Banking & Finance Digest September 28, 2026
Updated: 9 hours ago
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
1.1.1. RBI issues Basel-III directions on Minimum Capital Requirements for Market Risk
The Reserve Bank of India ("RBI") has issued the Reserve Bank of India (Commercial Banks - Minimum Capital Requirements for Market Risk) Directions, 2026, aligning the market risk framework for commercial banks with the revised Basel III standards. The Directions adopt the Simplified Standardised Approach (SSA) for calculating market risk capital requirements while seeking to simplify compliance and provide operational flexibility. Key changes include alignment of trading book treatment with existing investment classification norms, revised foreign exchange risk capital charge provisions, updated specific risk capital requirements for interest rate risk, revised capital treatment for debt mutual funds and Exchange Traded Funds (ETFs) held in the trading book, and inclusion of provisions for positions hedged through credit derivatives such as total return swaps. The Directions will come into effect from 1 April 2027, providing banks with sufficient implementation time.
1.1.2. RBI fixes GoI WMA Limit at INR 50,000 Crore for H2 FY 2026-27
RBI, in consultation with the Government of India (GoI), has fixed the limit for Ways and Means Advances ("WMA") for the second half of Financial Year (FY) 2026-27, i.e., from October 2026 to March 2027, at INR 50,000 crore (Indian Rupees Fifty Thousand Crore only). RBI has stated that fresh market borrowings may be triggered when utilisation reaches 75 per cent (seventy-five per cent) of the WMA limit and has retained the flexibility to revise the limit depending on prevailing circumstances. The interest rate applicable on WMA will continue to be linked to the RBI Repo Rate, while overdrafts will attract an interest rate 2 per cent (two per cent) above the Repo Rate.
Securities and Exchange Board of India (SEBI)
1.1.3. SEBI board approves sweeping reforms across PMS, Settlement, AIF, REIT, InvIT and Market Infrastructure Frameworks
The Securities and Exchange Board of India ("SEBI"), at its Board meeting held on 24 September 2026, approved a wide-ranging set of regulatory reforms covering Portfolio Management Services (PMS), settlement proceedings, Alternative Investment Funds (AIFs), Real Estate Investment Trusts (REITs), Infrastructure Investment Trusts (Inv-ITs), Foreign Portfolio Investors (FPIs), vault managers and capital market intermediaries. Key measures include notification of the SEBI (Portfolio Managers) Regulations, 2026, introduction of the Portfolio Managers Route for Investing in Mutual Funds (PRIM), permission for PMS investments in foreign securities and primary market issuances, and recognition of Independent Fund Managers (IFMs). SEBI also approved new Settlement Regulations, 2026, introducing a revised settlement formula, fast-track settlements, a wider settlement window and separate disgorgement treatment for wrongful gains.
International Financial Services Centres Authority
1.1.4. IFSCA issues framework for Differential Distribution by investment funds in IFSCs
The International Financial Services Centres Authority ("IFSCA") has issued a framework governing differential distribution mechanisms for investment funds operating in International Financial Services Centres ("IFSCs"). The framework is intended to provide greater flexibility in structuring fund distributions while ensuring transparency, investor protection and equitable treatment of stakeholders. The initiative forms part of IFSCA’s ongoing efforts to strengthen the fund management ecosystem, facilitate innovative fund structures and align the IFSC regulatory regime with evolving global market practices.
1.1.6. IFSCA expands eligible Jurisdictions for distribution of Investment Products to Retail Investors
IFSCA has expanded the list of eligible foreign jurisdictions from which investment products may be distributed to retail investors through the IFSC framework. The move is aimed at broadening investor access to a wider range of international investment products, enhancing product diversity and strengthening the attractiveness of IFSCs as global investment gateways. The expanded framework is expected to facilitate greater participation by international fund managers and product providers while maintaining appropriate regulatory safeguards for retail investors.
Miscellaneous
Insurance Regulatory and Development Authority of India
1.1.7. IRDAI repeals Dividend Repatriation Guidelines for Insurance Intermediaries
The Insurance Regulatory and Development Authority of India ("IRDAI") has repealed the Guidelines on Repatriation of Dividends by Insurance Intermediaries Having Majority Foreign Investment with effect from 30 July 2026. The repeal follows the notification of the IRDAI (Insurance Intermediaries) (Amendment) Regulations, 2026, which aligned the regulatory framework with the provisions of the Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Act, 2025 and the Indian Insurance Companies (Foreign Investment) Amendment Rules, 2025. IRDAI noted that the amended regulations have removed the requirement for prior regulatory approval for dividend repatriation and the conditions relating to related-party payments, rendering the earlier guidelines redundant.
Telecom Regulatory Authority of India (TRAI)
1.1.8. TRAI notifies Telecom Consumer Protection (Thirteenth Amendment) Regulations, 2026
TRAI has notified the Telecom Consumer Protection (Thirteenth Amendment) Regulations, 2026 to enhance affordability and consumer choice for users seeking voice and SMS-only services. The amendment mandates Telecom Service Providers (TSPs) to offer Special Tariff Vouchers ("STVs") exclusively for voice and SMS with appropriately reduced tariffs, corresponding to all voice, SMS and data STVs having validity of 30 days or less, monthly renewable validity plans, and at least one longer-validity option. TRAI stated that the measure is intended to address the limited availability of shorter-duration voice and SMS-only plans and provide low-income consumers with greater flexibility to recharge according to their requirements and financial capacity, while improving options for users who do not require bundled data services.
Monetary Penalties
RBI imposes monetary penalties on the following financial institutions:
S. No. | Name of Bank | Amount of Penalty | Contravention |
1. | Ola Financial Services Private Limited
| INR 3,10,000 (Indian Rupees Three Lakh Ten Thousand only) | Non-compliance with RBI directions on Know Your Customer ("KYC"). The company failed to carry out risk categorisation of certain customers as required under the applicable KYC framework. |
2. | Hero Fincorp Limited | INR 10,00,000 (Indian Rupees Ten Lakh only)
| Non-compliance with RBI directions on the Fair Practices Code for Lenders – Charging of Interest. The company collected excess interest from certain loan accounts. |
3. | KLM Axiva Finvest Limited
| INR 2,70,000 (Indian Rupees Two Lakh Seventy Thousand only)
| Non-compliance with RBI directions relating to the auction procedure. The company failed to remit to certain borrowers the surplus amount realised from the auction of pledged gold articles after adjustment of the outstanding loan amount. |
2. Key Asian Markets – Philippines and Indonesia
2.1. Philippines
2.1.1. BSP prescribes capital and prudential requirements for Banks adopting Digital Business Models
The Bangko Sentral ng Pilipinas ("BSP") has issued Circular No. 1240 prescribing capital and prudential requirements for thrift banks ("TBs"), rural banks ("RBs") and cooperative banks transitioning to business models similar to digital banks. Under the framework, existing TBs, RBs and cooperative banks identified by the BSP as operating under a digital bank-like model will be required to maintain a minimum capital of PHP 1.0 billion and comply with prudential standards applicable to digital banks within six months of receiving the BSP’s notice. The same minimum capital requirement will apply to acquisition transactions intended to transform a bank into a technology-driven institution. The BSP may also impose additional supervisory requirements, including enhanced reporting, restrictions on certain products or activities, and strengthened risk management systems. The circular further allows issuance of additional digital banking licences, including through the conversion of existing banks, subject to the applicable licensing framework and regulatory assessment of readiness, governance and operational capabilities.
2.2. Indonesia
2.2.1. BI and BCTL sign MoU on payment systems and digital financial innovation
Bank Indonesia ("BI") and Banco Central de Timor-Leste (BCTL) have signed a Memorandum of Understanding ("MoU") to strengthen cooperation in payment systems and digital financial innovation. Signed on 25 September 2026 during the Indonesia Digital Economy and Finance Festival and Indonesia Fintech Summit and Expo 2026 (FEKDI x IFSE 2026), the MoU provides a framework for collaboration through information sharing, enhanced institutional engagement and development of payment connectivity between Indonesia and Timor-Leste. A key focus area includes exploring Quick Response Code Indonesian Standard (QRIS) Cross-Border implementation, with the objective of facilitating simpler, more efficient, secure and inclusive cross-border payments, while supporting trade, transactions and broader economic activity between the two countries.
2.2.2. BI and HKMA sign MoU to advance QR-Based cross-border payments
BI and the Hong Kong Monetary Authority ("HKMA”) have signed a MoU to strengthen cooperation on Quick Response (“QR”) code-based cross-border payments. The MoU establishes a framework for bilateral collaboration aimed at promoting faster, more affordable, transparent and inclusive cross-border payment solutions between Indonesia and Hong Kong. Under the arrangement, BI and HKMA will engage in discussions on technical, operational and regulatory matters and explore interoperability of QR-based payment systems between the two jurisdictions. The initiative is expected to enhance payment connectivity and facilitate cross-border economic and commercial transactions.
3. Trends
3.1. Bank Credit continues to outpace Deposit Growth despite strong mobilisation in August
India’s banking sector continued to witness robust lending growth in August 2026, with outstanding credit increasing by 20 per cent (twenty per cent) year-on-year to approximately INR 223.9 lakh crore (Indian Rupees Two Hundred Twenty-Three Lakh Ninety Thousand Crore only), compared to deposit growth of 18 per cent (eighteen per cent), which reached INR 278.7 lakh crore (Indian Rupees Two Hundred Seventy-Eight Lakh Seventy Thousand Crore only). On a sequential basis, credit increased by 1.4 per cent (one point four per cent), while deposits grew by 3.5 per cent (three point five per cent), indicating improved deposit mobilisation and a narrowing gap between loan and deposit growth. Non-cash retail transactions also maintained strong momentum, rising 17 per cent (seventeen per cent) year-on-year to approximately INR 94.3 lakh crore (Indian Rupees Ninety-Four Lakh Thirty Thousand Crore only), supported by higher Unified Payments Interface (“UPI”) transaction values.
3.2. RBI reports Forex Inflows of USD 143.6 Billion under Special Swap Facility
RBI has released updated data on foreign exchange inflows mobilised under its special USD-INR swap facility for Foreign Currency Non-Resident (Bank) ("FCNR(B)") deposits, External Commercial Borrowings ("ECBs") and Overseas Foreign Currency Borrowings ("OFCBs"). As on 18 September 2026, aggregate inflows under the facility stood at USD 143.6 billion, comprising USD 132.98 billion through FCNR(B) deposits, USD 5.30 billion through OFCBs and USD 5.30 billion through ECBs. RBI noted that the FCNR(B) deposit window closed on 31 August 2026, while the swap facility for ECBs and OFCBs will remain available until 31 December 2026.
3.3. Finance Ministry seeks Banks’ inputs on AI-Based loan collection frameworks
The Ministry of Finance has sought feedback from banks on the adoption and use of Artificial Intelligence ("AI")-driven tools in loan collection processes as part of a broader assessment of AI implementation across the banking sector. The exercise aims to evaluate current levels of AI adoption, customer protection mechanisms and governance practices, with most banks reportedly using AI for borrower engagement, repayment facilitation, credit monitoring and fraud management, while only a limited number have implemented conversational AI-based collection solutions. The initiative aligns with the Enhanced Access and Service Excellence (EASE) 9.0 reform agenda, which encourages banks to strengthen their technology infrastructure, develop institution-specific Artificial Intelligence frameworks and improve operational efficiency, customer experience and risk management through responsible AI deployment.
4. Sector Overview
4.1. IRDAI’s proposed distribution reforms may reshape India’s InsurTech Sector
The Insurance Regulatory and Development Authority of India ("IRDAI")’s proposed overhaul of insurance distribution economics has raised concerns regarding the future profitability and sustainability of India’s insurtech and insurance intermediary ecosystem, estimated to be worth approximately USD 15 billion. The consultation paper proposes significant reductions in distributor commissions and remuneration across insurance products, aimed at lowering distribution costs, curbing mis-selling and improving value for policyholders. Industry participants have indicated that sustained commission compression could materially affect the business models of web aggregators, brokers and digital insurance platforms, prompting some intermediaries to explore diversification into insurance manufacturing and adjacent businesses.
5. Business Updates
5.1. Pine Labs and Google Cloud partner to build Agentic Commerce Infrastructure for Indian merchants
Pine Labs has partnered with Google Cloud to develop agentic commerce infrastructure aimed at enabling Indian merchants, particularly small and medium-sized businesses, to participate in AI-driven commerce. The collaboration will leverage Google Cloud’s Gemini-powered AI capabilities to support product discovery, customer engagement, merchant operations and payments. Key initiatives include an AI-powered advertising agent for merchants, a multi-agent platform named Jarvis for programme management and customer support, and the P3P payment layer to facilitate real-time and compliant transactions, initially through the UPI. The infrastructure will also support emerging standards such as the Universal Commerce Protocol (UCP) and Agent-to-Agent (A2A) frameworks, with the objective of making AI-enabled commerce more accessible, scalable and compliant for merchants across India.
5.2. Federal Bank and Jana SFB in advanced talks for Share-Swap Acquisition
Federal Bank Limited is reportedly in advanced discussions to acquire Jana Small Finance Bank (Jana SFB) through a share-swap transaction that could value Jana SFB at approximately INR 6,000 crore to INR 6,500 crore (Indian Rupees Six Thousand Crore to Six Thousand Five Hundred Crore only). According to reports, the proposed transaction would involve the acquisition of Jana SFB’s assets and liabilities, following which Jana SFB would cease to exist as a separate banking entity. The deal is expected to strengthen Federal Bank’s priority sector lending portfolio, enhance its presence in microfinance and retail lending segments, and provide operational scale. Discussions are ongoing regarding the swap ratio, employee integration and other operational matters, while regulatory approvals would be required prior to completion. The transaction is also expected to provide an exit avenue for existing investors in Jana SFB, including private equity stakeholders.
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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