1. Regulatory Updates
1.1. India
1.1.1. RBI updates regulatory sandbox framework for fintech innovation
The Reserve Bank of India (“RBI”) has made updates to its 'Enabling Framework for Regulatory Sandbox', extending timelines for various stages and allowing applicants to form in-principle partnerships before applying. These changes are based on four and a half years of experience, including four cohorts and feedback from fintechs and stakeholders. The revised framework emphasises compliance with the Digital Personal Data Protection Act, 2023. Timelines for the sandbox process have been extended to nine months, and entities can now engage in in-principle partnerships during the application. If a proposed product/service is similar to one previously tested, RBI may exclude it from eligibility. This update is part of RBI's efforts to encourage responsible innovation, enhance efficiency, and benefit consumers in the financial services sector. RBI
1.1.2. RBI cancels licenses of Sumerpur Mercantile Urban Cooperative Bank Limited
RBI, under Section 56, read with Section 22 of the Banking Regulation Act (“BR Act”), has cancelled the license of Sumerpur Mercantile Urban Cooperative Bank Limited, Sumerpur, Pali, Rajasthan, on the ground of inadequate capital and earning prospects as per Sections 11(1) and 22(3)(d) of the BR Act, non-compliance with requirements under Section 22(3)(a), 22(3) (b), 22(3)(c), 22(3) (d) and 22(3)(e) of BR Act, prejudicial conduct affecting interest of the depositors and the public, including inability to pay to the present depositors in full. RBI
1.1.3. Monetary Penalties
RBI imposes monetary penalties on the following financial institutions:
Name of the financial institution | Penalty Imposed | Reason |
INR 2,00,00,000 (Indian Rupees Two Crore Only) | Contravention of/non-adherence of provisions of sub-section (2) of Section 19 of the BR Act, and sub-section (2) of Section 26A of the BR Act read with the Depositor Education Awareness Fund Scheme, 2014 | |
INR 16,00,000 (Indian Rupees Sixteen Lakh Only) | Contravention of/non-adherence with directions issued by RBI on ‘Non-Banking Financial Company - Systemically Important Non-Deposit taking Company and Deposit taking Company (Reserve Bank) Directions, 2016’ and specific directions issued by RBI to the company, on submission of returns on XBRL platform. | |
INR 66,00,000 (Indian Rupees Sixty Six Lakh Only) | Contravention of/non-adherence with certain provisions of the directions issued by RBI on 'Prudential Norms on Income Recognition, Asset Classification and Provisioning Pertaining to Advances - Divergence in NPA Accounts' and ‘Reserve Bank of India Know Your Customer (KYC) Directions, 2016’. | |
INR 32,30,000 (Indian Rupees Thirty Two Lakh Thirty Thousand Only) | Contravention of/non-adherence with certain provisions of the directions issued by RBI on ‘Data Format for Furnishing of Credit Information to Credit Information Companies and other Regulatory Measures’, ‘Resolution Framework 2.0 – Resolution of Covid-19 related stress of Micro, Small and Medium Enterprises (“MSMEs”)’ and ‘Resolution Framework - 2.0: Resolution of Covid-19 Related Stress of Individuals and Small Businesses’. | |
INR 5,00,000 (Indian Rupees Five Lakh Only) | Contravention of/non-adherence with certain provisions of the directions issued by RBI on ‘Loans and advances to directors, their relatives, and firms/concerns in which they are interested’ and specific directions issued by RBI under the Supervisory Action Framework (“SAF”). | |
INR 5,00,000 (Indian Rupees Five Lakh Only) | Contravention of/non-adherence with specific directions issued by RBI under the SAF. | |
INR 5,00,000 (Indian Rupees Five Lakh Only) | Contravention of/non-adherence with section 26A read with section 56 of the BR Act and the directions issued by RBI on the Depositor Education and Awareness Fund. | |
INR 1,00,000 (Indian Rupees One Lakh Only) | Contravention of/non-adherence with certain provisions of the directions issued by RBI on ‘Exposure Norms and Statutory / Other Restrictions – Urban Co-operative Banks (“UCBs”)’ and ‘Investments by Primary UCBs’. | |
INR 23,30,000 (Indian Rupees Twenty-Three Lakh Thirty Thousand Only) | Contravention of/non-adherence with operational instructions issued by RBI, vide letter dated January 24, 2020, under ‘SAF for Primary UCBs’. |
1.2. Bangladesh
1.2.1. Meghna Bank forms strategic alliance with Nagad for enhanced financial services
Meghna Bank has entered into a strategic alliance agreement with Nagad Limited, allowing customers of MeghnaPay to seamlessly conduct interoperable transactions and payments using the Nagad platform. The agreement was signed by HN Ashequr Rahman, the chairman of Meghna Bank, and Tanvir A Mishuk, the executive chairman and CEO of Nagad, at Sheraton Dhaka in Banani, according to a press release. This partnership is expected to open up new possibilities for both entities, offering substantial business prospects within the financial sector. The Daily Star
1.3. Philippines
1.3.1. ProCredit secures USD 4.1 million in pre-seed funding for SME lending expansion
Philippine-based fintech enterprise ProCredit has successfully secured USD 4.1 million (United States Dollar Four Million One Hundred Thousand Only) in a pre-seed funding round focused on Small and Medium Enterprises (“SME”) loans. Led by Integra Partners, the funding included contributions from Menardo Jimenez Family Office, M Venture Partners, Cento Ventures, Gobi Partners, and local angel investors. ProCredit, founded by individuals with over fifty years of combined experience in SME lending, aims to become a leading SME lender in the Philippines. The company utilises a unique approach integrating a credit-first client engagement strategy, rules-based underwriting, and a technology platform to streamline operations. The funding will be used to expand the loan portfolio through organic growth and strategic acquisitions, with potential exploration into the banking sector to offer a broader range of lending solutions to mid-market SMEs. Fintech Singapore
2. Trends
2.1. Razorpay plans headquarters shift to India by 2024 end and eyes IPO in next two years
Razorpay, a prominent player in digital payments, is set to relocate its headquarters from the United States to India by the end of 2024, according to CEO Harshil Mathur. The company is actively pursuing regulatory approvals in both the US and India to redomicile in India, aligning with its plans for an initial public offering (IPO) within the next two years. Additionally, Razorpay has entered into partnerships with Google and Open AI to introduce AI-enhanced payment experiences for its merchants and users. Inc 42
2.2. Zurich Insurance to acquire seventy per cent stake in Kotak General
Zurich Insurance is set to acquire a 70 per cent (seventy per cent) stake in Kotak General for INR 5,560 crore (Indian Rupees Five Thousand Fife Hundred Sixty Crore Only) in a single transaction. Initially, the plan was for Zurich Insurance to acquire 51 per cent (fifty-one per cent), with the remaining 19 per cent (nineteen per cent) to be acquired over three years. The deal involves both primary and secondary acquisitions. Kotak Mahindra Bank confirmed the mutual agreement between the parties, with Zurich obtaining the majority stake in Kotak General in a single tranche. The acquisition is subject to customary condition precedents, including regulatory approvals from RBI and the Insurance Regulatory and Development Authority of India. Financial Express
3. Sector Overview
3.1. Positive Trends in MSME Loan Originations and Credit Profiles During Q3 FY2024: CIBIL and SIDBI
4. Business Updates
4.1. Flipkart introduces UPI for seamless digital payments - powered by Axis Bank
Flipkart unveiled its Unified Payments Interface (“UPI”) handle, aiming to enhance digital payment services for its vast user base, exceeding 500 million (five hundred million) customers. Collaborating with Axis Bank, the Flipkart UPI, initially for Android users, allows registration with the handle '@fkaxis.' Users can perform fund transfers and checkout payments through the Flipkart app. Post UPI launch, unique customer experiences will include loyalty features such as supercoins, cashbacks, milestone benefits, and brand vouchers. The UPI offering facilitates convenient online and offline transactions, both within and beyond the Flipkart marketplace, introducing one-click functionalities for recharges and bill payments to enhance overall payment efficiency. Business Standard
4.2. Razorpay unveils AI chatbot RAY for payments and intelligent marketing growth suite Engage
Razorpay, a fintech unicorn, has introduced an AI chatbot named RAY for payments and payroll management and also entered the marketing and growth solutions sector with the launch of an intelligent marketing growth suite called Engage. RAY, an AI-powered payroll management assistant, provides e-commerce companies with seamless payment solutions through voice and text commands. Razorpay asserts that both products are pioneering initiatives in India. Inc 42
4.3. AMFI urges mutual funds to safeguard investors amid surging inflows in small and mid-cap schemes
The Association of Mutual Funds in India (“AMFI”) has urged mutual fund houses to safeguard the interests of investors in small and mid-cap schemes, which have experienced significant inflows. The appeal comes amidst concerns about the valuation of stocks in these segments, leading AMFI to advise trustees and Asset Management Companies (AMCs) to implement policies for investor protection. These measures may include moderating inflows and portfolio rebalancing. AMFI emphasised that the approved policies should be disclosed on mutual funds' websites within 21 days from February 27, 2024. The Indian Express
4.4. Amazon Pay secures RBI's payment aggregator license for enhanced fintech operations
Amazon Pay, the fintech arm of Amazon India, has secured a Payment Aggregator (“PA”) license from RBI. This makes Amazon Pay one of the ten entities to receive the RBI's PA license in 2024, joining companies like Zomato, Juspay, and Stripe. In addition to the PA license, Amazon Pay already holds a Prepaid Payment Instruments (PPI) license, allowing it to operate wallet services. The PA license enables Amazon Pay to act as an intermediary between merchants and payment processors, facilitating transactions on behalf of multiple merchants while adhering to regulatory standards. The approval emphasises Amazon Pay's dedication to enhancing user experiences for both merchants and customers. Fortune India
4.5. Mswipe Technologies raises USD 20 million for expansion and product development
Mswipe Technologies, a payment company based in Mumbai, has successfully raised USD 20 million (United States Dollar Twenty Million Only) in primary growth equity capital from its current investors. The funds will be utilised to expand the merchant payment network, enhance product development, and strengthen technological infrastructure, according to a company statement. Recently, Mswipe obtained a PA license from RBI, enabling it to provide online gateway and aggregator services, with a particular focus on catering to the needs of MSMEs. Moneycontrol
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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