction in risk-weighted assets (RWAs) would improve capital ratios without any corresponding change in capital. However, the revised framework incorporates historical operational losses through an internal loss multiplier, which could increase capital charges for certain lenders. The loss component is calculated as 15 times the average annual operational risk losses, net of recoveries, with banks generally required to maintain 10 years of high-quality annual loss data, although a minimum of five years may be used for the initial calculation. The operational risk changes form part of wider regulatory revisions taking effect from 1 April 2027, including changes to credit and market risk capital requirements and the transition to expected credit loss (ECL)-based provisioning, which could add to capital pressures for some lenders.
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
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