AKP Banking & Finance Digest August 18, 2025

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1. Regulatory Updates

1.1. India

Reserve Bank of India (RBI)

1.1.1. RBI releases report of the committee to develop a framework for responsible and ethical enablement of Artificial Intelligence (FREE-AI) in the financial sector

Reserve Bank of India ("RBI") released a report on the committee set up on December 26, 2024, to create a Framework for Responsible and Ethical Enablement of Artificial Intelligence (FREE-AI) in the financial sector. The framework has six pillars across two sub-frameworks: Innovation Enablement (Infrastructure, Policy, Capacity) and Risk Mitigation (Governance, Protection, Assurance), with 26 (twenty-six) recommendations such as creating shared financial data infrastructure, an AI Innovation Sandbox, indigenous sector-specific AI models, adaptive policies, graded liability, capacity building, strong data and model governance, consumer protection, cybersecurity, red teaming, incident reporting, audits, transparency, and compliance toolkits.

1.1.2. RBI issues draft Guarantee Regulations under FEMA, 1999

RBI has issued a draft of the Guarantee Regulations under the Foreign Exchange Management Act (FEMA), 1999, seeking public feedback by September 04, 2025. The proposed regulations aim to simplify and rationalise the rules related to guarantees in cross-border transactions to promote ease of doing business. Key features include a principle-based framework where most guarantees involving cross-border transactions will fall under the automatic route, provided the underlying transactions and those arising from guaranteed invocation comply with FEMA. The scope of guarantees eligible for the automatic route is being expanded, with a comprehensive reporting system for all guarantees issued and invoked proposed.

1.1.3. RBI issues circular on the introduction of continuous clearing and settlement on realisation in the cheque truncation system

The RBI has released circular dated August 13, 2025, addressed to banks participating in Cheque Truncation System (CTS) and the National Payments Corporation of India (NPCI), Key changes include a single daily presentation session, continuous cheque image delivery and confirmation, hourly settlements from 11 AM based on positive or deemed approvals, and payment release to customers within one hour after settlement.

1.1.4. RBI announces exit of Indian Banks' Digital Infrastructure Company from fifth regulatory sandbox cohort

RBI announced the exit of Indian Banks' Digital Infrastructure Company ("IBDIC") Private Limited from the Fifth Cohort of its Regulatory Sandbox, which was conducted with a 'Theme Neutral' approach. IBDIC, in partnership with ICICI Bank, HDFC Bank, Yes Bank, and Aditya Birla Capital Limited, successfully tested a blockchain-based deep-tier financing solution designed to provide affordable and accessible credit to lower-tier Micro Small and Medium Enterprises ("MSMEs") within supply chains. The solution tokenises accepted supplier invoices, enabling digital transfer and financing against these tokens to support MSME value addition. Following successful testing and evaluation, the product may now be adopted by regulated entities, subject to regulatory compliance.

1.1.5. RBI restores Certificate of Registration of two NBFCs

The Certificate of Registration ("CoR") issued to the following Non-Banking Financial Companies ("NBFCs") has been restored after considering the orders passed by the Appellate Authority/Courts.

1.1.6. RBI cancels the CoR of registration of sixteen NBFCs

RBI by order dated August 13, 2025, has exercised powers under Section 45-IA (6) of the Reserve Bank of India Act, 1934, and cancelled the CoR of 16 (sixteen) NBFCs.

1.1.7. Ten NBFCs surrender CoR to RBI

RBI by order dated August 13, 2025, has announced that 10 (ten) NBFCs have surrendered their CoR, which have been cancelled under Section 45-IA (6) of the Reserve Bank of India Act, 1934.

i) Cancellation of CoR due to exit from Non-Banking Financial Institution (NBFI) business

ii) Due to meeting the criteria prescribed for unregistered Core Investment Company (CIC) that do not require registration

iii) Cancellation of CoR due to NBFC ceasing to be a legal entity due to amalgamation/merger/dissolution/voluntary strike-off, etc.

1.1.8. RBI issues second amendment to KYC Directions, 2025

RBI issued the second amendment to its Know Your Customer ("KYC") Directions, 2016, effective immediately, enhancing inclusivity by explicitly including Persons with Disabilities (PwDs) and mandating that no KYC application be rejected without due consideration and recorded reasons. Amendments also cover the expanded scope of occasional transactions of INR 50,000 (Indian Rupees Fifty Thousand only) or more, and international money transfers, the inclusion of Aadhaar Face Authentication for customer verification, and ensuring that liveness checks do not exclude persons with special needs. Additionally, new entries have been added to the regulatory appendix for reference.

1.1.9. RBI releases circular on investment in government securities by persons resident outside India through special rupee vostro account

The RBI has issued a circular dated August 12, 2025, permitting persons resident outside India who maintain a Special Rupee Vostro Account (SRVA) for international trade settlement in Indian Rupees to invest their surplus rupee balances in Central Government Securities, including Treasury Bills. This circular is addressed to all Authorised Dealer Category-I banks and takes immediate effect.

Securities and Exchange Board of India (SEBI)

1.1.10. SEBI issues master circular on Debenture Trustees

Securities Exchange Board of India ("SEBI") has issued a consolidated master circular for Debenture Trustees, compiling and superseding all previous directions to provide an updated regulatory framework. It applies to all registered Debenture Trustees, Credit Rating Agencies (CRA), issuers of listed/proposed debt or municipal debt securities, recognised stock exchanges, and depositories. The circular covers registration and governance norms, due diligence and security creation, security and covenant monitoring via the depository system, investor protection measures, disclosure and reporting obligations, etc., and mandatory registration with FINNET 2.0.

1.1.11. SEBI releases report on addendum to consultation paper on review of regulatory framework for registrars to an issue and share transfer agents – related to fees

SEBI has issued an addendum to its August 07, 2025, consultation paper on the review of the regulatory framework for Registrars to an Issue and Share Transfer Agents ("RTAs"), specifically covering fees. It proposes the removal of RTA categorisation and a uniform fee structure applicable to all RTAs, based on the current Category-I RTA fees. Existing Category-II RTAs may either continue their present activities until the end of their paid fee block or opt to perform full-fledged RTA functions by paying the differential fees.

1.1.12. SEBI releases consultation paper on review of SEBI (Stock Brokers) Regulation 1992

SEBI has issued a consultation paper proposing a revamp of the SEBI (Stock Brokers) Regulations, 1992, for all brokers and clearing members, adding new definitions, governance, risk management, investor protection norms, and net worth/fee requirements. The draft boosts Qualified Stockbroker duties, requires one Indian-resident designated director, and permits activities via separate business units, replacing the old rules.

1.1.13. SEBI issues amendments to SEBI (Investment Advisers) Regulations 2013

SEBI has issued amendments to the SEBI (Investment Advisers) Regulations, 2013, replacing the earlier requirement of maintaining 'net worth' with a new mandate for investment advisers to maintain a specified deposit. This deposit must be kept in a form and manner as prescribed by SEBI, marked as a lien in favour of a SEBI-recognised supervisory body. The deposited amount can be utilised to settle any dues arising from arbitration, conciliation, or other dispute resolution processes if the investment adviser defaults.

International Financial Services Centres Authority (IFSCA)

1.1.14. IFSCA issues revised regulatory framework for global access in IFSC

International Financial Services Centres Authority ("IFSCA") has issued a new framework for Global Access Providers ("GAPs"), broker-dealers, and their clients to access overseas markets from IFSC. GAPs must obtain authorisation, maintain prescribed net, meet fit-and-proper norms, and comply with KYC/Anti-Money Laundering ("AML")/Combating the Financing of Terrorism ("CFT") rules. Permitted products exclude crypto assets and certain derivatives already available in IFSC, with client funds to be held in segregated IFSC bank accounts.

1.1.15. IFSCA issues circular on opening of an account of a person resident in India

IFSCA, by circular dated August 13, 2025, has clarified that the term "foreign currency account with a bank outside India" under the Foreign Exchange Management (Foreign Currency Accounts by a Person Resident in India) Regulations, 2015, also includes accounts opened with an International Banking Unit ("IBU") in any specified foreign currency. Accordingly, IBUs in IFSC may open such accounts for persons resident in India without prior IFSCA permission.

Miscellaneous

Insurance Regulatory and Development Authority of India (IRDAI)

1.1.16. IRDAI Launches second quantitative impact study for Risk-Based Capital framework

The Insurance Regulatory and Development Authority of India ("IRDAI") has issued a circular dated August 14, 2025, on initiating the Second Quantitative Impact Study ("QIS 2") to further develop and refine the Risk-Based Capital ("RBC") framework for the Indian insurance industry. Building on insights from the first study ("QIS 1") conducted in 2023 and industry feedback, insurers are now required to execute QIS 2 using data as of 31 March 2025, following technical guidance provided separately. The circular applies to all life, general, health insurers, reinsurers, and branches of foreign reinsurers and Lloyd's India. Insurers must submit their results by 15 October 2025, but current regulatory reporting requirements continue unchanged, and the technical guidance applies only to QIS 2 and is not the final RBC standard.

Ministry of Corporate Affairs (MCA)

1.1.17. MCA releases the Insolvency and Bankruptcy Code (Amendment) Bill, 2025

On August 12, 2025 the Ministry of Corporate Affairs introduced the Insolvency and Bankruptcy Code (Amendment) Bill, 2025 at the Lok Sabha. The bill proposes wide-ranging reforms to the Insolvency and Bankruptcy Code, 2016 aimed at making insolvency processes more efficient, transparent and time-bound. It introduces new concepts such as a creditor-initiated insolvency resolution process allowing certain regulated creditors to commence insolvency out of court, a group insolvency framework to enable coordinated resolution of interconnected corporate debtors, and a framework for cross-border insolvency. The Bill strengthens timelines for admission of cases, disposal of applications, resolution plan approvals, liquidation and dissolution, while mandating written reasons where delays occur.

Telecom Regulatory Authority of India (TRAI)

1.1.18. TRAI issues a manual to assess digital connectivity in properties

The Telecom Regulatory Authority of India ("TRAI") has issued the Manual for Rating of Properties for Digital Connectivity, dated August 13, 2025, the first national framework to evaluate how well buildings support high-speed, reliable digital access. Developed under the 2024 Regulations, it sets a uniform methodology for Digital Connectivity Rating Agencies, provides for property managers and service providers, and defines transparent criteria.

National Payments Corporation of India (NPCI)

1.1.19. NPCI issues compliance directive on AI-COU relationship for BBPS transactions

The Bharat Bill Payment System ("BBPS") under National Payments Corporation of India ("NPCI"), following RBI's guidelines dated 24 June 2025, has mandated that all digital Agent Institutions ("AIs") that are not licensed Payment Aggregators ("PAs") must route BBPS transactions exclusively through the PA services of their designated Customer Operating Unit ("COU"). Where an AI is onboarded with two COUs that are both PAs, transactions must be processed only through the originating COU's PA service. Entities must comply with the directive by 30 June 2026, making necessary operational and system changes well in advance.

Monetary Penalties

1.1.20. RBI imposes penalties on seven banks for regulatory non-compliance

RBI has imposed monetary penalties on the following institutions:

2. Key Asian Markets- Philippines and Vietnam

2.1. Philippines

2.1.1. FDI net inflows to the Philippines rose 21.3 per cent in May 2025 to USD 586 Million

The Bangko Sentral ng Pilipinas ("BSP") reported a 21.3 per cent (twenty-one point three per cent) year-on-year increase in net foreign direct investment (FDI) inflows increasing from USD 483 Million (United States Dollar Four Hundred Eighty-Three Million only) in May 2024 to USD 586 Million (United States Dollar Five Hundred Eighty-Six Million only) in May 2025, driven by an 88.3 per cent (eighty-eight point three per cent) rise in non-residents' net investments in debt instruments to USD 427 Million (United States Dollar Four Hundred Twenty-Seven Million only), while reinvestment of earnings stayed at USD 97 Million (United States Dollar Ninety-Seven Million only).

2.1.2. BSP suspends in-app gambling access in mobile payment apps and websites

BSP has ordered all BSP Supervised Institutions (BSIs) — including e-wallets, banks, and other covered entities — to remove any in-app links or website features that provide access to online gambling within 48 hours. This covers any product or service that redirects users to gambling sites. The move responds to the sharp rise in online gambling transactions and aims to protect consumers' financial well-being and mitigate broader social costs. The suspension will remain in effect until the BSP issues a finalised policy on online gambling-related payment services.

2.1.3. BSP reports an increase in cash remittances to the Philippines

Cash remittances to the Philippines reached USD 2.99 Billion (United States Dollar Two Billion Nine Hundred Ninety Million only) in June 2025, up 3.7 per cent (three point seven per cent) from June 2024, mainly driven by land-based overseas Filipinos. For the first half of 2025, cumulative remittances rose 3.1 per cent (three point one per cent) to USD 16.75 Billion (United States Dollar Sixteen Billion Seven Hundred Fifty Million only). The United States remained the top source of remittances, followed by Singapore and Saudi Arabia. Personal remittances also increased by 3.7 per cent (three point seven per cent) to USD 3.33 Billion (United States Dollar Three Billion Three Hundred Thirty Million only) in June 2025, reflecting steady growth overall.

2.2. Vietnam

2.2.1. State Bank of Vietnam anchoring solidarity, responsibility, and breakthroughs in the banking sector

The State Bank of Vietnam ("SBV") has stabilised the economy, controlled inflation, restructured credit institutions, strengthened supervision, and led digital transformation in the previous 5 (five) years. Bold policies kept the Dong stable, boosted foreign reserves, and expanded financial inclusion to over 87 per cent (eighty-seven per cent) of adults. For the year 2025–2030, it targets modernised monetary policy, green credit growth, technological innovation, and a high-calibre workforce to drive sustainable prosperity.

2.2.2. SBV issues circular amending the required reserve regulations for credit institutions

SBV has issued Circular No. 23/2025/TT-NHNN (effective from October 01, 2025), amending Circular No. 30/2019/TT-NHNN on required reserves for credit institutions and foreign bank branches. The changes clarify cases exempt from maintaining reserves and introduce provisions for a 50 per cent (fifty per cent) reduction in the reserve ratio under the 2024 Law on Credit Institutions. It also updates organisational references to align with the SBV's current structure under Decree No. 26/2025/ND-CP, aiming to enhance regulatory clarity and operational alignment.

3. Trends

3.1.Bank of India plans to double its co-lending portfolio to INR 12,000 Crore by the financial year 2026

Bank of India plans to grow its co-lending and direct assignment book from INR 6,000 Crore (Indian Rupees Six Thousand Crore only) to INR 12,000 Crore (Indian Rupees Twelve Thousand Crore only) by partnering with NBFCs under RBI's 2025 Co-Lending Arrangements Directions, 2025. Rules mandate partner disclosure in loan agreements and allow the secondary lender to share up to 90 per cent (ninety per cent) for lower rates.

4. Sector Overview

4.1. Aadhaar face authentication hits 200 crore transactions

The Aadhaar Face Authentication in India has reached 200 (two hundred) crore transactions, doubling from 100 (one hundred) crore in 6 (six) months. This rapid uptake demonstrates strong trust in Aadhaar's secure, inclusive, and innovative contactless identity verification system.

4.2. Corporate earnings slow to multi-quarter lows in quarter one as banking and consumer durables weigh

In a sample of 3,197 (three thousand one hundred ninety-seven) companies analysed by ETIG, revenue growth slowed to a seven-quarter low of 6.4 per cent (six point four per cent), while net profit growth was the weakest in at least nine quarters at 7.7 per cent (seven point seven per cent). The decline was mainly due to underperformance in banking, consumer durables, and capital goods sectors, although sectors like cement, chemicals, construction, hospitality, and alcoholic beverages saw double-digit profit growth. Operating margins contracted by 60 (sixty) basis points year-on-year to 18.4 per cent (eighteen point four per cent), largely impacted by weakness in bank net interest margins.

4.3. India's credit-to-deposit ratio remains below 80 per cent amid slower loan growth

As of July 25, 2025, India's credit-to-deposit ratio stayed below 80 per cent (eighty per cent), with total bank credit growing from to INR 185 Lakh Crore (Indian Rupees One Hundred Eighty-Five Lakh Crore only) while deposits rose to INR 233.5 Lakh Crore (Indian Rupees Two Hundred Thirty-Three Lakh Crore Fifty Thousand Crore only). The slower credit growth compared to deposits is due to a high base effect, muted sectoral growth, and alternative investment options.

5. Business Updates

5.1. ICICI Bank withdraws the INR 50,000 minimum balance requirement

ICICI Bank has reduced its planned minimum monthly average for new savings accounts from INR 50,000 (Indian Rupees Fifty Thousand only) to INR 15,000 (Indian Rupees Fifteen Thousand only) in metros/urban areas, INR 7,500 (Indian Rupees Seven Thousand Five Hundred only) in semi-urban, and INR 2,500 (Indian Rupees Two Thousand Five Hundred only) in rural regions. Penalties for shortfall will be 6 per cent (six per cent) of the deficit or INR 500 (Indian Rupees Five Hundred only), whichever is lower.

5.2. NRIs' double-term insurance purchases from India in two years

NRIs have doubled their term insurance purchases from India between fiscal years 2022 and 2026 year-to-date, according to a Policybazaar analysis. The UAE and Gulf Cooperation Council (GCC) region represent about 59 per cent (fifty-nine per cent) of these purchases, with salaried professionals and business owners.

5.3. S&P Global upgrades ratings of ten financial institutions

S&P Global Ratings has upgraded the credit ratings of ten major Indian financial institutions, including leading banks such as State Bank of India, ICICI Bank, HDFC Bank, Axis Bank, Kotak Mahindra Bank, Union Bank of India, and Indian Bank, along with three finance companies—Bajaj Finance, Tata Capital, and L&T Finance. This move comes a day after S&P raised India's sovereign credit rating to 'BBB', the first upgrade in over 18 (eighteen) years, reflecting expectations of the country's strong economic growth momentum, improved asset quality, good profitability, and robust capitalisation in the financial sector.

5.4. RBI grants in-principle nod to Paytm Payments Services to operate as an online Payment Aggregator

RBI has granted approval to Paytm Payments Services Limited (PPSL), a subsidiary of One 97 (ninety-seven) Communications, to operate as an online payment aggregator. This authorisation lifts the merchant onboarding restrictions imposed on PPSL since November 2022, allowing the company to expand its payment aggregation services in line with RBI's guidelines issued in 2020 and subsequent updates.

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