Banking & Finance Digest October 19, 2026
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1. Regulatory Updates
1.1. India
Reserve Bank of India (RBI)
1.1.1. RBI announces regulatory measures for the Foreign Exchange Market
The Reserve Bank of India (“RBI”) has introduced a series of regulatory measures to strengthen market discipline and risk management in the foreign exchange market. Under the revised framework, Authorised Dealers (“ADs”) will no longer be permitted to allow the rebooking of cancelled foreign exchange derivative contracts involving the Indian Rupee (“INR”), although rollover of contracts on maturity will continue to be permitted in accordance with existing regulations. RBI has also reduced the threshold for undertaking foreign exchange derivative transactions without establishing underlying exposure from USD 100 million to USD 5 million equivalent across all ADs and recognised stock exchanges. In addition, ADs will be required to obtain undertakings from users confirming that the same underlying exposure has not been hedged with another AD. RBI has further introduced a Foreign Exchange Risk Reserve (FERR), requiring ADs to maintain cash reserves equal to 20 per cent (twenty per cent) of the INR equivalent of certain foreign exchange derivative contracts exceeding USD 2 million where foreign currency is purchased against the INR to hedge current account exposures. RBI stated that the measures are intended to promote prudent risk management and ensure the orderly and transparent functioning of the foreign exchange market.
Securities and Exchange Board of India (SEBI)
1.1.2. SEBI proposes revised framework for monitoring utilisation of Issue Proceeds
SEBI on 13 October 2026, published a consultation paper setting out recommendations of the working group reviewing the framework under the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, concerning the monitoring and disclosure of the utilisation of issue proceeds. The proposed review seeks to strengthen transparency and accountability in the utilisation of funds raised by listed companies through public issues. The recommendations contemplate enhanced oversight of the monitoring process, including a proposal for monitoring agencies to report directly to stock exchanges and for stock exchanges to have powers to penalise companies that fail to cooperate with such monitoring. The proposals are intended to strengthen investor protection and improve accountability in the deployment of funds raised from the capital markets. As the recommendations are contained in a consultation paper, they should not be treated as amendments already in force.
1.1.3. SEBI notifies Portfolio Managers Regulations, 2026
SEBI published the Securities and Exchange Board of India (Portfolio Managers) Regulations, 2026, on 12 October 2026. The new regulatory framework is scheduled to take effect from 1 April 2027. The notification marks a regulatory development for portfolio managers and entities providing portfolio management services. Portfolio managers should review the notified regulations and assess the requirements applicable to their operations ahead of the commencement date. The new regulations are scheduled to become effective on 1 April 2027; accordingly, the commencement date should be distinguished from the date of publication of the regulations.
International Financial Services Centres Authority (IFSCA)
1.1.4. IFSCA constitutes Technical Working Group on CIC in GIFT IFSC
The International Financial Services Centres Authority (“IFSCA”) has constituted a Technical Working Group (“TWG”) on Credit Information Companies (“CICs”) to support the development of a robust credit information ecosystem within the Gujarat International Finance Tec-City International Financial Services Centre (GIFT IFSC). The TWG will function as a standing expert body to examine technical, operational, legal and regulatory issues relating to the establishment and functioning of CICs in the IFSC and recommend measures to develop a secure, interoperable and internationally aligned credit information framework. The TWG comprises representatives from CICs, banks operating in the IFSC, finance companies registered with IFSCA and an IFSCA observer. Its mandate includes recommending standardised credit information reporting formats, procedures for correction and resubmission of erroneous data, and solutions to implementation challenges relating to onboarding, data submission, reconciliation and reporting. The working group has been established to strengthen credit information infrastructure and facilitate efficient credit risk assessment and information sharing within the IFSC ecosystem.
National Payments Corporation of India (NPCI)
1.1.5. NPCI defers implementation of MDR on select UPI merchant transactions
The National Payments Corporation of India (NPCI), on 13 October 2026, announced that the implementation of the Merchant Discount Rate (MDR) on specified Person-to-Merchant (P2M) Unified Payments Interface (UPI) transactions would be deferred until immediately after Diwali, with the revised implementation date to be notified separately. The framework, originally scheduled to take effect on 15 October 2026, provides for an MDR of 0.4 per cent (zero point four per cent) on eligible merchant transactions exceeding INR 2,000 (Indian Rupees Two Thousand only), subject to the prescribed cap. The deferment gives merchants, banks and payment service providers additional time to prepare for implementation and adjust operational processes.
2. Key Asian Markets – Bangladesh & Sri-Lanka
2.1. Bangladesh
2.1.1. Government of Bangladesh conducts first-ever treasury bond buyback auction to improve debt management
The Government of Bangladesh, through Bangladesh Bank (BB), conducted its first-ever government securities buyback auction on 11 October 2026, repurchasing Tk 1,716.14 crore (Bangladeshi Taka One Thousand Seven Hundred Sixteen Crore and Fourteen Lakh only) of outstanding two-year treasury bonds before maturity. Of 56 bids worth Tk 2,016.14 crore (Bangladeshi Taka Two Thousand Sixteen Crore and Fourteen Lakh only), BB accepted Tk 1,716.14 crore (Bangladeshi Taka One Thousand Seven Hundred Sixteen Crore and Fourteen Lakh only), against a notified amount of Tk 6,666.58 crore (Bangladeshi Taka Six Thousand Six Hundred Sixty-Six Crore and Fifty-Eight Lakh only). The initiative aims to smooth debt repayments, reduce refinancing risks and improve public debt management.
2.2. Sri Lanka
2.2.1. CBSL highlights rising credit risks in Financial Stability Review 2026
The Central Bank of Sri Lanka (“CBSL”) released its Financial Stability Review (FSR) for 2026, reporting that the financial system remained stable during the first half of 2026, supported by economic recovery and adequate capital and liquidity buffers across banks and finance companies. However, annual credit growth in the banking sector accelerated to 23.6 per cent in the second quarter of 2026, compared with 11.4 per cent a year earlier. The CBSL also highlighted emerging vulnerabilities from rapid household lending, particularly vehicle financing and gold-backed loans, alongside rising household indebtedness and exposure to volatile collateral values.
2.2.2. CBSL reports continued expansion in manufacturing and services activity in September 2026
CBSL has reported that both manufacturing and services activities continued to expand in September 2026, according to the latest Purchasing Managers’ Index (PMI) survey. The PMI – Manufacturing remained unchanged at 53.0, indicating continued expansion at the same pace as the previous month, supported by growth in new orders and production, particularly in the food and beverages and textiles sectors. Employment also increased, while manufacturers remained optimistic about activity over the next three months, driven by expectations of stronger year-end seasonal demand.
3. Trends
3.1. RBI tightens Foreign Exchange Measures to curb speculation and stabilise the Rupee
On 12 and 13 October 2026, the RBI’s foreign exchange measures continued to influence the currency market. The measures included directing certain oil marketing companies to purchase United States dollars through a special facility and imposing cash-margin requirements on specified foreign exchange hedging transactions. Market participants expect future earnings growth to rely increasingly on core lending income, fee-based revenues and controlled credit costs, particularly if bond yields remain elevated. Public sector banks may experience a more pronounced impact due to their relatively larger holdings of government securities.
3.2. Indian fintech funding increases despite fewer investment deals
India’s fintech sector reportedly attracted USD 2.2 billion in equity funding between January and September 2026, representing a 14 per cent increase compared with the corresponding period in 2025. However, the number of funding rounds declined by 41 per cent. The divergence suggests that the increase in funding was concentrated in fewer transactions, making fundraising conditions potentially more selective for fintech businesses. The trend is relevant to fintech companies assessing capital requirements, investors evaluating opportunities and financial institutions considering partnerships with technology-led financial-services providers.
4. Sector Overview
4.1. Specialised personal-loan NBFCs projected to record 50 per cent AUM growth in FY27
Specialised personal-loan non-banking financial companies (“NBFCs”) are expected to record approximately 50 per cent (fifty per cent) growth in assets under management (“AUM”) to INR 2 lakh crore (Indian Rupees Two Lakh Crore only) in FY27, compared with INR 1.3 lakh crore (Indian Rupees One Lakh Thirty Thousand Crore only) in FY26, according to a report by CRISIL Ratings. The growth is expected to be supported by sustained consumer demand, improving portfolio performance and the scalability of digital lending models. Improved asset quality has been attributed to tighter underwriting standards, selective lending and a greater focus on higher-quality borrowers, with new-to-credit borrowers accounting for only 4 per cent (four per cent) of AUM at the end of FY26, compared with approximately 10 per cent (ten per cent) two years earlier. Further, the adjusted 90-days-past-due ratio, including trailing 12-month write-offs, declined to 6.6 per cent (six point six per cent) as of March 31, 2026, from 8.5 per cent (eight point five per cent) a year earlier. The report also noted a shift towards higher-ticket loans exceeding INR 50,000 (Indian Rupees Fifty Thousand only) and a decline in exposure to short-tenor and high-annualised-percentage-rate loans.
5. Business Updates
5.1. Paytm’s domestic shareholding rises to 56 per cent as institutional ownership increases
One 97 Communications Limited, the parent company of Paytm, has reported an increase in domestic shareholding to over 56 per cent (fifty-six per cent) as of the end of the September quarter of FY27, according to its latest shareholding pattern filed with the stock exchanges. Domestic institutional ownership rose to 29.5 per cent (twenty-nine point five per cent), compared with 24.9 per cent (twenty-four point nine per cent) in the previous quarter, while domestic mutual funds increased their combined stake to 21.2 per cent (twenty-one point two per cent) from 17.9 per cent (seventeen point nine per cent). Domestic insurance companies also increased their combined holding to 6.2 per cent (six point two per cent) from 5.3 per cent (five point three per cent). In contrast, foreign direct investment holdings declined to 18.4 per cent (eighteen point four per cent) from 23.8 per cent (twenty-three point eight per cent), following block deals during the July–September quarter involving entities associated with Elevation Capital and Resilient Asset Management BV. The increase in domestic ownership marks the third consecutive quarter in which Paytm has remained majority Indian-owned, reinforcing its position as an Indian-Owned and Controlled Company (“IOCC”).
5.2. Fairfax’s acquisition of IDBI Bank signals growing foreign investor interest in India’s financial sector
Fairfax Financial Holdings Limited’s acquisition of a 60.7 per cent (sixty point seven per cent) stake in IDBI Bank Limited for approximately USD 6 billion (United States Dollars Six Billion only) is expected to support India’s banking sector reforms and signal growing foreign investor interest in the country’s financial services industry. The transaction follows the Government of India’s consolidation of 10 (ten) state-owned lenders into 4 (four) in 2019, reducing the number of public sector banks from 27 (twenty-seven) to 12 (twelve). The deal comes amid growing interest from overseas investors and private equity firms in Indian financial services assets, including reported interest in IIFL Finance Limited and Shriram Finance Limited. The increasing dealmaking activity reflects investor interest in India’s expanding economy, rising middle-class incomes and growing population of affluent citizens. The developments also align with the Government’s broader efforts to strengthen the banking system to support India’s ambition of becoming a developed economy by 2047, including consideration of further consolidation among public sector banks.
5.3. SMFG India Credit plans supply chain finance launch by Q3 FY27 and targets higher secured lending mix
SMFG India Credit has announced plans to launch its supply chain finance business by the third quarter of FY27, leveraging corporate relationships within the Sumitomo Mitsui Financial Group (“SMFG”) ecosystem and new technology and governance frameworks currently being implemented. Managing Director and Chief Executive Officer, Ravi Narayanan, described supply chain finance as a “quasi-wholesale” lending opportunity that complements the company’s existing retail and wholesale lending operations and stated that the business is expected to begin generating initial results during the current fiscal year.
5.4. Godrej Wealth targets INR 3,000 crore AUM in first year and expands wealth management footprint
Godrej Wealth, the wealth management arm of Godrej Capital, has outlined plans to achieve AUM of INR3,000 crore in its first year of operations, with an initial focus on establishing its presence across eight major cities and validating its customer proposition, technology platform and advisory framework. The company also aims to expand to at least 35 locations over the next three years as part of its broader objective of reaching INR 1 lakh crore AUM by 2031. The company intends to differentiate itself through personalised risk assessment models, technology-enabled portfolio aggregation and its proprietary “Godrej Choice” framework, which combines quantitative and qualitative analysis for investment selection. Leveraging the wider Godrej Group ecosystem, including approximately 50,000 existing lending customers, Godrej Wealth expects to build its client base through cross-selling opportunities and integrated financial solutions spanning lending, wealth creation and long-term financial planning. The company also indicated that an asset management business could be launched within the next three to five quarters.
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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