FIG Papers

The recent Master Directions issued by the Reserve Bank of India (RBI) on Credit cards and Debit cards – Issuance and Conduct Directions, 2022, dated April 21, 2022, is a consolidation of existing guidelines on the subject, except that it has brought about greater clarity by providing definitions on what is a credit card, credit limit and other related terminologies. In addition, it has spelt out more explicitly the scope of co-branding arrangements and the roles of card issuers and co-branding partners.Continue Reading FIG Papers (No. 12: Series-1) RBI Master Directions on Credit and Debit Cards

One Size Fits All Regulating Peer-To-Peer Lending Platforms

Technological innovation is the new normal in the financial services sector. The evolution of every aspect of this industry in the past few years has been truly transformational, whether it is access to funds, demand creation/aggregation or even payment systems. The inception and growth of peer-to-peer (P2P) lending platforms in India is one such example. P2P platforms effectively function as an online marketplace for lenders and borrowers, for a commission. A need for regulatory oversight was considered by the Reserve Bank of India (RBI), given the recent rise in the number of such operators and their integration into the financial services sector.

The RBI outlined its proposal to regulate such platforms in its consultation paper issued last year. Following notification on August 24, 2017 categorising P2P lending platforms as Non-Banking Financial Companies (NBFCs), the RBI has finally issued its widely anticipated master directions on October 04, 2017 (Master Directions).Continue Reading One Size Fits All? Regulating Peer-To-Peer Lending Platforms

It’s a Yes – for Banks!

The RBI has amended the Master Directions on Financial Services provided by Banks. This is a significant move permitting Banks to invest in Category II Alternative Investment Funds.

As of June 30, 2017, Alternative Investment Funds (AIFs) had raised the cumulative figure of Rs. 48, 129 crores, against aggregate capital commitments of Rs 96,000 crores. The AIF industry is thus growing at an exponential rate, raising monies from domestic and offshore investors.

Unfortunately, however, the Indian AIF industry, lags behind its western counterparts in terms of participation by domestic pools of capital. In western countries, long term or patient capital, such as pension funds, contributes nearly 40% of the capital raised by AIFs. In the Indian context, restrictions prescribed by sector regulators have inhibited fund managers from raising capital from the domestic financial services sector.

Hence, it was no surprise that one of the key themes in the 2016 reports of the Alternative Investment Policy Advisory Committee (AIPAC), chaired by Mr Narayan Murthy, was “unlocking domestic pools of capital”. The committee’s recommendation was premised on the argument that the domestic capital pools – pensions, insurance, domestic financial institutions, banks, and charitable institutions – need access to appropriate investment opportunities to earn risk-adjusted returns.Continue Reading It’s a Yes – for Banks!