AKP Banking & Finance Digest- June 10, 2024

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In its recent meeting, the Monetary Policy Committee ("MPC") decided to keep the policy repo rate unchanged at 6.50%.
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1. Regulatory Updates

1.1. India

1.1.1. MPC maintains repo rate amidst growth and inflation concerns

In its recent meeting, the Monetary Policy Committee ("MPC") decided to keep the policy repo rate unchanged at 6.50%. Despite resilient economic activity and signs of revival in private consumption, inflation remains a concern, particularly due to elevated food prices. MPC reaffirms its commitment to aligning inflation with the 4% target while supporting growth, opting to maintain a disinflationary stance. RBI

1.1.2. RBI's 2023-24 survey on foreign liabilities and assets of mutual funds and AMCs

Reserve Bank of India ("RBI") has commenced its annual survey for 2023-24 on foreign liabilities and assets of mutual funds and Asset Management Companies ("AMC"). This survey gathers data from mutual funds and AMCs regarding their external financial liabilities and assets as of the end of March of the latest financial year. Submission deadlines for AMCs and mutual fund companies are July 15, 2024. AMCs must submit their returns online via the RBI's web portal, while mutual fund companies need to fill out the survey schedule (Schedule-4) available on the RBI's website and send it via email. RBI

1.1.3. RBI announces policy measures to enhance financial ecosystem

RBI, in its recent press release, announced several developmental and regulatory policies aimed at bolstering the financial landscape. Key highlights include revision in the bulk deposits limit for commercial banks, rationalisation of export and import regulations under the Foreign Exchange Management Act, 1999, and the proposal to establish a Digital Payments Intelligence Platform to mitigate fraud risks. Additionally, measures to include recurring payments for FasTag and National Common Mobility Card (NCMC) under the e-mandate framework and the introduction of auto-replenishment for UPI Lite wallets signify efforts towards fostering seamless digital transactions. RBI

1.1.4. Monetary Penalties

RBI imposes monetary penalties on the following financial institutions:

Name of the Financial Institution Penalty Imposed Reasons
The Bavla Nagarik Sahakari Bank Ltd., Dist. Ahmedabad, Gujarat INR 3,00,000/- (Indian Rupees Three Lakh only) Contravention of/non-adherence with certain directions issued by RBI 'Loans and Advances to directors, relatives and firms/concerns in which they are Interested' read with 'Loans and Advances to directors etc. - directors as surety/guarantors – Clarification' and 'Master Direction - Know Your Customer (KYC) Direction, 2016',
The Ron Taluka Primary Teachers Co-operative Bank Ltd., Ron, Karnataka INR 75,000/- (Indian Rupees Seventy-Five Thousand only) Contravention of/non-adherence with certain directions issued by RBI on 'Frauds monitoring and reporting mechanism' and 'Policy and Practice regarding Nominal Membership'.

1.2. Bangladesh

1.2.1. Bangladesh Bank introduces new guidelines for credit bureaus

Bangladesh Bank has introduced comprehensive guidelines aimed at regulating credit bureaus in the country, emphasising the importance of accurate credit information for financial stability. The guidelines outline criteria for licensing, operational standards, oversight mechanisms, and consumer protection measures, aligning with international best practices to enhance the credibility of the financial sector. Bangladesh Bank

1.2.2. Bangladesh Bank issues guidelines for prepaid instruments

Bangladesh Bank has issued guidelines for non-payment system entities for issuing prepaid instruments ("PPIs"). The guidelines cover two types: closed PIs for use only with the issuer, and; semi-closed PIs usable at a group of registered sellers. PPIs cannot be reloaded, converted to cash, or used for virtual currencies. Issuers must disclose risks, have dispute resolution mechanisms, and report periodically. Bangladesh Bank can conduct inspections, cancel approvals, and request legal actions for non-compliance. The guidelines aim to regulate PI issuance by non-banking entities, promoting customer protection and financial stability. Bangladesh Bank

1.3. Philippines

1.3.1. City of San Fernando, Pampanga adopts Paleng-QR Ph Plus for digital payments

The City of San Fernando, Pampanga, recently launched Paleng-QR Ph Plus, a program aimed at promoting digital payment transactions in public markets, public utility vehicles, and business establishments. The initiative encourages Fernandino to embrace QR Ph codes for convenient and secure financial transactions, marking a significant step toward digital advancement and financial inclusivity in the city. Bangko Sentral Ng Pilipinas

2. Trends

2.1. NPCI International and Central Reserve Bank of Peru collaborate to introduce UPI-like real-time payments system

NPCI International Payments Limited (NIPL) has partnered with the Central Reserve Bank of Peru (BCRP) to develop real-time payments system akin to Unified Payments Interface ("UPI") in Peru. This milestone initiative positions Peru as the first South American country to adopt the globally recognised UPI technology, spearheaded by India. NPCI

2.2. Tata Motors Finance to merge with Tata Capital

Tata Motors announced the merger of Tata Motor Finance with Tata Capital, aligning with their strategy to focus on core businesses and emerging technologies. Tata Capital will issue equity shares to shareholders of Tata Motor Finance, effectively giving Tata Motors a 4.7% stake in the merged entity. The merger aims to expand Tata Capital's presence in new and old commercial vehicles/passenger vehicles financing, offering innovative products and digital services, with regulatory approval expected in 9-12 months and no adverse impact on customers or creditors. Economic Times

2.3. Canara Bank seeks regulatory approval to convert software subsidiary into NBFC

Canara Bank is seeking regulatory approval to convert its software subsidiary, Canbank Computer Services Ltd (CCSL), into a Non-Banking Finance Company ("NBFC"). This move will allow the bank to focus on its credit card division, with plans to expand its customer base to 1 crore over the next 7-8 years. By shifting its credit card wing to the NBFC, Canara Bank aims to ensure that the credit card business gets focused attention. Business Line

3. Sector Overview

3.1. UPI sets new record with 14.04 billion transactions in May

The UPI network achieved a significant milestone in May, processing a record-breaking 14.04 billion (fourteen billion and forty million) transactions, up from 13.3 billion (thirteen billion three hundred million) in April. This surge in transaction volume amounted to INR 20.45 lakh crore (Indian Rupees Twenty point Four Five Lakh Crore only) in May, marking a 49 percent (forty-nine percent) year-on-year growth. These figures reflect a substantial increase compared to the same period last year, positioning May 2024 as the highest-performing month since UPI's inception in April 2016. The Statesman

3.2. Mutual Funds' debt exposure to NBFCs grow at 30% to INR 2.08 trillion in April 2024, per CareEdge Report

NBFCs raised nearly 30% more from mutual funds ("MFs") year-on-year, reaching INR 2.08 trillion in April 2024, according to CareEdge Ratings. This growth reflects MFs' increased comfort in investing in better-rated finance firms. Factors contributing to this include the RBI's nudge to the banks to moderate their funding to NBFCs and the reduced cost gap between funds from asset management companies and banks. MF debt exposure to NBFCs, including commercial papers (CPs) and corporate debt, surpassed INR 2 trillion for the first time in 55 months. The rating agency said that larger and better-rated NBFCs have been accessing the capital market, as most of the issuers are from the banking, financial services and insurance sector, with over 90 per cent of the aggregate issuers being either AA- or AAA-rated entities. CareEdge Ratings

4. Business Updates

4.1. Adani Group introduces 2 credit cards via Adani One app in collaboration with ICICI Bank

Adani Group debuts in retail finance with the release of two credit cards, Signature and Platinum, in partnership with ICICI Bank and Visa. Available via the Adani One app, these cards offer rewards for app-based spending and complimentary perks at Adani airports. Jeet Adani, director of Adani Group highlighted this integration with Adani One, which aims to digitise physical B2B businesses, while ICICI Bank's Rakesh Jha underscored the move's importance in fortifying the bank's credit card portfolio. Medianama

4.2. Muthoot Microfin enters into a co-lending partnership with SBI

Muthoot Microfin Limited, a leading microfinance institution, has partnered with the State Bank of India ("SBI") to empower women entrepreneurs in rural and semi-urban areas across India. Through this collaboration, Muthoot Microfin aims to expand its financial services reach to this demographic. Under this agreement, Muthoot Microfin and SBI will jointly provide lending support to members of Joint Liability Groups (JLGs) involved in agricultural, allied activities, and other income-generating enterprises. The loan amounts will range from a minimum of INR 10,000 (Indian Rupees Ten Thousand Only) to a maximum of INR 3,00,000 (Indian Rupees Three Lakh Only), significantly enhancing financial opportunities for women entrepreneurs in rural regions. Business Standard

4.3. JioFinance App unveiled by Jio Financial Services

Jio Financial Services, a division of Reliance Industries Ltd, has launched the beta version of its 'JioFinance' app, aiming to rival competitors like Google and Amazon. The app offers a seamless integration of digital banking, UPI transactions, bill settlements, and insurance advisory services. Key features include instant digital account opening and streamlined bank management through the 'Jio payments bank account' feature. Future plans involve expanding loan solutions, starting with mutual funds and progressing to home loans, demonstrating a commitment to evolving customer needs. Fintech Futures

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