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) Fintech Advances: A Glimpse into Strategic Growth and Innovation
1) Slice and NESFB Merge to Enter the Small Finance Banking Sector
Groundbreaking Merger Completion: Slice has finalized its merger with North East Small Finance Bank (NESFB), becoming the first fintech entity to enter India’s small financial banking sector. The combined entity, approved by both the Reserve Bank of India (RBI) and the Competition Commission of India (CCI), aims to simplify financial access through diverse banking products.
Strategic Alignment and Expansion: The joint operation will focus on simplifying customer onboarding and scaling operations across India, prioritizing services for the underbanked. Slice founder Rajan Bajaj emphasized the merger’s role in reaching underserved populations, while NESFB’s CEO, Rupali Kalita, highlighted the partnership’s impact on expanding banking reach.
2) Zinc Secures $25.5 Million to Advance Education-Focused Wealth Solutions
New Funding Milestone: Zinc, an ed-fintech startup focusing on goal-based wealth planning for children’s education, has raised $25.5 million in seed funding led by Nexus Venture Partners, alongside Quona Capital and others. The platform aims to support Indian families in financially planning for overseas education.
Broad Service Offering: Zinc will offer a range of solutions, including wealth management, international remittances, and investment advice, leveraging its approvals as a Registered Investment Advisor and Payment Service Provider. Its founder, former PayU CEO Prashanth Ranganathan, envisions low-fee, accessible counseling options to reach clients in smaller cities.
3) Cashfree Payments Authorized to Issue Prepaid Instruments
Expanding Payment Solutions: Cashfree Payments has received RBI approval to operate as a prepaid payment instrument (PPI) provider, enabling the issuance of prepaid cards and digital wallets. With this license, the firm can further enhance its offerings for internet businesses to drive user engagement.
Driving Innovation and Growth: Backed by notable investors such as Y Combinator and SBI, Cashfree now joins 46 other PPI providers in India. CEO Akash Sinha sees this milestone as an opportunity to foster new payment solutions within India’s booming digital commerce landscape.
B) India’s Economic Landscape: Digital Transformation and Financial Inclusion
1) Digital India’s Push for a Stronger Credit Ecosystem
A New Era of Lending: The RBI’s launch of the Unified Lending Interface (ULI) represents a significant advancement for India’s credit ecosystem, particularly for underserved groups like small farmers and SMEs. The ULI platform facilitates seamless access to applicants’ financial records, helping lenders make more informed decisions.
Digital Transformation at Scale: India’s digital infrastructure, powered by initiatives like Aadhaar, UPI, and the JAM trinity, has created an environment ripe for the long-term growth of consumer credit. UPI transactions have grown tenfold since the pandemic, and digital payments now drive over 1400 crore transactions monthly.
2) Jio Financial’s Subsidiary Approved as Payment Aggregator
New Market Entry: Jio Payment Solutions Ltd., a Jio Financial Services arm, has received RBI authorization to operate as an online payment aggregator. This designation allows the subsidiary to consolidate payments across platforms, reflecting a strategic expansion in India’s financial ecosystem.
Broader Ventures in Wealth Management: Beyond payment aggregation, Jio Financial and BlackRock have launched Jio BlackRock Asset Management, marking their third venture together. They aim to offer a suite of wealth management solutions, further establishing Jio’s footprint in India’s asset management sector.
3) Home Ministry Alerts Public on Illegal Digital Payment Gateways
Cybersecurity Alert: The Ministry of Home Affairs (MHA) has issued an alert about illegal digital payment gateways that facilitate money laundering, often managed by foreign criminal syndicates using mule accounts. Identified gateways like PeacePay and PoccoPay have been linked to scams, including fake investment sites and betting platforms.
Citizen Caution: The MHA urges citizens not to rent or sell their bank accounts or registration documents, cautioning that funds deposited in compromised accounts can lead to legal consequences. The national cybercrime helpline (1930) and the cybercrime.gov.in website are available for reporting suspicious activities.
4) Prioritizing Regulatory Compliance in Fintech Disruption
Building First, Disrupting Later: Amid rising fintech innovation, the RBI’s recent interventions emphasize the importance of compliance in fostering a sustainable sector. The formation of a self-regulatory organization, FACE, is expected to promote responsible growth among fintechs, helping them to prioritize consumer protection.
Learning from Global Success Stories: The sector can take inspiration from countries like Germany and Japan, where well-regulated financial institutions played a pivotal role in economic stability. India’s fintechs have a similar opportunity to support financial inclusion while aligning with regulatory standards to maintain public trust.
5) AI and Digital Transformation: AWS’s Role in India’s Financial Services
Accelerating Digital Transformation: Amazon Web Services (AWS) is leading significant advancements in India’s BFSI sector through cloud-based solutions and AI integration. AWS collaborates with major banks and fintechs to bolster security, operational resilience, and customer engagement.
Supporting Fintech Ecosystem Growth: Through initiatives like AWS Activate, AWS offers startups technical support and resources, benefiting India’s fintech leaders, including Razorpay and Zerodha. AWS also provides flexible programs to help smaller institutions transition to cloud services, supporting the broader fintech ecosystem’s growth and innovation.
C) Business Moves and Partnerships: Expanding Reach and Services
1) BharatPe Debuts ‘Invest BharatPe’ Platform to Expand Investment Options
New Investment Offering: BharatPe has launched ‘Invest BharatPe,’ introducing digital gold as its first investment product in collaboration with Safegold. This new platform adds to BharatPe’s financial suite, offering users a secure and accessible way to invest in digital gold.
Supporting Financial Inclusion: BharatPe CEO Nalin Negi highlighted that the timing aligns with consumer interest in gold during the festive season, aiming to encourage financial inclusion across underserved areas. Following regulatory updates, BharatPe continues to grow its lending options, such as two-wheeler loans and loans against mutual funds.
2) CG FinTech Forms Strategic Alliance with Adelaide United FC
Sports and Fintech Synergy: CG FinTech has joined forces with Adelaide United Football Club as its Official Trading Partner. This partnership aims to bridge the worlds of sports and financial technology, offering fans and communities new financial opportunities and services.
Enhancing Visibility and Engagement: As part of this collaboration, CG FinTech’s logo will feature on Adelaide United’s away shirts for the upcoming season. Both entities will leverage cross-promotional strategies to foster stronger engagement with fans and clients alike, reflecting shared values of community empowerment and financial education.
D) Regulatory Insights: Strengthening Compliance Standards
1) RBI Sets Minimum Net Worth for Central Counterparties at ₹300 Crore
Revised Net Worth Requirement: The RBI now mandates that entities seeking recognition as Central Counterparties (CCPs) maintain a minimum net worth of ₹300 crore. This update to the 2019 norms is part of a broader initiative to ensure CCPs operate with enhanced financial stability.
Enhanced Regulatory Oversight: Alongside capital requirements, CCPs must establish a compliance committee and ensure shareholder alignment with CCP operations. This regulatory tightening follows the increase in global market participation in Indian Government Securities.
2) RBI Levies Fine on Vaijapur Merchants Co-operative Bank for Compliance Gaps
Monetary Penalty for Non-Compliance: The Reserve Bank of India has imposed a penalty of ₹7.5 lakh on Vaijapur Merchants Co-operative Bank Limited, Maharashtra. Key violations included non-adherence to interest rate guidelines and failure to implement software for monitoring suspicious transactions.
Regulatory Reminder: The RBI’s action underscores the importance of robust compliance systems for all banks, especially concerning transparency in transactions and alignment with state regulations.
3) Gondia District Central Co-operative Bank Penalized for Breaching Credit Regulations
RBI Action Against Loan Mismanagement: Gondia District Central Co-operative Bank in Maharashtra has been fined ₹2.6 lakh for contravening regulatory requirements, including improperly extending a loan to a director and failing to join three Credit Information Companies.
Emphasis on Compliance: This penalty serves as a regulatory reminder for banks to adhere strictly to governance and lending protocols, especially concerning conflict-of-interest rules involving directors.
4) Shri Shiveshwar Nagari Sahakari Bank Fined Over Unclaimed Deposit Regulations
Penalty for Untransferred Funds: Shri Shiveshwar Nagari Sahakari Bank in Maharashtra received a ₹1 lakh penalty from the RBI for not transferring eligible unclaimed deposits to the Depositor Education and Awareness Fund within the stipulated timeframe.
Significance for Banking Protocols: This action highlights the RBI’s strict stance on timely fund transfers to national funds, underscoring the importance of safeguarding unclaimed funds per regulatory requirements.
5) Prerna Nagari Sahakari Bank Fined for Loan Irregularities Involving Director’s Family
Regulatory Breach on Loan to Director’s Family: The RBI has levied a ₹2 lakh penalty on Prerna Nagari Sahakari Bank Limited, Maharashtra, for sanctioning a loan to a business associated with a director’s family member, with the director acting as guarantor.
Focus on Transparent Lending Practices: The penalty emphasizes the RBI’s commitment to enforcing strict lending practices, especially where conflicts of interest could compromise governance standards.
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!
