AKP Banking & Finance Digest- October 28, 2024

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The Reserve Bank of India ("RBI") has announced a ban on thirteen unauthorised forex trading platforms, intensifying its efforts to protect Indian consumers...
India Finance and Banking

1. Regulatory Updates

1.1. India

1.1.1. RBI updates alert list of unauthorised forex trading platforms

The Reserve Bank of India ("RBI") has announced a ban on thirteen unauthorised forex trading platforms, intensifying its efforts to protect Indian consumers from unregulated financial activities. Among the banned platforms are Ranger Capital, TDFX, Inefex, and YorkerFX, all of which were operating without the necessary authorisation. The RBI reiterated the importance of verifying the legality of forex trading platforms, as unauthorised trading can expose consumers to financial risks. This update aligns with the RBI's proactive approach in maintaining consumer safety and regulatory compliance in the forex trading sector. RBI

1.1.2. RBI revokes UAE Exchange Centre LLC's certificate of authorisation

RBI has revoked the certificate of authorisation for UAE Exchange Centre LLC ("UAEEC's"), effective October 10, 2024. The action, taken under section 8 of the Payment and Settlement Systems Act, 2007, impacts UAEEC's operation as a cross-border in-bound money transfer operator under the Money Transfer Service Scheme. The revocation stems from non-compliance with regulatory requirements. RBI

1.1.3. RBI survey highlights expansion in international trade of banking services

The RBI's 2023-24 survey on international trade in banking services reveals growth in overseas operations of Indian banks, with an 8.8 per cent (eight point eight per cent) rise in deposits and 4.3 per cent (four point three per cent) growth in balance sheets for branches abroad. Employee numbers also increased by 8.2 per cent (eight point two per cent) in overseas branches. Meanwhile, foreign banks in India saw a 7.2 per cent (seven point two per cent) expansion in consolidated balance sheets. Higher global interest rates contributed to a substantial increase in interest income and fee-based revenue across both Indian and foreign bank segments, with United Kingdom-based Indian branches generating the most fee income. RBI

1.1.4. Monetary Penalties

RBI imposes monetary penalties on the following financial institutions:

Name of the Financial Institution

Penalty Imposed

Reasons

Nazareth Urban Co-operative Bank Ltd., Tamil Nadu

INR 1,00,000/- (Indian Rupees One Lakh only)

Contravention of/non-adherence with certain directions issued by RBI on 'Loans and advances to directors, their relatives, and firms /concerns in which they are interested'.

Family Home Finance Private Limited, Mumbai, Maharashtra

INR 50,000/- (Indian Rupees Fifty Thousand only)

Contravention of/non-adherence with with certain directions issued by RBI on 'Know Your Customer (KYC)'.

The Aurangabad District Central Co-operative Bank Limited, Bihar

INR 1,25,000/- (Indian Rupees One Lakh Twenty Five Thousand only)

Contravention of/non-adherence of the provisions of section 26A read with section 56 of the Banking Regulation Act, 1949 (BR Act) and non-compliance with certain directions issued by RBI on 'Membership of Credit Information Companies (CICs) by Co-operative Banks'

Vidyasagar Central Co-operative Bank Limited, Midnapore, West Bengal

INR 50,000/- (Indian Rupees Fifty Thousand only)

Contravention of/non-adherence with the directions issued by RBI on 'Housing Finance'.

1.2. Bangladesh

1.2.1. Bangladesh Bank raises repo rate to 9.5 per cent 

The Bangladesh Bank ("BB") increased its policy rate, or repo rate, by 50 (fifty) basis points to 9.5 per cent (nine point five per cent), effective September 25, to tackle persistent double-digit inflation. This marks the fourth hike in 2024 and the eleventh since May 2022. The new rate will raise borrowing costs for banks and increase loan interest rates for consumers, aiming to reduce spending and control inflation. The central bank also adjusted the Standing Lending Facility (SLF) rate to 11 per cent (eleven per cent) and the Standing Deposit Facility (SDF) rate to 8 per cent (eight per cent). Dhaka Tribune

1.3. Philippines

1.3.1. Bank Indonesia maintains BI Rate at 6 per cent

BSP will enhance its rediscounting facility by launching the Discount Window Facility ("DWF"), effective two months after the publication of BSP Circular No. 1202 on September 24, 2024. The DWF allows banks to offer government and BSP securities in exchange for advances, aligning BSP's credit operations with global standards. Bangko Sentral Ng Pilipinas

1.3.2. Banks maintain loan standards amid net tightening in Q3 2024

In third quarter ("Q3") 2024, most banks upheld credit standards for business and household loans, as reflected in the modal approach findings from the Senior Bank Loan Officers' Survey. However, the diffusion index (DI) results indicated a net tightening of credit standards for both sectors, primarily due to deteriorating borrower profiles, reduced bank profitability, and a lower risk tolerance. Demand for loans remained relatively stable, with a slight increase in business loan demand tied to financing needs and a boost in household loan demand due to favorable terms and consumer spending. Bangko Sentral Ng Pilipinas

2. Trends

2.1. Jio Financial eyes partnership with Allianz

Jio Financial Services (JFSL), a branch of Mukesh Ambani's Reliance Industries, is progressing toward a partnership with Allianz SE to launch insurance solutions in India. This collaboration aims to establish both life and general insurance operations, filling gaps in a market with significant growth potential. With an insurance penetration rate lower than many global peers, India presents an attractive opportunity for innovative insurance products, especially with Jio Financials' digital-first approach. Inc42

3. Sector Overview

3.1. Indian fintech deal activity drops in H1 2024

In the first half ("H1") of 2024, Indian FinTech deal activity decreased by 43 per cent (forty-three per cent) year-over-year, with only 149 (one hundred forty-nine) deals completed compared to 262 (two hundred and sixty-two) in H1 2023. Despite the drop in deal volume, the average deal size increased from USD 12.7 million (United States Dollar Twelve Million and Seven Hundred Thousand only) to USD 16 million (United States Dollar Sixteen Million only), indicating a shift towards larger investments. Fintech Global

4. Business Updates

4.1. PB Fintech subsidiary secures account aggregator licence

PB Financial Account Aggregator Private Limited ("PBAA"), a subsidiary of PB Fintech, has received a Certificate of Registration (CoR) from the RBI to operate as an account aggregator. With this licence, PBAA can now function as a non-banking financial institution for account aggregation services, enabling it to streamline financial data sharing between institutions without handling public deposits. Economics Times 

4.2. Phi Commerce launches CollectiPhi-360

Phi Commerce has introduced CollectiPhi-360, a multi-channel payments platform designed for lenders to manage automated, doorstep, offline, partial, and bulk collections. This innovation aims to streamline and enhance payment processes across various channels. The Pune-based fintech has attracted investor interest due to its market growth and is currently seeking to raise additional funding within the next 6 (six) – 12 (twelve) months. Inc42

4.3. Paytm secures NPCI approval to onboard new UPI customers

Paytm has received approval from the National Payments Corporation of India ("NPCI") to onboard new Unified Payment Instrument ("UPI") customers, contingent upon adherence to guidelines on risk management and brand standards. This approval follows a challenging period for Paytm, marked by restrictions from the RBI on Paytm Payments Bank earlier this year. LiveMint

4.4. Mega Corp launches EV financing arm for MSME growth

Mega Corporation, a non-banking financial company, has launched Lendingo, a new division dedicated to financing electric vehicles ("EVs") and supporting Ministry of Micro, Small and Medium Enterprises ("MSMEs") within the EV sector. The company will provide loans, leases, and other financing solutions for EV-related projects, including EV batteries and rickshaws. This initiative aims to encourage the adoption of sustainable energy while expanding Mega Corporation's lending portfolio. Financial Express

4.5. IndiaP2P launches product complying with new RBI guidelines

Navi Technologies, led by Sachin Bansal, has ascended to the fifth position in Unified Payment Instrument ("UPI") transactions for September, processing 120.41 (one hundred twenty point four one) million transactions, a 35.74 per cent (thirty-five point seven four per cent) increase from August's 88.7 (eighty-eight point seven) million. This marks a significant achievement as Navi surpassed Axis Bank, which recorded 120.38 (one hundred twenty point three eight) million transactions. Business Standard

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