Happy Monday, everyone!
MTLegal Team is bringing you a weekly update on everything that happened in the fintech space over the past week.
Our goal with these updates is to inform you about any new developments, trends, regulations, or notable events in the fintech sector.
This will help fintech companies plan, protect, and preserve their businesses based on market changes and regulatory updates.
Here’s last week’s update:
A) Rising Trends in Fintech
1) PB Fintech Receives RBI Nod for Account Aggregator License
Strategic Expansion: PB Fintech, the parent company of Policybazaar, announced that its subsidiary, PB Financial Account Aggregators (PBAA), has secured a Certificate of Registration from the Reserve Bank of India (RBI). This license designates PBAA as a non-banking financial company (NBFC) authorized to offer account aggregator services.
Regulatory Approval: Obtaining this license marks a significant milestone for PB Fintech, enabling PBAA to securely aggregate financial data from multiple institutions without accepting public deposits. The company aims to leverage this approval to broaden its offerings and solidify its position in the financial technology space in India.
Financial Highlights: PB Fintech posted a net profit of ₹60 crore in Q1 FY24, reflecting a notable turnaround from a net loss of ₹11.9 crore in the same period last year. The firm’s total insurance premium for the quarter stood at ₹4,871 crore, driven by a robust 78% year-on-year growth in health and life insurance business.
2) LIC Advocates Telco and Fintech Partnerships for Wider Insurance Reach
Expanding Coverage: Life Insurance Corporation (LIC) of India’s CEO, Siddhartha Mohanty, emphasized the importance of exploring partnerships with telecommunications and fintech companies to extend insurance services to underserved regions.
Challenges and Solutions: Mohanty noted that while traditional channels like agents and brokers have been effective, they face limitations in reaching remote and rural areas. Collaborating with telecom and fintech firms, which already have access to these regions, presents an opportunity to significantly increase outreach.
Insurance for All: The move aligns with the industry’s commitment to achieving “insurance for all” by ensuring affordable and accessible coverage to every citizen, leveraging innovative distribution methods.
3) Fintech Startup Groww Relocates Headquarters to India, Pays Hefty Tax
Strategic Move: Groww, a prominent stock trading app, has shifted its headquarters from the United States back to India. The relocation was accompanied by a substantial tax payment of $159.4 million, signaling its commitment to the Indian market.
Homecoming Trend: Groww joins a growing number of Indian startups returning home to capitalize on the country’s thriving IPO market and gain crucial local analyst coverage. With nearly 70 companies going public in the first three quarters of 2024, India’s appeal for fast-growing startups continues to rise.
Regulatory and Market Benefits: Returning to India offers tech firms better access to domestic institutional investors and regulatory frameworks that are increasingly supportive of innovation and growth within the country’s startup ecosystem.
B) India’s Economic Insights
1) RBI Study Reveals Decline in Cash Usage as Digital Payments Surge
Digital Shift: A study by RBI economist Pradip Bhuyan highlighted that cash usage in consumer spending has significantly declined post-COVID, dropping from 81–86% in March 2021 to 52–60% by March 2024. This reduction aligns with the increasing adoption of digital payments, particularly the United Payments Interface (UPI).
Key Findings: The study, titled “Cash Usage Indicator for India,” noted that UPI’s share in person-to-merchant (P2M) transactions surged from 33% in 2020-21 to 69% in 2023-24 in value terms. Despite the growing digital adoption, cash remains prevalent for low-value purchases.
Currency in Circulation: The report also indicated a decline in the currency-to-GDP ratio, down to 11.5% in 2023-24 from its peak of 13.9% in 2020-21. The shift reflects the expanding role of digital transactions in India’s evolving payment landscape.
2) Rapid Growth in India’s Private Credit Market Raises Concerns
Credit Boom: India’s private credit market is witnessing rapid growth, with a surge in local and global players entering the space. However, industry experts raised concerns about potentially weaker lending standards among some new entrants.
Global Perspectives: Speaking at the Bloomberg India Credit Forum, Cerberus head Indranil Ghosh warned that lighter diligence and covenant standards could pose risks. The RBI’s chief, Shaktikanta Das, expressed confidence in the sector’s stability but advised continuous vigilance given the global landscape.
Competitive Landscape: As competition heats up, India’s direct-lending market is expected to see further consolidation in the coming years, with established firms maintaining cautious optimism about the outlook.
3) PwC Report Finds Low Awareness of Data Protection Act Among Consumers
Data Privacy Concerns: A survey by PwC India revealed that only 16% of consumers understand the Digital Personal Data Protection (DPDP) Act, highlighting a significant awareness gap. Additionally, only 9% of organizations reported a comprehensive understanding of the Act.
Key Findings: The study, which surveyed 3,233 consumers and 186 organizations, emphasized the need for greater education on data privacy rights and responsibilities. It found that 56% of consumers were unaware of their rights related to personal data.
Trust and Compliance: Despite the low awareness, only 42% of organizations view compliance with the DPDP Act as an opportunity to build consumer trust. PwC stressed the importance of a privacy-first approach and proactive investment in raising awareness.
4) Paytm Reports Profit Boosted by One-Time Gain Despite Revenue Dip
Financial Turnaround: Paytm, operated by One 97 Communications, reported a consolidated profit of ₹928.3 crore for Q2 FY24, driven by a one-time gain of ₹1,345 crore from the sale of its entertainment ticketing business to Zomato. The fintech firm’s revenue, however, dipped 34% year-on-year to ₹1,660 crore.
Operational Highlights: On a sequential basis, Paytm’s revenue grew 11%, with payments revenue rising 9% and financial services revenue increasing 34%. The company also reported improvements in its payment processing margin and merchant subscriptions.
Cost Control: Paytm managed to cut its indirect costs by 17% QoQ, mainly due to a reduction in employee and marketing expenses. The company emphasized a continued focus on cost discipline while exploring growth opportunities.
5) BharatPe Partners with nasscom Foundation to Empower Women Entrepreneurs in Maharashtra
Empowering Women: BharatPe, in collaboration with nasscom Foundation, has launched an initiative to formalize businesses for 1,500 women entrepreneurs in six districts of Maharashtra. The program, part of BharatPe Cares, aims to integrate these entrepreneurs into the formal economy and improve their financial stability.
Program Highlights: The initiative involves training local resource persons (LRPs) to guide rural women on obtaining essential business registrations and connecting them with digital market platforms. The program also provided market linkages for 250 women, enhancing their business growth opportunities.
Long-Term Impact: BharatPe’s CEO, Nalin Negi, emphasized the company’s dedication to advancing financial inclusion and unlocking opportunities for women entrepreneurs. The partnership represents a crucial step in supporting rural women and fostering inclusive growth.
C) Recent Business Updates
1) Paytm Resumes Onboarding UPI Users after NPCI Lifts Restrictions
Regulatory Clearance: One97 Communications Ltd, the parent company of Paytm, has received approval from the National Payments Corporation of India (NPCI) to onboard new UPI users, ending a months-long regulatory freeze imposed earlier this year by the Reserve Bank of India (RBI). The NPCI’s permission, granted on October 22, 2024, is subject to adherence to stringent procedural guidelines and regulatory frameworks.
Compliance Requirements: In its letter, NPCI stressed the need for compliance with multiple guidelines, including risk management protocols, multi-bank norms, and data protection laws. Paytm must also abide by key legal provisions, such as the Payments and Settlement Act of 2007 and the Digital Personal Data Protection Act of 2023.
Strategic Reopening: Paytm’s resumption of onboarding new UPI users marks a significant step towards expanding its user base and regaining momentum after a period of regulatory scrutiny.
2) Odisha FC Partners with iServeU to Transform the Sports-Tech Landscape
Innovative Alliance: Odisha FC, one of India’s top football clubs, has forged a partnership with iServeU, a leading fintech company in Asia. This collaboration aims to blend sports and technology to create new opportunities for players and fans. iServeU will serve as the official partner for the 2024-25 Indian Super League (ISL) season.
Focus on Community Engagement: iServeU’s CEO, Debiprasad Sarangi, highlighted the goal of investing in sports and opening avenues for aspiring engineers. The partnership also plans to launch a Fan Loyalty Card program, offering perks to Odisha FC fans.
Strategic Goals: Raj Athwal, CEO of Odisha FC, emphasized that the partnership aligns with the club’s values and will help foster a new era of success. He expressed excitement about working with iServeU to build on the club’s recent achievements and continue engaging with fans in innovative ways.
D) Regulatory Changes (RBI)
1) RBI Expands Access to NDS-OM Trading Platform
New Access Guidelines: The Reserve Bank of India (RBI) has broadened access to its Negotiated Dealing System-Order Matching (NDS-OM) electronic trading platform. The expanded criteria now include regional rural banks, local area banks, non-banking finance companies (NBFCs), housing finance companies, provident funds, pension funds, and regulated market infrastructure institutions.
Enhanced Market Participation: The move comes as government securities (G-Secs) gain traction after their inclusion in prominent global indices like JPMorgan Chase’s Emerging Markets Bond Index and Bloomberg’s Local Currency Government indices.
Direct vs. Indirect Access: Eligible entities with an SGL account and a current account with the RBI can now have direct access, while others, such as foreign institutional investors, will continue to trade through indirect channels.
2) RBI Penalizes Vidyasagar Central Co-operative Bank for Non-Compliance
Penalty Imposed: The RBI has levied a fine of ₹2 lakh on Vidyasagar Central Co-operative Bank Limited, Midnapore, for violating its guidelines on housing finance. The penalty is based on findings from a statutory inspection conducted by NABARD on March 31, 2023.
Regulatory Breach: The inspection revealed that the bank had exceeded the permitted exposure limit on housing finance, prompting regulatory action. The RBI reiterated that this penalty is strictly due to deficiencies in compliance and does not impact the validity of the bank’s transactions with its customers.
3) Aurangabad District Central Co-operative Bank Faces RBI Action
Fine for Non-Compliance: The RBI has imposed a monetary penalty of ₹1.25 lakh on Aurangabad District Central Co-operative Bank Ltd., Bihar, for violations related to credit information reporting and transferring funds to the Depositor Education and Awareness Fund.
Violation Details: The RBI identified that the bank had failed to submit borrower credit information to any of the four Credit Information Companies (CICs) and neglected to transfer eligible amounts within the prescribed period. The action underscores the need for cooperative banks to adhere strictly to regulatory guidelines.
4) RBI Penalizes Nazareth Urban Co-operative Bank for Lending Violations
Breach in Lending Rules: The RBI has slapped a ₹1 lakh fine on Nazareth Urban Co-operative Bank Ltd., Tamil Nadu, for sanctioning loans to a relative of one of its directors. The penalty is based on findings from an inspection conducted as of March 31, 2023.
Compliance Issues: The RBI found that the bank’s actions violated guidelines concerning loans to directors, their relatives, or firms where they hold an interest. This enforcement action aims to maintain regulatory integrity and adherence to fair practices in lending.
We hope you found this update insightful.
MTLegal Team is here to support everyone in the fintech sector—whether it’s for licensing, registration, or contractual needs.
We’ve got your back.
Contact us today, and let’s protect the business you’re building!
