AKP Banking & Finance Digest August 25, 2025

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1. Regulatory Updates

1.1. India

Reserve Bank of India (RBI)

1.1.1. RBI releases discussion paper on Review of Monetary Policy Framework

The Reserve Bank of India ("RBI") has released a discussion paper seeking public comments on the second review of India's flexible inflation targeting (FIT) framework. Established under a 2016 amendment to the Reserve Bank of India Act, 1934, this framework sets the inflation target based on the Consumer Price Index (CPI) every five years. The initial target, notified in 2016 and retained in 2021, is up for review by March 2026. Stakeholders and the public are invited to submit comments by September 18, 2025.

1.1.2. RBI invites public comments on the draft circular on Counterparty Credit Risk- Add-on factors for computation of potential future exposure- revises instructions

RBI has invited public comments on a draft circular proposing revised instructions on Counterparty Credit Risk ("CCR") related to Potential Future Exposure ("PFE") calculations, aiming to update the current guidelines under the Basel III Capital Regulations. The draft clarifies that banks acting as clearing members for SEBI-recognised equity and commodity derivatives exchanges must maintain capital charges for CCR. It also aligns the add-on factors for PFE calculation under the Current Exposure Method with international Basel Committee on Banking Supervision standards, reflecting market developments since 2008. Key updates involve revised credit conversion factors for off-balance sheet items like interest rate contracts, exchange rate contracts, equities, precious metals, and other commodities, varying by contract duration. Comments are invited by September 10, 2025.

Securities and Exchange Board of India (SEBI)

1.1.3. SEBI extends timeline for implementation of SEBI circular Margin obligation to be given by way of pledge/re-pledge in the Depository System

The Securities Exchange Board of India ("SEBI") has extended the implementation timeline for its June 03, 2025, circular on margin obligations via pledge/re-pledge in the Depository System from September 01 to October 10, 2025, following requests from depositories for additional time for system readiness and testing. Stock Exchanges, Depositories, and Clearing Corporations must notify members, ensure compliance, and amend relevant rules accordingly.

1.1.4. SEBI issues consultation paper on review of requirement of minimum public offer and timelines to comply with minimum public shareholding for issues in terms of Securities Contracts (Regulation) Rules, 1957

SEBI has issued a consultation paper on the review of requirements of Minimum Public Offer ("MPO") and timelines to comply with Minimum Public Shareholding ("MPS") under the Securities Contracts (Regulation) Rules, 1957, especially for large issuers. SEBI proposes to lower the MPO and extend MPS compliance deadlines based on post-issue market capitalisation thresholds, recognising challenges large companies face in executing substantial public offerings and maintaining market liquidity. For issuers above INR 50,000 Crore (Indian rupees Fifty Thousand Crore only), a reduced MPO and longer timelines for reaching 25 per cent (twenty-five per cent) public shareholding are suggested.

1.1.5. SEBI issues consultation paper on implementation of eligibility criteria for derivatives on non-benchmark indices based on SEBI circular

SEBI issued a consultation paper dated August 18, 2025, on implementing eligibility criteria for derivatives on non-benchmark. The norms require such indices to have at least 14 (fourteen) constituents, top constituent weight not exceeding 20 per cent (twenty per cent), top three combined at most 45 per cent (forty-five per cent), and a descending weight structure. Stock exchanges may launch new qualifying indices or adjust the weight and constituents of existing indices. SEBI invited public comments on these proposals by September 08, 2025.

Miscellaneous

Ministry of Electronics and Information Technology (MeitY)

1.1.6. Promotion and Regulation of Online Gaming Bill, 2025 receives assent of the President of India

The Promotion and Regulation of Online Gaming Bill, 2025, has received the President's assent and regulates all online gaming, including e-Sports, educational games, social gaming, and online money games operated domestically or abroad. The Act aims to establish a regulatory Authority for policy support, development, and oversight of the sector while promoting responsible gaming and protecting youth and vulnerable populations from adverse social, economic, psychological, and privacy-related impacts. It prohibits offering, facilitating, or promoting online money games with expected financial returns due to their links to addiction, fraud, money laundering, and threats to public health and national security. The Bill prescribes strict penalties for violations, including imprisonment and fines.

Unique Identification Authority of India (UIDAI)

1.1.7. UIDAI issues Aadhaar (Sharing of Information) First Amendment Regulations, 2025

The Unique Identification Authority of India ("UIDAI") has issued the Aadhaar (Sharing of Information) First Amendment Regulations, 2025, which amends the Aadhaar (Sharing of Information) Regulations, 2016. The amendment allows UIDAI, with the consent of a parent or guardian, to share the Aadhaar number generated for children below 5 (five) years of age, enrolled based on a birth certificate without collecting core biometric information, with the Registrar General of India or the State Chief Registrar under the Registration of Births and Deaths Act, 1969, to prevent duplicate Aadhaar enrolments based on the same birth certificate. Additionally, it provides that sharing is not required in cases where the Aadhaar number of a deceased person is deactivated under specific enrolment regulations.

1.1.8. UIDAI issues Aadhaar (Payment of Fees for Performance of Authentication) Amendment Regulations, 2025

UIDAI, exercising powers under sections 54(1) and (2) of the Aadhaar Act, 2016, has issued the Aadhaar (Payment of Fees for Performance of Authentication) Amendment Regulations, 2025, dated August 20, 2025. These regulations amend the 2023 Regulations by introducing a new sub-regulation 2A to regulation 3. This new sub-regulation specifies that where a requesting entity, having a MoU or agreement with the Authority, receives updates about the status of Aadhaar numbers previously submitted, such as omission, deactivation, or reactivation, a fee shall be charged for each such update. However, no fee will be charged if the requesting entity provides information about deactivating Aadhaar numbers. Further, the Authority may waive such fees partially or wholly when updates are in the interest of its functions, including maintaining information accuracy in the Central Identities Data Repository (CIDR).

1.1.9. UIDAI notifies the Aadhaar (Enrolment and Update) Second Amendment Regulations, 2025

UIDAI has notified the Aadhaar (Enrolment and Update) Second Amendment Regulations on August 22, 2025, to enhance data accuracy and management. The amendments provide guidelines for omitting Aadhaar numbers with mixed biometric data and procedures for deactivating numbers in cases of death verified through official registries. Updates include revised enrolment forms and processes for children under five, including residents and Non-Resident Indians (NRIs), with detailed documentation requirements and consent protocols. The notification also clarifies fee structures for enrolment and updates to biometric and demographic data.

1.1.10. UIDAI unveils Aadhaar-based authentication framework for cooperative banks

UIDAI, in collaboration with the Ministry of Cooperation and National Bank for Agriculture and Rural Development (NABARD), has unveiled a new Aadhaar-based authentication framework aimed at benefiting over 380 (three hundred eighty) cooperative banks across India. The framework, launched to mark the International Year of Cooperatives, enables all 34 (thirty-four) State Cooperative Banks (SCBs) and 352 (three hundred fifty-two) District Central Cooperative Banks (DCCBs) to provide Aadhaar-enabled authentication services efficiently and cost-effectively. Only SCBs will be registered directly with UIDAI as Authentication User Agencies (AUA) and eKYC User Agencies (KUA). At the same time, DCCBs will utilise the IT infrastructure of their respective SCBs, thus avoiding separate system development and reducing costs.

1.1.11. UIDAI onboards Starlink for Aadhaar-based customer verification

UIDAI has onboarded Starlink Satellite Communication Private Limited as a Sub-Authentication User Agency and Sub-eKYC user agency, enabling the satellite internet provider to use Aadhaar Authentication for customer verification. This integration allows Starlink to conduct quick, paperless, and compliant KYC processes while ensuring regulatory compliance for delivering high-speed internet services to households, businesses, and institutions across India.

National Payments Corporation of India (NPCI)

1.1.12. NPCI RFP: Cryptographic key management solution with a six-year warranty

The National Payments Corporation of India ("NPCI") has issued a request for proposal (RFP) for procuring a comprehensive Cryptographic Key Management Solution, which includes the supply, installation, integration, and maintenance of CKMS with Hardware Security Modules (HSMs) across its data centres. The solution must meet stringent technical, compliance, and security standards (FIPS, PCI DSS, RBI) and support high performance, scalability, and multi-cloud environments, with 24x7 support and training for NPCI personnel. Bids must fulfil eligibility and technical criteria, follow specified submission formats, and comply with strict service level agreements (SLA), warranty, and penalty provisions for non-compliance or delays. Selection will be based on a combined technical and commercial evaluation, with detailed deliverables and ongoing support obligations outlined for the chosen vendor.

Ministry of Corporate Affairs (MCA)

1.1.13. MCA issues Companies (Indian Accounting Standards) Second Amendment Rules, 2025

The Ministry of Corporate Affairs ("MCA"), through a notification dated August 13, 2025, has issued the Companies (Indian Accounting Standards) Second Amendment Rules, 2025, effective from the date of publication. These amendments update various Indian Accounting Standards ("Ind AS"), including revisions to Ind AS 101 regarding transitional provisions for International Financial Reporting Standards (IFRS) 11 Joint Arrangements and lease classifications under Ind AS 116. Changes also address supplier finance arrangements in Ind AS 107, clarifications in Ind AS 1 about classification of liabilities as current or non-current with covenants, and inclusion of Pillar Two model rules related to international tax reform in Ind AS 12.

Monetary Penalties

1.1.14. RBI imposes penalties on five banks for regulatory non-compliance

RBI has imposed monetary penalties on the following institutions -

2. Key Asian Markets- Philippines and Vietnam

2.1. Philippines

2.2.1. BSP welcomes R&I affirmation of the Philippines' A- investment-grade credit rating with stable outlook

The Bangko Sentral ng Pilipinas ("BSP") welcomed Rating and Investment Information Inc.'s ("R&I") affirmation of the Philippines' "A-" investment-grade rating with stable outlook on August 20, 2025. R&I highlighted the country's robust 5.7 per cent (five point seven per cent) growth rate in 2024, among Southeast Asia's fastest, and inflation declining to a six-year low of 0.9 per cent (zero point nine per cent) in July 2025. The rating agency noted limited impact from 19 per cent (nineteen per cent) US reciprocal tariffs due to the Philippines' low export reliance on the US.

2.2.2. BSP vows to sustain reforms following PH's removal from the EU list of high-risk third countries

The BSP reaffirmed its commitment to strengthening anti-money laundering and counter-terrorism financing efforts following the Philippines' removal from the EU's high-risk list on June 10, 2025. This marks the third exit this year, reflecting growing international confidence. The removal is expected to lower remittance fees and improve foreign banking relationships.

2.2.3. BSP issues advisory on fraudulent documents misrepresenting the BSP

BSP warns the public against circulating fraudulent documents that appear to be issued by the BSP or its officials. Fraudulent documents may display the BSP logo and contain forged signatures to mislead recipients and unlawfully obtain financial gain or personal information. The BSP advises the public to remain vigilant and to verify the authenticity of any communication or document about financial transactions.

2.3. Vietnam

2.3.1. SBV releases Draft Decree regulating the conditions for collateral assets of bad debts to be seized

The State Bank of Vietnam ("SBV") seeks opinions from organisations and individuals on the Draft Decree regulating the conditions for collateral assets of bad debts to be seized. The decree applies to credit institutions, foreign bank branches, state-owned debt-buying organisations, and related entities, specifying that collateral cannot be the debtor's sole residence or primary livelihood tool. Debtors must confirm and provide proof regarding the collateral status at the time of contract signing; failure to provide an exemption leads to seizure eligibility. It will take effect from October 15, 2025, with relevant ministries and organisations responsible for enforcement.

2.3.2. SBV releases Draft Decree on Bank Licensing, Forex Management, and AML Measures at the International Financial Centre Vietnam

The SBV has solicited opinions from organisations and individuals on the Draft Decree regulating the licensing of the establishment and operation of banks, foreign exchange management, anti-money laundering, anti-terrorist financing, and anti-proliferation of weapons of mass destruction at the International Financial Centre in Vietnam. The decree is based on the Government Organisation Law dated February 18, 2025, and addresses multiple top government offices and agencies.

2.3.3. SBV issues circular amending reserve requirement regulations for credit institutions

On August 12, 2025, SBV issued Circular No. 23/2025/TT-NHNN amending and supplementing specific provisions of Circular No. 30/2019/TT-NHNN dated December 27, 2019. The August 20, 2025, circular updates the rules regarding the mandatory reserve requirements for credit institutions and foreign bank branches. Key changes include regulations on cases where credit institutions fail to meet reserve requirements and a 50 per cent (fifty per cent) reduction in reserve ratios in accordance with the Law on Credit Institutions No. 32/2024/QH15.

3. Trends

3.1. SBI and Bank of Baroda may see a margin rebound in the second half of the financial year 2026

Public sector banks like State Bank of India ("SBI") and Bank of Baroda ("BoB"), which have lagged private sector peers in Net Interest Margins ("NIMs"), are expected to see a rebound in the second half of the financial year 26 as deposit and wholesale funding costs decline. Savings account rate cuts provide funding flexibility. Yes Securities, forecasts NIM rises of 9 (nine) and 8 (eight) basis points for SBI and BoB, respectively, with private banks also narrowing the margin gap. Deposit rate cuts on savings and retail term deposits will boost margins, benefiting IndusInd, ICICI, and Axis banks.

3.2. NUCFDC in talks with Fintechs to offer indirect support to Urban Co-operative Banks

National Urban Cooperative Finance and Development Corporation Limited ("NUCFDC") is working with fintechs to indirectly support Urban Co-operative Banks ('UCBs') due to regulatory restrictions on direct collaborations. UCBs need digital transformation to remain relevant and fill credit gaps for Micro Small and Medium Enterprises ("MSMEs") and startups. RBI has enabled select UCBs to join the Unified Lending Interface (ULI), permitted easier branch expansion, and extended the priority lending deadline to March 2026.

3.3. Bank Gross Non-Performing Asset ratio likely to remain low in financial year 2026; private banks to face more pressure

India's banking sector is expected to maintain a low Gross Non-Performing Asset (GNPA) ratio between 2.3 per cent (two point three per cent) and 2.4 per cent (two point four per cent) in financial year 2026, supported by a nearly 10 per cent (ten per cent) year-on-year reduction in bad loans as of the first quarter in financial year 2026. While private sector banks may face more pressure due to rising slippages in unsecured personal loans, credit cards, and microfinance, public sector banks continue to show resilience through recoveries and lower incremental slippages. Improved asset quality, corporate deleveraging, and steady recoveries, alongside easing funding costs, position the banking system well to sustain moderate growth and absorb potential shocks despite emerging stresses in select unsecured loan segments.

4. Sector Overview

4.1. BFSI GCC sector faces 42 per cent AI and data skill gap as demand surges

According to the "BFSI GCC Talent Report 2025" by Quess Corp, India's BFSI Global Capability Centres (GCCs) are rapidly expanding from a USD 40-41 Billion (United States Dollar Forty to Forty-Two Billion only) sector in 2023 to a projected USD 125-135 Billion (United States Dollar One Hundred Twenty-Five to One Hundred Thirty-Five Billion only) by 2032, with a CAGR of 12-13 per cent (twelve to thirteen per cent). However, the sector faces an acute 42 per cent (forty-two per cent) skill gap in AI and data engineering, driving intense competition for talent and significantly higher salary demands.

4.2. Cooperative banks record strong loan growth, yet face a license freeze since 2004

India's banking sector is expected to maintain strong asset quality through the financial year 2026, with Gross Non-Performing Assets (GNPA) projected to stay in the 2.3–2.4 per cent (two point three to two point four per cent) range despite emerging stress in unsecured retail loans and microfinance. Corporate deleveraging, a shrinking pool of legacy stressed assets, and steady recoveries will offset pressures in select segments, keeping the system resilient.

4.3. GST 2.0 could infuse INR 5.3 Lakh Crore into the economy with minimal fiscal consequences

GST 2.0 reforms, including rate rationalisation, simplification of slabs, and expanded exemptions, are projected to boost household and business spending by approximately INR 5.3 Lakh Crore (Indian Rupees Five Lakh Thirty Thousand Crore only). The measures aim to widen the tax base and improve compliance through enhanced digitalisation, offsetting most revenue losses.

5. Business Updates

5.1. After the absolute money gaming ban, Dream11's parent ventures into the investment space

Following the enactment of the Online Gaming Bill, 2025, which imposes a nationwide ban on real-money gaming, Dream11 (Dream Sports) has ceased all real-money gaming operations. The company is now actively pivoting to other business verticals, including investments in platforms like FanCode, DreamSetGo, and international markets, with a focus on non-real-money gaming, esports, and digital sports engagement.

5.2. South Indian Bank launches product offering loans of up to 90 per cent of gold value

South Indian Bank has launched "SIB Gold Xpress," a new gold loan product offering loans up to 90 per cent (ninety per cent) of the gold's value. The scheme caters to MSMEs, non-MSMEs, and small businesses, providing loans from INR 25,000 (Indian Rupees Twenty-Five Thousand only) to INR 25 Lakh (Indian Rupees Twenty-Five Lakh only) with flexible tenures up to 3 (three) years. Borrowers can securely pledge their gold at any bank's branch nationwide to meet business expansion, working capital, or personal funding needs.

5.3. NBFCs tap USD 3.67 Billion in overseas syndicated loans, more than double 2024 levels

Indian NBFCs have significantly increased their overseas syndicated loan borrowings, raising USD 3.67 billion (United States Dollar Three Billion Six Hundred Seventy Million only) in 2025, more than double the USD 1.64 billion (United States Dollar One Billion Six Hundred Forty Million only) raised in 2024. This growth is driven by lower borrowing costs, more interested foreign banks, and favourable tax treatment. About 78 per cent (seventy-eight per cent) of these loans were raised by companies rated below AAA. Some NBFCs, like Avanse Financial Services, also raise funds in multiple currencies to reduce costs and taxes, helping diversify their funding sources internationally. Housing finance companies struggle as the mortgage rate war intensifies.

5.4. Housing finance companies struggle as mortgage rate war intensifies

Housing finance companies face intense pressure as public sector banks aggressively price mortgage rates, squeezing margins. Despite growth in loan disbursals, assets under management (AUM) are not keeping pace due to borrower shifts. Bajaj Housing Finance reported a 0.5 per cent (zero point five per cent) decline in net profit, while Aadhar and LIC Housing Finance saw 10 per cent (ten per cent) and 5 per cent (five per cent) growth, respectively. Since the RBI's 100 (hundred) basis points repo rate cut, lower lending rates have reduced net interest margins. LIC Housing Finance's managing director noted intense competition, especially in the prime segment, where they compete with banks. Bajaj Housing Finance expects margin pressure to continue for one to two more quarters before returning to a typical trajectory.

5.5. RBI authorises Federal Bank to handle Maharashtra's government receipts through GRAS

RBI has authorised Federal Bank to act as a receiving bank for the Government of Maharashtra to handle its receipts through the Government Receipts Accounting System (GRAS). This approval allows Federal Bank to facilitate efficient electronic receipt management for the state government, streamlining the process of collecting payments such as taxes and other dues. The RBI's sanction aligns with ongoing efforts to digitise and enhance the banking infrastructure for government transactions, improving transparency and operational efficiency in receipt handling.

5.6. Cedar-IBSi Capital secures INR 100 Crore for specialist fintech fund

Cedar-IBSi Capital has raised INR 100 Crore (Indian Rupees One Hundred Crore only) with INR 10 Crore (Indian Rupees Ten Crore only) to INR 15 Crore (Indian Rupees Fifteen Crore only) in pipeline commitments, achieving 60 per cent (sixty per cent) of its target for its B2B fintech fund. Key investors include Muthoot Finance, IIFL Capital, Middle East investors, etc. The early-stage fund focuses on fintech and financial services infrastructure companies.

5.7. Credgenics acquires Arrise to revolutionise debt collection with the CG Setu launch

Credgenics has overtaken Arrise and introduced CG Setu to streamline and enhance digital debt collection. The new platform integrates advanced technology to make online debt recovery more effective. This strategic acquisition positions Credgenics at the forefront of innovation in debt management solutions.

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