Search Financial Regulatory Practice

Listen to this post
Financial Regulation

Central banks and other financial regulatory authorities are responsible for influencing major investment decisions and resource allocation through their policies. In India, the Reserve Bank of India (RBI) has joined a growing number central banks and financial regulators, who have incorporated climate change into their financial stability mandate seeking to frame prudential regulations and/or direct credit towards sustainable projects. We have analysed the recent developments in our previous posts available here and here.

Continue Reading Green Central Banks and Financial Regulators – Are they Legally Mandated?
Listen to this post
New RBI IT Outsourcing Directions Industry Implications

Background

The Reserve Bank of India (“RBI”) has issued the RBI Master Direction on Outsourcing of Information Technology Services, dated April 10, 2023 (“Directions”), that will come into effect on October 1, 2023, in line with its earlier Draft Master Direction on Outsourcing of IT Services, dated June 23, 2022 (“Draft Directions”). The RBI’s message to Regulated Entities (“RE”) via these Directions is clear – the liability of Regulated Entities (“RE”) towards their customers does not get diminished due to such outsourcing arrangements or on account of engaging Third Party Service Providers (“TPSP”), nor does it impede effective supervision by the RBI. Outsourcing activities for financial services were already regulated (“Existing Guidelines”), but not for information technology (“IT”) services. In line with the Existing Guidelines, the idea is that core functional areas of RE cannot be outsourced.

Continue Reading FIG Paper (No. 20 – Series 1): New RBI IT Outsourcing Directions: Industry Implications
Listen to this post

Financial institutions have invested heavily into artificial intelligence (“AI”) and machine learning (“ML”) techniques globally, and in India, over the past decade. There are estimates that AI technologies could potentially contribute towards US$ 1 trillion in additional value for the global banking sector, and a World Economic Forum survey indicated that seventy seven per cent of all respondents (151 fintechs and financial institutions from thirty three countries) anticipated AI to possess a high or a very high overall importance in their businesses in the near future. Tangible use-cases in the financial sector have resultantly sprung, benefitting both customers and investors through robo advisors, portfolio optimisation, and algorithmic trading bots. Financial institutions on their part have benefitted greatly through chat bots handling consumer interactions and grievances, identity verification (including video KYC), predictive analytics to mitigate and minimise frauds, etc.

Continue Reading FIG Paper (No. 19 – Series 1)- AI/ ML, ChatGPT: Legal and regulatory considerations for financial service use-cases
Listen to this post

Insider Trading Regime

Introduction

Across jurisdictions, the mischief of insider trading is sought to be curbed and punished by the market regulators since any securities market of repute would measure its success, among other variables, based on the integrity and fairness of transactions conducted on its platform. As such, the prohibition of insider trading stems from the moral imperative, which demands that there is no information asymmetry between insiders and other shareholders while dealing in listed securities. This effectively translates into restraint being exercised by insiders i.e. the persons who have access to the unpublished price sensitive information in relation to the listed securities in which they deal.

Continue Reading Winds of Change – The Recent Judicial and Legislative Developments in Insider Trading Regime

Listen to this post

FIG Paper

Background:

A Working Group on Digital Lending (“RBI WG”), constituted by the Reserve Bank of India (“RBI”), had published its Report in November 2021. It had made recommendations on (i) the legal and regulatory framework for digital lending; (ii) technology; and (iii) financial consumer protection, implementable over the near-term (up to one year) and medium-term (beyond one year).

Continue Reading FIG Paper (No. 16 – Series 1) – Impact Analysis of RBI’s Recommendations of the Working Group on Digital Lending – Implementation

Listen to this post

Payment System Operators New M&A Implications

Background:

On July 4, 2022, the Reserve Bank of India (“RBI”) clarified to all banks and non-bank payment system operators (“PSOs”) that its prior approval would be required for any (a) takeover/ acquisition of control, which may or may not result in change of management; and (b) sale/ transfer of payment activity to an entity not authorised for undertaking similar activity (“Circular”).

Continue Reading FIG Paper (No. 15 – Series 1) – Payment System Operators (PSOs) – New M&A Implications

FIG PAPER (NO. 14) – RBI’s Vision for Payment Systems till 2025

The Reserve Bank of India (RBI) has published the latest of the payments vision documents titled ‘Payments Vision 2025’ with a view to build on the recent success in the digital payments space in India and the successful implementation of Payments Vision 2021. We will discuss the key developments in payments which the RBI envisages till 2025.

The RBI in its Payments Vision 2025 has set out a core theme on its vision on payments. The theme is E-payments for everyone, everywhere, everytime (4 Es). The vision set forth by the RBI in Payments Solution 2025 is to provide every user with six attributes with respect to E-payments. These are Safe, Secure, Fast, Convenient, Accessible and Affordable E-payment options. The RBI has published Payments Vision 2025 across five anchor goalposts of Integrity, Inclusion, Innovation, Institutionalisation and Internationalisation, with specific directions for each of the goalposts. Continue Reading FIG PAPER (NO. 14) – RBI’s Vision for Payment Systems till 2025

SEBI

Background

In order to provide for an alternative and efficient dispute resolution mechanism for securities law violations, the Securities and Exchange Board of India (“SEBI”) introduced the consent mechanism through a circular in 2007[1] (which was partially modified in 2012)[2]. This was subsequently codified through the SEBI (Settlement of Administrative and Civil Proceedings) Regulations, 2014 (“2014 Regulations”), pursuant to the notification of the Securities Laws (Amendment) Act, 2014, which expressly empowered SEBI to settle matters with a view to removing any ambiguity over the validity of the settlement process. This regime specifically excluded certain serious violations (e.g. insider trading, fraud) from the purview of the settlement mechanism. Explicit provisions which enabled initiation of settlement proceedings prior to the issuance of show cause notice were also introduced, to reduce administrative burden and cost on SEBI.

Continue Reading Amendments to SEBI Settlement Regime – A Snapshot

Fintech Department

In recent years, in line with global trends, India’s growth has been fuelled by technology and platform economy, with physical moving towards digital and ‘phygital’.

Continue Reading FIG Paper (No. 10: Series -1) RBI’s New FinTech Department: Industry Implications & Future

FIG Paper 8

Introduction:

With the pandemic acting as a tailwind for the digital payments industry in India, the fintech industry represents a key opportunity for the Reserve Bank of India (“RBI”) for its financial inclusion push in the country. A key driver in this regard is the burgeoning prepaid payment instruments (“PPI”) industry. PPIs have been widely used in the country for many years, but have seen significant commercial changes in recent times to reach a wider consumer base, given the high market penetration of mobile internet in India.

Continue Reading FIG Paper (No. 8) – New Master Directions for PPI – A Fresh Look at Prepaid Payment Instruments!