1. Regulatory Updates
1.1. India
1.1.1. New framework for FPI to FDI reclassification
RBI has introduced an operational framework for the reclassification of Foreign Portfolio Investments (“FPI”) to Foreign Direct Investment (“FDI”) for investments exceeding the 10 per cent (ten per cent) equity limit. Effective immediately, AD Category-I banks will facilitate the reclassification process, provided the FPI meets government approval and sectoral guidelines. The reclassification must be completed within five trading days, and once completed, the investment will be treated as FDI, subject to all FDI regulations. RBI
1.1.2. RBI updates list of domestic systemically important banks
RBI has released its 2024 list of Domestic Systemically Important Banks (D-SIBs), with State Bank of India (“SBI”), HDFC Bank, and ICICI Bank continuing to hold their positions. The banks are assigned additional Common Equity Tier 1 (“CET1”) capital requirements based on their systemic importance. From April 2025, SBI and HDFC Bank will face higher CET1 requirements of 0.8 per cent (zero point eight per cent) and 0.4 per cent (zero point four per cent), respectively, in addition to the capital conservation buffer. RBI
1.1.3. RBI cancels Durga Co-op Bank's licence
RBI has revoked the licence of The Durga Co-operative Urban Bank Ltd., Vijayawada, citing inadequate capital, failure to meet regulatory standards, and inability to protect depositor interests. The bank will cease operations on November 12, 2024, and a liquidator will be appointed. Depositors are eligible for insurance claims up to INR 5 lakh (Indian Rupees Five Lakh only). RBI
1.1.4. RBI hosts conference for cooperative registrars
RBI hosted the Second Conference of State Registrars of Cooperative Societies (RCSs) in New Delhi on November 14, 2024. The conference focused on strengthening cooperative banks, with discussions on governance, financial inclusion, and digital evolution. Key points included the need for improved risk management, stronger collaboration with RBI, and enhanced technological capabilities. Proposals for model bylaws, training liquidators, and improving the liquidation process were also discussed. RBI
1.1.5. RBI releases report on municipal finances
RBI released its Report on Municipal Finances, focusing on "Own Sources of Revenue Generation in Municipal Corporations." Analysing budgetary data from 232 (two hundred and thirty two) municipal corporations (“MCs”), the report highlights challenges faced by MCs, particularly their dependence on government transfers and grants. While revenue accounts remain in surplus, most MCs' own revenues are insufficient to cover expenses, limiting their autonomy. RBI
1.1.6. Monetary Penalties
RBI imposes monetary penalties on the following financial institutions:
Name of the Financial Institution | Penalty Imposed | Reasons |
INR 1,10,000/- (Indian Rupees One Lakh Ten Thousand only) | Contravention of the specific directions issued by RBI under ‘Priority Sector Lending (PSL) - Targets and Classification’ and specific directions issued by RBI on making contribution to Micro and Small Enterprises (MSE) Refinance Fund due to shortfall in achievement of PSL. | |
INR 50,000/- (Indian Rupees Fifty Thousand only) | Non-compliance with certain directions issued by RBI on ‘Know Your Customer (KYC)’. | |
INR 80,000/- (Indian Rupees Eighty Thousand only) | Contravention of/non-adherence with certain directions issued by RBI on ‘Know Your Customer (KYC)’ and ‘Membership of Credit Information Companies (CICs) by Co-operative Banks’. | |
INR 1,00,000/- (Indian Rupees One Lakh only) | Non-compliance with the directions issued by RBI on ‘Priority Sector Lending (PSL) - Targets and Classification’ and specific directions issued by RBI on making contribution to the Micro and Small Enterprises (MSE) Refinance Fund due to shortfall in achievement of PSL. | |
INR 2,50,000/- (Indian Rupees Two Lakh Fifty Thousand only) | Contravention of/non-adherence with certain directions issued by RBI on ‘Loans and Advances to directors, relatives and firms/concerns in which they are interested’ and ‘Financial Statements - Presentation and Disclosures’. | |
INR 1,00,000/- (Indian Rupees One Lakh only) | Contravention of/non-adherence with certain directions issued by RBI on ‘Placement of Deposits with Other Banks by Primary (Urban) Co-operative Banks (UCBs)’ and ‘Know Your Customer’. | |
INR 6,34,000/- (Indian Rupees Six Lakh Thirty Four Thousand only) | Contravention of/non-adherence with certain directions issued by RBI on ‘Priority Sector Lending (PSL) - Targets and Classification’ and specific directions issued by RBI on making contribution to the Micro and Small Enterprises (MSE) Refinance Fund due to shortfall in achievement of PSL. |
1.2. Bangladesh
1.2.1. Warning issued over delayed import payments
Bangladesh Bank (“BB”) has issued a warning to banks over delayed import payments, particularly by state-run and Shariah-based lenders, which have resulted in a USD 400 million (United States Dollar Four Hundred Million only) backlog of overdue Letters of Credit (LC). The central bank emphasised that such delays harm the country’s international reputation, raise import costs, and damage correspondent relationships with foreign banks. The Daily Star
1.3. Vietnam
1.3.1. Vietnam pushes forward cashless payment regulations
The State Bank of Vietnam (“SBV”) is accelerating the implementation of regulations under Decree No. 52/2024 to enhance cashless payments. A recent meeting highlighted progress in adopting key Circulars and discussed measures to improve security, including biometric verification. SBV urged banks to strengthen staff training, update regulations, and address challenges like cyber fraud to ensure effective implementation. The State Bank of Vietnam
2. Trends
2.1. Prosus plans PayU IPO for 2025
Prosus, the payments giant, which operates in India and multiple global markets, has appointed Goldman Sachs as one of its lead bankers for the public offering. PayU aims to file its Draft Red Herring Prospectus (DRHP) by early 2025. The company, which recently reported an 11 per cent (eleven per cent) revenue growth in Fiscal Year (FY) 2024, is focusing on strengthening its financials ahead of the Initial Public Offering (“IPO”). Inc42
3. Sector Overview
3.1. India’s startup resilience amid global slowdown
India’s tech ecosystem remains resilient in 2024, thriving despite global economic challenges. While overall funding dipped slightly, sectors like fintech, retail tech, and cleantech have shown strong growth, fuelled by digital adoption and government support. The rise of six new unicorns and a rebound in IPO activity reflect investor confidence, while innovations in areas like electric vehicles and Artificial Intelligence (“AI”) continue to drive India's tech narrative. SME Futures
4. Business Updates
4.1. BlackBuck raises INR 501 crore from anchors
BlackBuck, the logistics unicorn, raised INR 501 crore (Indian Rupees Five Hundred and One Crore only) from anchor investors ahead of its IPO. Nomura led the round with an investment of INR 67.87 crore (Indian Rupees Sixty- Seven Crore and Eighty-Seven Lakh only), followed by Invesco and State Bank of India. The company is set to raise INR 1,114 crore (Indian Rupees One Thousand One Hundred and Fourteen Crore only) through the IPO, with a price band of INR 259 (Indian Rupees Two Hundred and Fifty-Nine only) to INR 273 (Indian Rupees Two Hundred and Seventy-Three only) per share. The Business Standard
4.2. Cashfree launches cross-border payments pilot
Cashfree Payments has launched a pilot for cross-border payments in partnership with major companies like Swiggy, Zepto, and Nykaa. The initiative targets Unified Payments Interface (UPI) and RuPay card users, enabling global transactions that were previously not supported. The Bengaluru-based fintech also received an RBI Prepaid Payment Instruments (PPI) licence to facilitate prepaid purchases and fund transfers. The Economic Times
4.3. Razorpay partners to invest in startups
Razorpay, in collaboration with Peak XV and Lightspeed, has launched a venture program to invest up to USD 1 million (United States Dollar One Million only) annually in early-stage business to business startups. The initiative will provide funding, access to Razorpay’s tech stack, and mentorship. It aims to support 10 (ten) – 15 (fifteen) startups each year across various sectors, including fintech and healthcare. Inc42
4.4. GIFT city launches fintech Institute hub
GIFT City has launched the GIFT International Fintech Institute (GIFT IFI) and the GIFT Fintech Innovation Hub (GIFT IFIH) to foster fintech talent and innovation. The institute, backed by Ahmedabad University, IIT Gandhinagar, and UC San Diego, will offer training programs starting January 2025. The hub will support fintech startups with resources and mentorship. Times of India
4.5. India’s digital economy poised to hit 20 per cent of GDP by 2026
RBI Deputy Governor Michael Patra highlighted India’s leadership in the digital revolution, attributing rapid advancements in fintech for accelerating digital payments. Addressing a conference, he noted that the digital economy, currently comprising 10 per cent (ten per cent) of India’s gross domestic product (GDP), is projected to reach 20 per cent (twenty per cent) by 2026. He emphasized India’s robust digital public infrastructure, burgeoning AI talent, and financial technology innovations like mobile banking and digital KYC, with private banks leading adoption. Productivity gains include a 25-30 per cent (twenty-five to thirty per cent) decline in customer acquisition costs and significant reductions in paper use and fuel consumption, reflecting digitalisation's transformative impact.The Business Standards
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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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