financial institutions

Climate Finance

Climate change is one of the defining challenges of our times. It is a classic example of  a ‘collective action problem’  – one requiring collaborative action between individuals, groups and nations, but where such coordinated action is difficult on account of misaligned incentives. Climate change is likely to result in physical and transition risks that could have implications on stability of the overall financial system as well as the physical safety and financial soundness of banks, financial institutions. Given the potential implications of climate change on monetary policy as well as financial stability, addressing it should be part of the mandate of central banks and financial regulators.Continue Reading Climate Finance for Regulated Entities – Upcoming Trends

Banks and Financial Institution

Introduction

The Hon’ble Supreme Court of India (“Hon’ble SC”) in its recent judgment dated March 27, 2023, in State Bank of India & Ors. v. Rajesh Agarwal & Ors.[i], has conclusively decided on the question of whether the principles of natural justice should be read into the provisions of the Reserve Bank of India (“RBI”) (Fraud Classification and Reporting by Commercial Banks and Select FIs) Directions, 2016[ii] (“Master Directions on Frauds”). The question, which has been pending before various High Courts and was raised before the Hon’ble SC in numerous appeals, has now been answered in the affirmative by the Hon’ble SC by holding that the principles of natural justice, particularly the rule of audi alteram partem, has to be necessarily read into the Master Directions on Frauds to save it from vice of arbitrariness as classification of an account as fraud entails serious civil consequences for the borrowers.Continue Reading Principles of Natural Justice Prevail: Supreme Court Reads Rule of Audi Alteram Partem into Master Directions on Frauds

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

Role of IFSC in the Indian SPAC Dream

India, being one of the major consumers of international financial services, has been pushing the envelope on making itself the hub for such services. With this objective, the Government of India had operationalised India’s first (and currently the only) International Financial Services Centre (“IFSC”) at GIFT Multi Services Special Economic Zone (“SEZ”) in Gujarat in April 2015. In this regard and to further this objective, the International Financial Services Centres Authority Act was enacted in December 2019 to set up a unified regulator, viz the International Financial Services Centres Authority (“IFSCA”), which commenced operation in October 2020. The IFSCA has been vested with the roles and powers of four domestic regulators, namely the Reserve Bank of India (“RBI”), the Securities and Exchange Board of India (“SEBI”), the Insurance Regulatory and Development Authority of India (“IRDAI”), and the Pension Fund Regulatory and Development Authority. IFSCA has been set up to develop and regulate financial institutions, financial services, and financial products within the IFSCs in India.Continue Reading Role of IFSC in the Indian SPAC Dream: An Overview – Part 1