Copy of Banking & Finance Digest October 26, 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 issues amendment directions removing limits for Non-Option Derivative Contracts
The Reserve Bank of India (“RBI”) has issued the Reserve Bank of India (Commercial Banks - Miscellaneous) Second Amendment Directions, 2026, with immediate effect. Pursuant to a regulatory review and in exercise of its powers under the Banking Regulation Act, 1949, RBI has deleted Section C (Limits for Non-Option Derivative Contracts) under Chapter IV (Paragraph 37) of the Reserve Bank of India (Commercial Banks- Miscellaneous) Directions, 2025. The amendment came into force upon issuance and removes the existing regulatory limits applicable to non-option derivative contracts for commercial banks.
1.1.2. RBI removes limits on Non-Option Derivative Contracts for SFBs
RBI has issued the Reserve Bank of India (Small Finance Banks - Miscellaneous) Amendment Directions, 2026, with immediate effect. Pursuant to the amendment, RBI has removed the provisions prescribing limits for non-option derivative contracts under the existing regulatory framework for Small Finance Banks (“SFBs”). The change streamlines the regulatory regime governing derivative transactions undertaken by SFBs and takes effect from the date of publication.
1.1.3. RBI issues final guidelines on implementation of Basel Leverage Ratio 2017 Standard
RBI has issued the Reserve Bank of India (Commercial Banks – Prudential Norms on Capital Adequacy) Eleventh Amendment Directions, 2026, finalising the implementation of the Leverage Ratio 2017 Standard issued by the Basel Committee on Banking Supervision. The final directions follow a public consultation process conducted in August 2026, during which stakeholder feedback on the draft framework was invited and subsequently considered by the RBI. The amended framework introduces the latest Basel-aligned leverage ratio requirements for commercial banks as part of the RBI’s ongoing efforts to strengthen prudential regulation and enhance the resilience of the banking sector. The RBI has stated that stakeholder feedback has been suitably incorporated into the final directions. The revised leverage ratio framework will come into effect from 1 April 2027.
1.1.4. RBI issues Basel III Operational Risk Capital Framework Implementation Directions
RBI has issued the Reserve Bank of India (Commercial Banks – Forthcoming Instructions) Second Amendment Directions, 2026, setting out the implementation framework for the Basel III Standardised Approach (Basel III SA) for minimum regulatory capital requirements relating to operational risk. The Directions specify the implementation date, provide an indicative mapping of Business Indicator (BI) components to financial statement line items, and incorporate additional clarifications issued by the Basel Committee on Banking Supervision (BCBS). The RBI noted that the revised Basel III capital adequacy framework for commercial banks, excluding SFBs, Payment Banks (PBs) and Regional Rural Banks (RRBs), will come into effect from 1 April 2027. The amendment operationalises the minimum capital framework for operational risk under Basel III and provides greater clarity to banks on the computation and reporting requirements ahead of implementation.
Securities and Exchange Board of India (SEBI)
1.1.5. SEBI proposes automatic approval route for investments in related activities by Market Infrastructure Institutions
SEBI through a consultation paper dated 22 October 2026, has proposed amendments to Regulation 38(2) of the Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2018 and Regulation 7(c)(i) of the Depositories and Participants Regulations, 2018. The proposal seeks to introduce an automatic approval route enabling recognised stock exchanges, clearing corporations and depositories to undertake investments in specified related activities without obtaining prior SEBI approval, subject to prescribed conditions and safeguards. The proposal is intended to reduce procedural delays, improve operational flexibility and facilitate business expansion by Market Infrastructure Institutions ("MIIs"), while maintaining regulatory oversight through eligibility conditions and investment limits. As this is a consultation paper, the proposals are not yet in force.
1.1.6. SEBI introduces margin waiver framework for subsequent transactions following Early Pay-In
SEBI issued a circular on 22 October 2026 providing a framework for granting margin relief on subsequent buy/sell transactions in the cash segment where securities have already been provided through the Early Pay-In ("EPI") mechanism. Under the revised framework, brokers may obtain margin benefits to the extent of the value covered by accepted EPI securities.
The circular is expected to improve capital efficiency for market participants and reduce collateral requirements in eligible transactions while preserving market risk safeguards. Market intermediaries should review operational and system changes required before implementation.
1.1.7. SEBI issues Investor Advisory on Invitation-Only WhatsApp Stock Tip Groups
SEBI issued Press Release No. 65/2026 cautioning investors against stock tips and investment recommendations circulated through invitation-only WhatsApp groups operated by unregistered persons. The regulator warned investors against relying on unverifiable claims, manipulated trading records and unauthorised advisory services offered through social media channels.
International Financial Services Centres Authority (IFSCA)
1.1.8. IFSCA issues comprehensive guidelines for Algorithmic Trading in IFSC stock exchanges
The International Financial Services Centres Authority ("IFSCA") has issued comprehensive guidelines governing algorithmic trading on stock exchanges operating in the International Financial Services Centre ("IFSC"), to strengthen market integrity, enhance liquidity and ensure orderly market conduct. The framework introduces mandatory stock exchange approval for algorithmic trading systems, conformance testing requirements, extensive pre-trade risk controls, kill-switch mechanisms, audit trail obligations, annual system audits and enhanced surveillance measures. The guidelines also impose specific governance and compliance responsibilities on Broker Dealers, Remote Trading Participants (RTPs) and Direct Market Access/Sponsored Access (DMA/SA) clients, while requiring stock exchanges to implement mechanisms to address order flooding, dysfunctional trading algorithms and excessive order-to-trade ratios. Stock exchanges have been directed to implement the framework within three months.
Miscellaneous
Telecom Regulatory Authority of India (TRAI)
1.1.9. 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.
National Payments Corporation of India (NPCI)
1.1.10. 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 – Philippines & Indonesia
2.1. Philippines
2.1.1. GIR declines to USD 99.5 billion as balance of payments records USD 3.1 billion deficit in September 2026
BSP reported that the Philippines’ gross international reserves (“GIR”) stood at USD 99.49 billion (United States Dollars Ninety-Nine Billion Four Hundred Ninety Million only) as of September 30, 2026, primarily due to net foreign exchange operations, valuation adjustments and the national government’s foreign currency debt servicing requirements. The GIR level remained sufficient to cover 6.2 months of imports and 3.1 times the country’s short-term external debt. The country’s overall balance of payments (BOP) recorded a deficit of USD 3.14 billion (United States Dollars Three Billion One Hundred Forty Million only) in September 2026, bringing the cumulative January-September 2026 deficit to USD 9.09 billion (United States Dollars Nine Billion Ninety Million only), compared to USD 5.32 billion (United States Dollars Five Billion Three Hundred Twenty Million only) during the corresponding period in 2025. The increase in the deficit was driven by the continued trade deficit and foreign portfolio investment outflows, partly offset by remittances, foreign direct investment inflows and government borrowings.
2.1.2. BSP warns public against fraudulent use of names of its officials and employees
The Bangko Sentral ng Pilipinas (“BSP”) issued an advisory on October 15, 2026, warning the public against scams involving individuals falsely claiming to be BSP officials or employees. Such individuals may send letters or electronic messages requesting deposits or transfers to bank or other financial accounts, purportedly to facilitate the release, recovery or restoration of funds or for charitable purposes. In some cases, they may present forged BSP identification cards bearing the name, photograph and signature of an official or employee. The BSP clarified that such identification cards and the contact details used by the scammers are not authorised. It further emphasised that its officials and employees do not solicit funds or payments from the public for charitable purposes or for the release, recovery or restoration of funds. The public has been advised not to transfer funds, disclose personal account or other financial information, click on suspicious links, or download attachments from unknown or unverified sources. The BSP urged the public to exercise caution and independently verify the authenticity of communications purportedly originating from the BSP or its officials and employees through its designated channels.
2.2. Indonesia
2.2.1. BI reports sustained business activity growth in Q3 2026
Bank Indonesia (“BI”) has reported that business activity remained resilient during the third quarter of 2026, as reflected by a Weighted Net Balance (WNB) of 11.46 per cent (eleven point four six per cent). Growth was driven by strong performance in the manufacturing, public administration, electricity and gas supply, construction and real estate sectors. Production capacity utilisation remained stable at 73.75 per cent (seventy-three point seven five per cent), while corporate liquidity, profitability and access to credit continued to improve. Looking ahead, respondents expect business activity to remain positive in the fourth quarter of 2026, with a projected WNB of 10.77 per cent (ten point seven seven per cent), supported by seasonal demand during the Christmas and New Year period.
3. Trends
3.1. Funding Costs and Liquidity Management Emerge as Key Considerations for Banks and NBFCs
The relationship between credit growth, deposit mobilisation and system liquidity remains an important consideration for India’s banking and lending sector. A report published by CRISIL Ratings on 7 October 2026 projected domestic bank credit growth of approximately 14.5%–15.5% for the financial year 2026–27, supported by retail and micro, small and medium enterprise (“MSME”) lending. The report also highlighted the importance of deposit mobilisation and liquidity conditions in sustaining lending growth. Separately, an October 2026 industry report noted that banks whose advances were growing faster than their deposits could face greater funding pressure if liquidity tightened, with potential implications for NBFCs dependent on bank borrowings.
4. Sector Overview
4.1. Government plans to reduce stakes in four public sector banks to 75 per cent
The Union Government is considering reducing its shareholding in Central Bank of India, UCO Bank, Punjab & Sind Bank and Indian Overseas Bank to 75 per cent (seventy-five per cent) to meet the minimum public shareholding requirement prescribed by the stock market regulator. The government is also working on the next phase of consolidation in public sector banks, which could identify two additional banks for privatisation. The proposed stake dilution is expected to be undertaken over the next year through offers for sale, depending on market conditions. The government aims to retain three to four large state-owned banks, with potential consolidation decisions to consider technology compatibility, geographical presence and business mix. Privatisation would require legislative amendments, including to the Banking Companies (Acquisition and Transfer of Undertakings) Act. The government had exempted state-run companies, including financial institutions, from the minimum public shareholding requirement of 25 per cent (twenty-five per cent) until August 2026, with a further extension expected to be notified.
4.2. NBFCs face margin pressure from rising funding costs despite robust loan growth
Non-banking financial companies (“NBFCs”) are expected to report healthy earnings for the September 2026 quarter, supported by strong credit demand, steady loan growth and stable asset quality. However, the operating environment may become more challenging in the second half of Financial Year (FY) 2026-27 as higher interest rates increase funding costs. The RBI’s recent 25 basis point repo rate hike and shift to a calibrated tightening stance have raised expectations of further rate increases, with analysts anticipating an additional 50 basis points of hikes during the remainder of the year. As NBFCs rely on bank borrowings, bonds, commercial papers and other market instruments to fund their loan books, higher interest rates may increase fresh borrowing and refinancing costs, placing pressure on margins.
5. Business Updates
5.1. Jio Platforms IPO attracts demand of approximately INR 6.5 lakh crore as subscription crosses 18 times
Jio Platforms Ltd.’s INR 30,200-crore (Indian Rupees Thirty Thousand Two Hundred Crore only) initial public offering (“IPO”) attracted total demand of approximately INR 6.5 lakh crore (Indian Rupees Six Lakh Fifty Thousand Crore only), including anchor investor interest and bids received by the second day of public subscription. The portion reserved for qualified institutional buyers was subscribed 54.68 times, while the non-institutional and retail investor portions were subscribed 13.83 times and 2.63 times, respectively. Employee and shareholder reservations were subscribed 2.85 times and 7.47 times, respectively. The IPO received bids worth approximately INR 4.5 lakh crore (Indian Rupees Four Lakh Fifty Thousand Crore only) on 22 October 2026, calculated at the upper end of the price band of INR 1,065–INR 1,119. Jio Platforms allotted shares worth INR 8,109.85 crore (Indian Rupees Eight Thousand One Hundred Nine Crore and Eighty-Five Lakh only) to 212 anchor investors at the upper end of the price band. The IPO, which opened on 21 October 2026, is scheduled to close on 23 October 2026, with listing expected on 28 October 2026. The offering has also received more than one crore applications, surpassing the previously reported record of approximately 97 lakh applications for Waaree Energies Ltd.’s IPO.
5.2. PhonePe rebrands Share Market as PhonePe Invest, targets first-time equity investors
PhonePe has rebranded its investing and trading platform, Share.Market, as PhonePe Invest, integrating equities, IPOs, mutual funds and futures and options offerings within its broader financial services ecosystem. The company has also launched Portfolio Optimiser, a proprietary tool designed to help users build, analyse and optimise investment portfolios. The rebranding reflects PhonePe's strategy to expand beyond active traders and investors by targeting individuals who currently invest through products such as gold, fixed deposits and mutual funds. The company stated that the platform is intended to facilitate participation in equity markets by first-time investors, while continuing to serve existing investors and traders through portfolio monitoring, analysis and investment management tools.
5.3. L&T reports highest-ever quarterly profit and loan book growth in Q2 FY27
L&T Finance Ltd. (“L&T”) reported its highest-ever consolidated profit after tax (“PAT”) of INR 975 crore (Indian Rupees Nine Hundred Seventy-Five Crore only) for the quarter ended 30 September 2026, registering a growth of 33 per cent (thirty-three per cent) year-on-year. Its consolidated book grew 28 per cent (twenty-eight per cent) to INR 1,36,635 crore (Indian Rupees One Lakh Thirty-Six Thousand Six Hundred Thirty-Five Crore only), while its retail book increased 29 per cent (twenty-nine per cent) to INR 1,34,600 crore (Indian Rupees One Lakh Thirty-Four Thousand Six Hundred Crore only). Retail disbursements rose 27 per cent (twenty-seven per cent) to INR 24,027 crore (Indian Rupees Twenty-Four Thousand Twenty-Seven Crore only). Growth was recorded across key business segments, including personal loans, gold finance, two-wheeler finance and small and medium enterprise finance. The company also continued to expand its digital capabilities through its PLANET app, which surpassed 2.7 crore downloads and handled 94 per cent (ninety-four per cent) of customer service requests during the quarter. L&T stated that it would continue to focus on disciplined underwriting, asset quality, technology deployment and risk-calibrated growth under its Lakshya 2031 strategy.
5.4. RBI approves amalgamation of Emirates NBD Bank India Branches with RBL Bank
RBI has approved the amalgamation of the Indian branches of Emirates NBD Bank P.J.S.C. with RBL Bank Limited under a sanctioned Scheme of Amalgamation pursuant to Section 44A of the Banking Regulation Act, 1949. The amalgamation will take effect from 1 December 2026, from which date all Indian branches of Emirates NBD Bank P.J.S.C. will operate as branches of RBL Bank Limited. The transaction marks a regulatory consolidation in the banking sector and facilitates the transfer of the transferor bank's Indian branch operations to the transferee bank.
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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