1. Regulatory Updates
1.1. India
1.1.1. RBI finalises framework for Self-Regulatory Organizations
The Reserve Bank of India (“RBI”) has finalised an Omnibus Framework for recognising Self-Regulatory Organizations (“SROs”) for regulated entities (“REs”), including fintechs. Each sector of REs will have separate SROs, and RBI will now accept applications from entities seeking SRO status. This framework aims to address the growing number and scale of REs, the adoption of innovative technologies, and the need for better industry standards for self-regulation. The framework outlines parameters such as objectives, responsibilities, eligibility criteria, and governance standards common to all SROs. Sector-specific guidelines will be issued separately. The framework emphasises the importance of SROs operating with credibility, transparency, and professionalism under regulatory oversight to ensure regulatory compliance and foster sector integrity. Directors of SROs must meet 'fit and proper' criteria and maintain independence, while governance processes must be transparent and robust. The recognition process for SROs will be stringent to ensure their effectiveness. RBI
1.1.2. New tax rule mandates timely payments to MSMEs in India
Sections 15 of the Micro, Small, and Medium Enterprises Development (MSMED) Act, 2006, and newly introduced Section 43B(h) of the Income-tax Act, 1961 (“IT Act”) necessitate payments to Micro, Small, and Medium Enterprises (“MSME”) Registered Enterprises within 15 (fifteen) days, extendable to 45 (forty-five) days under the agreement. Effective April 01, 2024, all business entities in India must adhere to these payment timelines. Late payments to MSMEs will only be deductible in the year they are settled, not when incurred, potentially raising taxable income and business taxes. The penalty for delayed payments includes interest charges at the RBI’s bank rate, with no allowance for deduction as expenses under the IT Act. Business Standard
1.1.3. Monetary Penalties
RBI imposes monetary penalties on the following financial institutions:
Name of the financial institution | Penalty Imposed | Reason |
INR 1,31,80,000/- (Indian Rupees One Crore Thirty One Lakh Eighty Thousand Only) | Contravention of/non-adherence with directions issued by RBI on ‘Interest Rate on Advances’ and ‘Central Repository of Information on Large Credits (CRILC) - Revision in Reporting’. | |
INR 63,60,000/- (Indian Rupees Sixty Three Lakh Sixty Thousand Only) | Contravention of/non-adherence with directions issued by RBI on ‘Interest Rate on Advances’. | |
INR 26,60,000/- (Indian Rupees Twenty Six Lakh Sixty Thousand Only) | Contravention of/non-adherence with the provisions of section 26 A (2) read with section 56 of the Banking Regulation Act, 1949 (“BR Act”) and for non-compliance with RBI directions on ‘Loans and advances to directors, their relatives, and firms/concerns in which they are interested’. | |
INR 13,30,000/- (Indian Rupees Thirteen Lakh Thirty Thousand Only) | Contravention of/non-adherence with directions issued by RBI on ‘Interest Rate on Deposits’. | |
INR 75,000/- (Indian Rupees Seventy Five Thousand Only) | Contravention of/non-adherence with the provisions of section 27 read with section 56 of the BR Act. | |
INR 5,00,000/- (Indian Rupees Five Lakh Only) | Contravention of/non-adherence with directions issued by RBI on ‘Management of Advances-UCBs’ and ‘Exposure Norms and Statutory/Other Restrictions-UCBs’. | |
INR 1,00,000/- (Indian Rupees One Lakh Only) | Contravention of/non-adherence with directions issued by RBI on Exposure Norms and Statutory/Other Restrictions-UCBs’ and ‘Know Your Customer (KYC) Directions, 2016’. |
1.2. Bangladesh
1.2.1. Challenges in Bangladesh's banking sector, lowest profitability in South Asia
The banking sector in Bangladesh faces challenges with the lowest profitability in South Asia, primarily attributed to higher non-performing loans (“NPLs”), lower efficiency, and elevated costs of funds. Bangladesh Bank data reveals a decline in return on assets (“ROA”) from 0.52 percent (zero point five two percent) in 2022 to 0.43 percent (zero point four three percent) in June of the following year. In comparison, neighbouring countries like the Maldives, Nepal, Bhutan, and Pakistan exhibit higher ROA percentages. The former chairman of the Association of Bankers Bangladesh attributes Bangladesh's low ROA to its significant default loan burden, evidenced by NPLs constituting 9.36 percent (nine point three six percent) of total loans disbursed. In contrast, NPL ratios in other South Asian countries like India, Nepal, Afghanistan, and the Maldives are comparatively lower. Addressing NPL management could potentially enhance Bangladesh's banking sector profitability. The Daily Star
1.3. Vietnam
1.3.1. Vietnam proposes fintech regulatory sandbox
The State Bank of Vietnam has proposed a draft decree for a regulatory sandbox specifically tailored for fintech, focusing on three key solutions: credit scoring, open API, and Peer-to-Peer lending. This decision comes after several iterations of the draft, with the latest version reducing the number of solutions due to resource constraints. The sandbox implementation will last up to two years, with the central bank determining the scope, including transaction limits and participant numbers. Vietnam's banking sector has experienced a surge in technology adoption, driven by fintech advancements. However, this growth has posed challenges for regulatory agencies in managing risks related to money laundering, network security, and user data protection. Vietnam News
2. Trends
2.1. Pine Labs, Zepto, and Meesho consider headquarters move to India for strategic benefits
Leading fintech company Pine Labs and quick commerce platform, Zepto are planning to relocate their headquarters to India. Pine Labs aims to merge its Singapore-based holding company with its Indian operations and has initiated the approval process with the National Company Law Tribunal (NCLT) and regulatory authorities in Singapore. Similarly, Zepto is in the final stages of applying for a cross-border merger. Meanwhile, e-commerce platform Meesho is exploring options to raise additional funding to cover the tax implications of relocating its holding company from the US to India. This trend reflects a growing preference among Indian-origin companies to shift their domicile back to India, driven by the attractive valuations offered by domestic public markets for technology ventures. Economic Times
2.2. Policybazaar's parent company PB Fintech Ventures into payment aggregation with new subsidiary PB Pay
Fintech giant Policybazaar's parent company PB Fintech announced its intention to establish a new wholly-owned subsidiary aimed at entering the payment aggregation sector. Named PB Pay, this entity will focus on conducting payment aggregation operations. PB Fintech revealed its plan to seek a payment aggregator license from RBI once PB Pay is formally established. The subsidiary will be established with a proposed authorised share capital of INR 50 crore (Indian Rupees Fifty Crore Only) and a proposed paid-up share capital of INR 27 crore (Indian Rupees Twenty Seven Crore Only). Notably, the payment aggregator framework was introduced by the RBI in March 2020, mandating a license for acquiring merchants and providing digital payment acceptance solutions. Inc 42
2.3. India's first regulated real estate tokenisation platform is likely to launch at GIFT City
India's inaugural regulated real estate and infrastructure asset tokenisation platform is poised to launch at Gujarat International Finance Tec-City (“GIFT City”). Utilising blockchain, the platform aims to democratise investments, allowing small investors to own fractional shares in projects through asset tokens. The International Financial Services Centres Authority (IFSCA), based in GIFT City, has granted conditional approval to entities like Realdom India Pvt Ltd to establish such platforms. Realdom, a Startup India registered company and Nasscom T-AIM member, is progressing through a regulatory Sandbox process to launch its platform, Pinvest Exchange. Blockchain integration promises enhanced security and benefits for stakeholders, including asset owners, developers, investors, and buyers. BFSI
2.4. Amazon Pay to extend smart stores service with top brand partnerships
Amazon Pay is expanding its collaboration with the top 20 (twenty) brands in India as it expands its Smart Stores' service, aiming to reach a total of 150 (one hundred fifty) brand partnerships. Girish Krishnan, Director of Payments, Rewards & Merchant Services at Amazon Pay, highlighted the deliberate approach taken to ensure the quality of partnerships. He mentioned that this year, they anticipate onboarding the top 15-20 (fifteen to twenty) brands to the platform, emphasising the importance of selecting the right partners for optimal outcomes. Business Standard
3. Sector Overview
4. Business Updates
4.1. IndusInd Bank launches Indus PayWear app for contactless payments with tokenised cards
IndusInd Bank introduces the Indus PayWear app, allowing customers to digitise their credit and debit cards for contactless payments via Indus PayWear wearables like rings, watch clasps, and stickers. Suboor Ahmed, COO at Tappy Technologies, highlights the ease of converting physical cards to digital via the app. Integration of tokenisation with IndusInd’s PayWear devices, powered by Thales' Secure Element Chip, enhances security and user convenience. This initiative aligns with IndusInd's digital innovation strategy, evidenced by its recent partnership with Viamericas Corporation to facilitate digital transfers from the US to India, catering specifically to Indian residents in the US. Fintech Futures
4.2. Juspay surpasses INR 200 crore milestone in revenue, despite increased net loss
Juspay, a fintech startup backed by SoftBank, achieved significant growth in its operating revenue, surpassing the INR 200 crore (Indian Rupees Two Hundred Crore Only) mark in the financial year ending March 31, 2023. Its operating revenue surged by 89 percent (eighty-nine per cent) to INR 213.3 crore (Indian Rupees Two Hundred Thirteen Crore Thirty Lakhs Only) in FY23. Despite this growth, Juspay experienced a 4 percent (four percent) increase in net loss, reaching INR 105.7 crore (Indian Rupees One Hundred Five Crore Seventy Lakhs Only) in FY23. Nevertheless, Juspay remains a key player in the digital payments industry, catering to various sectors, including BFSI, e-commerce, travel, fintech, and airlines, with its diverse range of services, such as payment gateway solutions and software support. Inc 42
4.3. Yenmo secures funding to expand instant loan services in India
Yenmo, a platform in India, recently secured USD 500,000 (United States Dollar Five Hundred Thousand Only) in funding from Silicon Valley accelerator Y Combinator. The investment aims to promote financial inclusion by offering instant loans against mutual funds, empowering all Indian consumers. With a flat 10.5 percent (ten point five percent) interest rate, loans can be accessed within minutes, allowing investments to grow while addressing immediate financial needs. Yenmo plans to expand its services to include loans against stocks, insurance, digital gold, and land, and offers an API for easy integration into other products. Business Standard
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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