1. Regulatory Updates
1.1. India
1.1.1. RBI appoints Shri R. Lakshmi Kanth Rao as Executive Director
The Reserve Bank of India (“RBI”) has appointed Shri R. Lakshmi Kanth Rao as Executive Director (“ED”) effective from May 09, 2024. Previously, Shri Rao held the position of Chief General Manager-in-Charge in the Department of Regulation. With over three decades of experience in the RBI, he has worked extensively in areas such as regulating banks and NBFCs, bank supervision, and consumer protection. Shri Rao has served as the Banking Ombudsman in RBI Chennai and as Regional Director of Uttar Pradesh in Lucknow. He has also been involved in various Committees and Working Groups, contributing to policy formulation. In his new role as Executive Director, Shri Rao will oversee the Deposit Insurance and Credit Guarantee Corporation, the Right to Information Act (FAA), and the Department of Communication RBI
1.1.2. Monetary Penalties
RBI imposes monetary penalties on the following financial institutions:
Name of the Financial Institution | Penalty Imposed | Reasons |
INR 1,50,000/ (Indian Rupees One Lakh Fifty Thousand only) | Contravention of/non-adherence with certain provisions of the ‘Reserve Bank of India Know Your Customer (“KYC”) Direction, 2016’ issued by RBI | |
INR 3,10,000/- (Indian Rupees Three Lakhs Ten Thousand only) | Contravention of/non-adherence with certain provisions of the ‘Reserve Bank of India Know Your Customer (“KYC”) Direction, 2016’ issued by RBI | |
INR 2,50,000 (Indian Rupees Two Lakhs Fifty Thousand only) | Contravention of/non-adherence with the specific directions issued by RBI under Supervisory Action Framework (“SAF”). | |
INR 5,00,000/- (Indian Rupees Five Lakhs only) | Contravention of/non-adherence with the directions issued by RBI on ‘Comprehensive Cyber Security Framework for Primary (Urban) Cooperative Banks (“UCB”) – A Graded Approach’ and ‘Levy of Penal Charges on Non-Maintenance of Minimum Balances in Inoperative Accounts’ | |
INR 2,00,000/- (Indian Rupees Two Lakhs only) | Contravention of/non-adherence with the directions issued by RBI on ‘Comprehensive Cyber Security Framework for Primary (Urban) Cooperative Banks (“UCB”) – A Graded Approach’ and ‘Levy of Penal Charges on Non-Maintenance of Minimum Balances in Inoperative Accounts’ |
1.2. Bangladesh
1.2.1. MTB partners with ShareTrip Pay to launch travel wallet solution
Mutual Trust Bank (“MTB”) has entered into a strategic alliance with ShareTrip Pay, the first travel wallet in the country and a subsidiary of ShareTrip, to introduce a travel wallet solution. Kashef Rahman, the CEO and founder of ShareTrip Pay, along with Khalid Hossin, the head of the digital banking division at the bank, signed the agreement at MTB's corporate head office located in Gulshan, according to a press release. The Daily Star
1.3. Philippines
1.3.1. Skyro partners with ADVANCE.AI to enhance financial services in the Philippines
Skyro, a fintech company regulated by the Philippines’ Securities Exchange Commission (SEC), has partnered with ADVANCE.AI, a digital identity verification and risk management solutions provider in Southeast Asia. Launched in August 2022, Skyro offers various consumer finance products through partnerships and its mobile app. A study by FICO in 2021 revealed that many Filipino consumers abandon lengthy online banking applications, and a significant number drop out if asked too many questions during onboarding. Additionally, Filipinos have lost P155 million (Peso One Hundred Fifty-Five Million only) to fraud-related scams in the first eight months of 2023. The partnership between Skyro and ADVANCE.AI aims to provide simple, secure, and customer-centric financial services in the Philippines.. Fintech Philippines
1.3.2. CTBC Bank Philippines collaborates with Hitachi Asia to enhance digital banking experience
CTBC Bank Philippines has partnered with Hitachi Asia to enhance its web interface and mobile banking applications to improve access to digital financial services and promote financial inclusion in the Philippines. The bank collaborated with Hitachi Asia to introduce Retail NetBanking, a redesigned digital interface, to enhance the mobile banking experience for its customers by prioritising convenience and security. The upgraded platform features a user-friendly dashboard providing a unified view of financial products, customisable features, and personalised widgets, allowing users to access the most relevant information. Additionally, the interface includes enhanced security measures such as device recognition technology and a time-based One-Time Password (OTP) system to strengthen protection against unauthorised access. Fintech Futures
2. Trends
2.1. Paytm shifts focus to UPI Lite wallet for low-value payments amid RBI restrictions
One97 Communications, the parent company of Paytm, announced its focus on the UPI Lite wallet for users who prefer digital wallets for low-value payments, following RBI's directive for Paytm Payments Bank to halt most operations and bar new credits to its mobile wallets from March 15. Users can withdraw or transfer their remaining balance but cannot add new funds. The UPI Lite wallet, distinct from Paytm's in-house wallet, allows instant transactions up to INR 500 (Indian Rupees Five Hundred only), suitable for small payments like groceries and commuting. Users can add up to INR 2,000 (Indian Rupees Two Thousand only) twice daily, totalling INR 4,000 (Indian Rupees Four Thousand only), and transact without a PIN. One97 Communications is partnering with banks like Axis Bank, HDFC Bank, State Bank of India, and YES Bank to ensure a reliable UPI transaction framework. Financial Express
2.2. NPCI likely to extend UPI market share cap deadline by two years
The National Payments Corporation of India (“NPCI”) is expected to extend the deadline for implementing a 30 percent (thirty percent) cap on the market share of digital payment platforms by another two years, pushing the enforcement from December 2024. This marks the second extension, as reducing the market shares of dominant players, such as PhonePe and Google Pay, without harming Unified Payments Interface (“UPI”) payment growth is challenging. Together, these companies held 86.37 percent (eighty-six point three seven percent) of the market share in terms of transactions as of April 2024. While NPCI remains supportive of the market share cap, a final decision will be made closer to the deadline. This extension benefits PhonePe and Google Pay, reinforcing their duopoly in the digital payments space. The central government will ultimately decide on whether payment companies can charge for UPI payments. This update follows recent reports that NPCI might reconsider the 30 percent (thirty percent) cap by year-end. Inc 42
3. Sector Overview
3.1. Banks increase cyber insurance coverage amid rising cyber threats
Banks are increasingly opting for cyber insurance coverage due to a rise in cyber-related incidents, higher claim frequencies, and increased regulatory scrutiny. According to insurance brokers, there was nearly an 8 percent (eight percent) increase in coverage by banks and financial institutions in 2023-24 compared to the previous year. The banking industry in India saw its cyber insurance claims ratio rise to over 50 percent (fifty percent) in the financial year 2022-23 from 40 percent (forty percent) in 2021-22. Insurance industry experts note that the evolving cyber threat landscape, from phishing schemes to ransomware attacks, poses challenges to banks in safeguarding digital assets and maintaining customer trust. Business Standard
3.2. India's data centre capacity to double by 2026 amidst green energy transition and digital growth
India's data centre capacity is projected to double, reaching 2,000 MW (two thousand mega watt) by 2026, as the nation progresses towards a developed market economy and embraces green energy solutions. This expansion presents significant investment opportunities, with an expected capital expenditure of INR 50,000 crore (Indian Rupees Fifty Thousand Rupees only) over the next three years, according to CareEdge Ratings. The data centre industry is forecasted to achieve a 32 percent (thirty-two percent) revenue growth between FY24 and FY26. Despite producing about 20 percent (twenty percent) of the world's data, India currently accounts for only 3 percent (three percent) of global data centre capacity. Economic Times
4. Business Updates
4.1. Zeta launches digital Credit-as-a-Service for Banks
Banking tech unicorn Zeta has launched a digital credit-as-a-service product for banks, based on NPCI’s credit line on the UPI scheme, to accelerate credit issuance in India. Zeta anticipates the scheme's transaction volumes to exceed USD 1 trillion (United States Dollar One Trillion only) by 2030, aiming to capture 50 percent (fifty percent) of this market. The service, with variable pricing based on bank-specific needs, includes a comprehensive suite powered by Zeta’s cloud-native core banking and payments platform, facilitating digital credit processes from origination to collection. It features pre-integrated systems for quick launches, bundled services for operational efficiency, and various product blueprints like EMI loans, merchant loans, and agricultural loans. Additionally, it supports operations, compliance, regulatory reporting, and offers process consulting to integrate the credit line on UPI with existing bank systems. Inc 42
4.2. Pine Labs partners with Emirates NBD to expand digital payment solutions
Fintech major Pine Labs has partnered with UAE-based Emirates NBD to provide digital payment solutions for the bank's clients. Emirates NBD will utilise Pine Labs’ Credit+ platform to enhance its offerings and implement merchant acquiring processing solutions for corporate and institutional clients, starting in the UAE and later expanding to Saudi Arabia and Egypt. Credit+, launched in 2023, assists fintechs and merchants in managing consumer credit programs, rewards, offers and launching cobranded credit cards, serving over 20 (twenty) countries across South Asia, the Middle East, and Africa. Economic Times
4.3. PhonePe enables UPI payments in Sri Lanka through collaboration with LankaPay
On May 15, PhonePe announced its collaboration with LankaPay, Sri Lanka's national payment network, to enable UPI payment acceptance in the country. This partnership allows Indians visiting Sri Lanka to make payments using UPI by scanning the LankaQR code, eliminating the need for cash or currency conversion calculations. Transactions will be debited in INR, with the currency exchange rate displayed. The collaboration is facilitated through LankaPay's partnership with NPCI International Payments Limited (NIPL), enabling any UPI or PhonePe app user in Sri Lanka to scan a LankaQR code at merchant locations for transactions. Merchants receive settlements in Lankan rupees, while the debited bank account reflects the transaction in INR, with NPCI managing the currency conversion process. PhonePe is the first to integrate UPI International, extending its availability to merchant outlets with local QR codes in countries like the UAE, Singapore, Mauritius, Nepal, and Bhutan. Forbes India
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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